An Estate Plan Is Necessary for the Unthinkable

  • Post author:

The death of basketball legend Kobe Bryant, his daughter, and seven others reminded us that we never know what fate has in store for us. A recent article from The Press Enterprise titled Yes, you must go there: Think about the unthinkable, plan for the worst” explains the steps.

Put an appointment in your schedule. Make an appointment with a qualified estate planning attorney. If you make the call and have an actual appointment, you have a deadline and that’s a start. The attorney may have a planning worksheet or organizer that they can send to you to guide you.

Start getting organized. If this seems overwhelming, break it out into separate parts. Begin with the easy part: a list of names, addresses, phone numbers, and email addresses for family members. Include any other people who you intend to include in your estate plan.

Next, list your assets and an estimated value of each. It doesn’t have to be to the penny. Include the account numbers, name of the institution, phone number, and, if you have a personal contact, a name. Include bank accounts, real estate holdings, timeshares, stocks, bonds, personal property, vehicles, RVs, any collectibles of value (attach appraisals if you have them), life insurance, and retirement accounts.

List the professionals who you rely on—your estate planning lawyer, CPA, financial advisor, etc.

If you own a firearm, include your license and make sure that both your spouse and your estate planning attorney are aware of the information. In certain states, having possession of a firearm without being the licensed owner is against the law. Speak with your estate planning attorney about the law in your state and how to prepare for a situation if the firearm needs to be safely and properly dealt with.

Name an executor or personal representative. Estate planning is not just for death. It is also for incapacity. Who will act on your behalf, if you are not able to do so? Many people name their spouse, a long-time trusted friend, or a family member. Be certain that person is willing to act on your behalf. Have a second person also named, in case something occurs, and your first choice cannot serve.

If you have minor children, your estate plan will include a guardian, who will be responsible for raising them. Talