Your Spouse Just Died … Now What?

There are several steps to take while both spouses are alive and well, to help reduce the chance of the surviving spouse finding themselves in a “financial deadlock” situation, or worse. The preparations require the non-financially dominant partner to be involved as much as possible, says Barron’s in the article “How to Avoid Financial Deadlock—or Worse—After One Spouse Dies”

Step one is to prepare the financial equivalent of a “go-bag,” like the ones people are supposed to have when they must leave their home in a crisis. That means a list of all financial contacts, advisors, estate planning attorney, accountants, insurance professionals and copies of all beneficiary designations. There should also be a list or a spreadsheet of all the couple’s assets and liabilities, including digital assets and passwords to these accounts. The spouse should also note the location of financial records and critical legal documents, including insurance policies, wills, and trusts.

Each partner must have access to checking and cash independently of the other, and the spouses need to review together how assets and accounts are titled.

It is especially important for both spouses to be on the deed to their home with right of survivorship, so that the surviving spouse can easily prove that they are the sole owner of the home after the spouse dies. Otherwise, they may not be able to communicate with the mortgage company. If a surviving spouse must go to court and file probate in order to deal with the home, it can become costly and more stressful.

It’s not emotionally easy to go through all this information but it is critical for the surviving spouse’s financial security.

Any information that will be needed by the surviving spouse should be documented in a way that is easily accessible and understandable for the spouse. Even if someone is very organized and has a well-developed description of their assets and estate plan, it may not be as easily understood for someone whose mind works differently. This is especially true if the couple has had years where the non-financial spouse was not involved with the family’s assets and is suddenly digesting a lot of new information.

It is wise for the non-financial spouse to be in meetings with key advisors and take on some of the tasks like bill paying, reviewing insurance policies and reconciling accounts well before either spouse experiences any kind of cognitive decline. Ideally, the financially dominant partner takes the time to train the other spouse and then also have them handle the finances independently to the extent possible until they are both comfortable managing all the details.

Each spouse needs to understand how the death of the other will impact the household income. If one spouse has a pension without survivor benefits and that spouse is the first to die, the surviving spouse may find themselves struggling to replace that income. They also need to consider daily aspects of their lives, like if one spouse is highly dependent upon the other for caregiving.

Spouses are advised not to make any big financial or life decisions within a year or so of a spouse’s death. The surviving spouse is often not in a good emotional state to make smart decisions, and that is the time they are most at risk for senior financial abuse.

Both spouses should sit down with their estate planning attorney and discuss what will happen if either of them is widowed. It is a difficult topic but planning ahead will make the transition less traumatic from a financial and legal perspective.

Reference: Barron’s (Sep. 15, 2019) “How to Avoid Financial Deadlock—or Worse—After One Spouse Dies”

Does Your Family Include A Hoarder?

We all know someone who can’t bear to throw anything out, no matter how small or valueless the item is. When they pass, the family has the dreadful task of cleaning away the mess while grieving. It’s not easy, says Next Avenue in the article 6 Tips for Dealing with the Aftermath of a Family Hoarder.”

For one woman, whose grandmother lived in a one-bedroom apartment only ten miles away from her, the idea of cleaning out her grandmother’s apartment wasn’t bad.

It was terrible.

The grandmother’s spending and hoarding had led to a foreclosure on the home six years after her husband had passed away. Her possessions overflowed from every closet, drawer, and surface. She had 30 large bins filled with craft supplies in the small living room. There were notes and pictures shoved into boxes, with fast-food napkins and outdated receipts.

The apartment was rented, so everything had to be cleared out in thirty days unless the family wanted to pay another month’s rent.

Three weeks and three garage sales later, the apartment was cleaned out. Five large bags of clothing were donated to a local charity. A junk removal service was paid $250 to remove a mattress, couch, and TV. Most of it went to the trash.

Here are six tips for anyone confronted with this difficult task:

  1. If you can help it, don’t do it by yourself. Ask friends or family members to help. If you can afford it, consider a clean-out service.
  2. Find out if there are any instructions in the will. If there are specific directions about possessions, follow them. If not, let close family members make requests before the cleanout starts.
  3. Limit what you keep. You don’t need a full dining room set or a box of costume jewelry to remember a loved one.
  4. Look for easy items to discard first. As soon as possible, get rid of any trash, old food in the pantry, junk mail, etc.
  5. Don’t pinch pennies in a garage sale. Yes, some stuff may be worth top dollar, but your goal is to sell as much stuff as possible. Accept any reasonable offers.
  6. Make “let it go” your personal anthem. Remember that just because you are getting rid of stuff, does not mean you are getting rid of the person or your memories. Handle items fast, get the task done, and move on. It’s like yanking off a bandage–the faster you do it, the better.

Reference: Next Avenue (August 12, 2019) 6 Tips for Dealing with the Aftermath of a Family Hoarder”

A Love Letter to Your Family

For the 70% of Americans who do not have an estate plan, the article “Senior Spotlight: Composing the ‘family love letter’” from the Lockport Journal should help you understand why it is so important to set one up. One reason why people don’t take care of this seemingly simple task is because they don’t fully understand why estate planning is needed. They think it’s only for the wealthy, or that it’s only for old people, or that it’s only about death and taxes.

Consider this idea: an estate plan is actually about protecting yourself while you are alive, protecting your family when you have passed, and leaving a legacy for those you have left behind.

The main elements of an estate plan are: 1) create and execute documents that provide for incapacity and death, and 2) provide information about and guidance to help navigate your assets, liabilities and wishes.

You’ve spent a lifetime accumulating assets. It is now time to sit down with family members and have a heart-to-heart talk about the details of the estate and what your intentions are with respect to its distribution. The subject of death can be challenging for all. However, discussing your estate plan is vital if you want to protect your family from what might come after you are gone. Each family has its own goals, so it’s a good idea to talk about it frankly while you still can.

Even though these topics may be hard to bring up, not having those discussions significantly increases the chances of your family having conflict and choosing sides, assets not going where you had intended, and unnecessarily higher costs in taxes and legal fees.

If speaking about this is too hard, you may want to write your family a love letter. It would contain all the information that your family would need at the time of your death or your incapacity due to illness or injury. That includes a power of attorney, a health care directive, and maybe other documents depending on your situation.

Ideally, all this information will be located in one convenient place. Don’t put it on a computer where you use a password. If the family cannot access your computer, all your hard work will be useless to them. Put it in a folder or a notebook, that is clearly labeled and tell family members where it is.

They’ll need this information:

  • A list of your important contacts — your estate planning attorney, financial advisor, CPA, insurance broker and medical professionals.
  • Credit card information, frequent flier miles.
  • Insurance and benefits including all health, life, disability, long-term care, Medicare, property deeds, employment and any military benefits.
  • Documents including your trust, will, power of attorney, birth certificates, military papers, divorce decrees, and citizenship papers.

Think of these materials and discussions as your opportunity to make a statement for the future generation. If you don’t have an estate plan in place already or if you have not reviewed your estate plan in more than a few years, it’s time to make an appointment for a review. Your life may have not changed, but tax laws have, and you’ll want to be sure your estate is not entangled in old strategies that no longer benefit your family.

Reference: Lockport Journal (Feb. 16, 2019) “Senior Spotlight: Composing the ‘family love letter’”

How Do I Know If My Mom’s Estate Was Divided Properly?

It’s not uncommon for a senior to let her adult children know about her life insurance policies. In many cases, it’s because that child or all of her children are the beneficiaries. It is also not unusual for one child to be named the executor of the parent’s estate.

The trouble arises, if Mom took actions before she died and didn’t tell anyone, or if she only told one child. In this case, the mother kept important documents in a safety deposit box. A brother, who lived closer to the mother, told his sister that before their mother died, she made some big decisions: she cashed out the life insurance policies, emptied the safety deposit box, sold her car and signed a reverse mortgage on the house.

Therefore, how does the sister determine if whatever’s left was evenly divided?

It will take some investigating. The good news is that there’s always a paper trail.

nj.com’s recent article asks, “My mom died. How can I know I’m getting the right inheritance?” As the article explains, if the policies were cashed out by the parent, they no longer exist.

If you know the name of the insurance company and policy number, you can try to call the life insurance company’s home office to confirm this. However, they may not give out much information, if you weren’t the named beneficiary.

There are a few tips to help track down life insurance old policies.

If Mom had a reverse mortgage, then you know she owned a home. If the home wasn’t owned jointly (or held in a trust), then it would be a probate asset.

One way to determine this, is to check with the county court where she died, to see if a will was probated or any estate administration application was filed. The home would need to be sold by the executor or administrator, so there would be some paperwork. If there was, you can contact the executor/administrator for more information.

With a parent’s safety deposit box, the executor/administrator, once appointed, would have the authority to empty the contents of the box. However, if Mom previously emptied the contents, there’d be nothing for the executor/administrator to retrieve. You should check with that individual.

If you don’t believe the executor is being honest with you, you may need to work with your own attorney to make sure you’re getting what you’re due from Mom’s estate. And remember that the State of California has protections and rights for heirs and beneficiaries to be informed about the administration of their parent’s estates.

Reference: nj.com (February 21, 2019) “My mom died. How can I know I’m getting the right inheritance?”

Surviving Spouse Needs An Estate Plan

When one spouse dies after meticulously titling assets to pass through joint tenancy to the surviving spouse, estate planning attorneys flinch. There are occasions when everything works smoothly, but they are the exception. As this article from the Santa Cruz Sentinel warns “After husband’s death, wife needs to create revocable trust.” Actually, she needs more than a revocable trust: she needs an estate plan.

Most of the assets in the plan created by her husband, in this case, did pass to the wife outside of probate. However, there are a number of details that remain. She needs to obtain date-of-death values for any non-IRA securities the couple owned, and she should also have their home’s value determined, so that a new cost basis for the house will be established. She also needs an appointment with an estate planning attorney to create a will and an estate plan.

If the surviving spouse dies without a will, her children will inherit the estate in equal shares by intestate succession. However, if any of her children pass before she does, the estate could be distributed to her grandchildren. If they are of legal age, there is no control over how the assets will be managed.  Making matters worse, if a child or grandchild is disabled and receiving government benefits, an inheritance could make them ineligible for Social Security and Medicaid benefits, unless the inheritance is held within a Special Needs Trust.

Another reason for an estate plan: a will details exactly how assets are distributed, from the set of pearls that great aunt Sarah has kept in the family for decades to the family home. A durable power of attorney is also part of an estate plan, which lets a named family member or trusted friend make financial decisions on your behalf, if you become incapacitated. An estate plan also includes an advance health care directive, so a loved one can make medical decisions on your behalf if you are not able.

These are the basics of an estate plan. They protect loved ones from having to go to court to obtain the power to make decisions on your behalf, as well as protect your family from outsiders making claims on your estate.

A revocable trust is one way to avoid probate. An estate planning attorney will be able to evaluate your own unique situation and determine what the best type of trust would be for your situation, or if you even need a trust.

You may be thinking of putting your home, most families’ biggest asset, into joint tenancy with your children. What if one or more of your children have a divorce, lawsuit or bankruptcy? This will jeopardize your control of your home. A revocable trust will allow your assets to remain in your control.

The last piece in this estate is the IRA. If you are the surviving spouse, you’ll want to roll over your spouse’s IRA into your own. Make sure to update the beneficiary designation. If you neglect this step and the IRA pays into your estate when you pass, then the IRA has to be cashed in within five years of your death. Your children will lose the opportunity to stretch IRA distributions over their lifetimes.

An estate planning attorney can help guide you through this entire process, working through all the details. If your goal is to avoid probate, they can make that happen, while protecting you and your loved ones at the same time.

Reference: Santa Cruz Sentinel (March 24, 2019) “After husband’s death, wife needs to create revocable trust”

What If My Beneficiary Isn’t Ready to Handle an Inheritance?

A recent Kiplinger article asks: “Is Your Beneficiary Ready to Receive Money?” In fact, not everyone will be mentally or emotionally prepared for the money you wish to leave them. What if your beneficiary isn’t ready to handle an inheritance? Here are some things to consider:

The Beneficiary’s Age. Children under 18 years old cannot sign legal contracts. Without some planning, the court will take custody of the funds on the child’s behalf. This usually occurs via custody accounts, protective orders or guardianships. If this happens, there’s little control over how the money will be used. The guardianship will usually end and the funds are paid to the child the second they turn 18. Giving significant financial resources to a young adult who’s not ready for the responsibility, often ends in disaster. Work with an estate planning attorney to find a solution to avoid this result.

The Beneficiary’s Lifestyle. There are many other circumstances for which you need to consider and plan. These include the following:

  • A beneficiary with a substance abuse or gambling problem;
  • A beneficiary and her inheritance winds up in an abusive relationship;
  • A beneficiary is sued;
  • A beneficiary is going through a divorce;
  • A beneficiary has a disability; and
  • A beneficiary who’s unable to manage assets.

All of these issues can be addressed, with the aid of an estate planning attorney. A testamentary trust can be created to make certain that minors (and adults who just may not be ready) don’t get money too soon, while also making sure they have funds available to help with school, health care, and living expenses.

Who Will Manage the Trust? Every trust must have a trustee. Find a person who is willing to do the work. You can also engage a professional trustee for larger trusts. The trustee will distribute funds, only in the ways you’ve instructed. Conditions can include getting an education, or using the money for a home or for substance abuse rehab.

Estate Plan Review. Review your estate plan after major life events or every few years. Talk to a qualified estate planning attorney to make the process easier and to be certain that your money goes to the right people at the right time.

Reference: Kiplinger (April 1, 2019) “Is Your Beneficiary Ready to Receive Money?”

What’s a Revival Trust?

Have you ever thought of having your body scientifically frozen when you die, on the chance you’ll be revived one day with cryonics? If it happens, you’ll need to have ready access to funds when you’re thawed.

There’s an estate planning answer for self-preservation called a revival trust, also known as a future income trust that can help.

Next Avenue’s recent article, “To Freeze Yourself at Death, There’s an Estate Planning Trust for That,” explains that a revival trust sets aside your assets, usually under supervision of an attorney, so if science progresses to the point that you can live a second time, you’ll have money for you to re-live on.

There are about 400 people that have been cryonically preserved, since the technology begin in the late 1960s. A total of 1,500 individuals have made arrangements to do so upon their death. There are two cryonics centers that do most of the freezing in America: the Cryonics Institute in Clinton Township, Michigan and the Alcor Life Extension Foundation in Scottsdale, Arizona.

There is a bit of uncertainty about how a future IRS would view a revival trust. So far, the IRS hasn’t said if it would treat a revived person as his or her former self for tax purposes, or as a new taxpayer. In that scientific future, the issue could arise of “double taxation”: taxes imposed twice on the same income—first at preservation, then at revival.

One of the reasons futurists think about revival after a medical advancement is because at death, the body ceases to function as a whole, but some cells are still alive. They hope for a future world free of disease, death, and aging.

However, there’s one problem, which is that the preservation of a body requires toxic chemicals like sodium pentobarbital, Narcan, metocurine, SoluMedrol, potassium chloride and chlorpromazine. That creates a problem in how to dispose of the hazardous waste left over in the cryonics process.

Since a scientific breakthrough making revitalization possible may be decades or hundreds of years away (if ever), you should add a termination date on a revival trust and hold the document at a financial institution that has been around for some time.

Reference: Next Avenue (March 8, 2019) “To Freeze Yourself at Death, There’s an Estate Planning Trust for That”

Where There’s A Will, There’s a Better Future for Family

The plain truth is, everyone needs a will. The value of someone’s personal property has very little to do with the need for a will or estate plan. Without one, the process of settling an estate and having heirs receive their inheritance could be delayed for many months, or even years, says the article “Where there’s a will, there is a plan in place” from The Advertiser. For wills to be legally acceptable, there are certain things that need to be included:

Identification of the person making the will, also known as the testator. The will must contain the person’s name, address, state their intention to create a distribution process for assets and the statement that this will is intended to be their last will and testament and all other wills are revoked. The will must also be dated to be sure to know hold old it is, with regard to other wills.

Outstanding debt payment. The will needs to explain how any outstanding bills will be paid, including funeral costs, medical costs, taxes owed, and any other expenses that a person may have at the time of their death. This may vary by state, so speak with a local estate planning attorney to find out what your state’s laws are.

Name any heirs and what they are being given. You may give your property to whomever you want, or to a charity. The bequest needs to be carefully written, so it is very specific and there are no misunderstandings. Since it may be hard to know what will be left after final expenses are paid, it may be wise to give percentages of assets, rather than specific figures. An estate planning attorney will know how to best handle this aspect of a will.

Chose an executor and name them in the will. The executor is responsible for carrying out the wishes of the testator and is in charge of paying debts, taxes, distributing assets and any tasks assigned in the will. Choosing the right person for this task is very important. They need to be able to handle the responsibility and be able to execute your wishes, without being bullied by family members or friends. Always name a secondary executor, in case the first predeceases you, or if the person is unable or unwilling to serve.

Name a guardian for minor children. This is why parents of young children must have a will. If there is no will, the court will determine who should raise the children, following the laws of kinship of your state. You may not agree with the court’s decision. Select a person (or couple) you believe will raise the children, as close as possible to how you would raise the children.

Plan for your funeral. This is a kindness to your loved ones. If you don’t plan in advance, your loved ones may spend more than you would wish on an elaborate funeral. The opposite may also happen. A simple paragraph may do the job, or you could visit the local funeral home and prepay, selecting everything so that it will be done according to your own wishes.

In addition to a will, you’ll want a power of attorney and health care power of attorney in place to protect you, in case of incapacity. This way, someone will be able to take care of your finances and someone else will be able to make health care decisions, if you can’t.

An estate planning attorney can work with you to make sure that all these documents are properly prepared according to your state’s laws.  They have worked with many others, know what kind of issues crop up and how to prepare for them. This is especially important with blended families or families where there are complicated histories. Think of the estate plan as a gift to your heirs, a chance to express your wishes and a way to create a legacy for your loved ones.

Reference: The Advertiser (March 10, 2019) “Where there’s a will, there is a plan in place”

Have You Prepared Your Family for Your Death?

Napoleon Bonaparte said that most battles are won or lost in the preparation stage, long before the first shot is fired. Have you prepared your family for your death?

MarketWatch’s recent article, “Breaking the taboo: How to prepare your heirs for your death” says that when it comes to retirement, 60s are the new 50s!

This is a critical lesson when planning for your own death and the related issue of transitioning assets to your family. The majority of estates lose assets—as well as peace within the family—after a transition. That’s because the heirs were unprepared, they didn’t trust each other and communications fell apart.

The preparation of your death should involve making heirs aware of the location of all important estate planning documents and financial assets. They should also have the contact info of your financial professionals and attorney. They should understand how the parents want to deal with end of life and incapacity issues. These are some important questions that will help you see, if your heirs are prepared:

  • Do your children (and their spouses, if any) know your estate plan?
  • Is there a plan to provide certain information sooner and other information at a later time?
  • Has your family read your will/trust and other estate planning documents?
  • Does your family know the family’s net worth?
  • Are your heirs in communication with your attorney, accountant, insurance advisors, and investment advisor?

Family battles can easily happen when members don’t believe they’ve been given their fair share and weren’t part of the process. Although it’s important to treat family wealth as a private matter, it should not be private within the family. Good communication between parents and heirs can prevent many issues.

Attaining the optimal degree of knowledge-sharing and family involvement requires its own planning. Family values, as well as current and future goals, should be a part of the entire financial planning process. When done well, financial planning is about much more than investment management. The success of a family wealth transition plan depends on preparing the family for the transition of the family’s wealth and its values.

Reference: MarketWatch (March 7, 2019) “Breaking the taboo: How to prepare your heirs for your death”

As a New Parent, Have You Updated (or Created) Your Estate Plan?

Congrats, you are a new parent! Now you’re sleep-deprived, overwhelmed, and frazzled. Having a child dramatically changes one’s legacy plan and makes having a plan all the more necessary, says ThinkAdvisor’s recent article, “5 Legacy Planning Basics for New Parents.” If you don’t have an estate plan, now is the time to create one.

Even though you are tired, it is important to take time to talk through two high-priority items. Create a staggered checklist—starting with today—and set attainable dates to complete the rest of the tasks. Here are five things to put on that list:

  1. Will/Guardianship Nomination. This gives the probate court your instructions on who will care for your children, if something happens to both you and your spouse. A will also should name a guardian to be responsible for the children. Parents also should think about how they want to share their personal belongings and financial assets. Without a will, the state of California decides what goes to whom. Lastly, a will must name an executor to carry out your wishes.
  2. Beneficiaries. Review your beneficiary designations when you create your will, because you don’t want your will and designations (on life insurance policies and investments) telling two different stories. If there’s an issue, the beneficiary designation overrides the will. All accounts with a beneficiary listed automatically avoid probate court.
  3. Trust. Created by an experienced estate planning attorney, a trust has some excellent benefits, particularly if you have young children. Everything in a trust is shielded from probate court, including property. This avoids court fees and hassle. A trust also provides some flexibility and customization to your plan. You can instruct that your children get a sum of money at 18, 25 or 30, and you can say that the money is for school, among other conditions. The trustee will distribute funds, according to your instructions.
  4. Power of Attorney and Advance Health Care Directive. These are two separate documents, but they’re both used in the event of incapacitation. Their power of attorney for finance and health care directive designees can make important financial and medical decisions when you’re incapable of doing so.
  5. Life Insurance. Most people don’t think about purchasing life insurance, until they have children. Therefore, if you haven’t thought about it, you’re not alone. If you are among the few who bought a policy pre-child, consider increasing the amount so your child is covered, if something should happen.

Reference: ThinkAdvisor (March 7, 2019) “5 Legacy Planning Basics for New Parents”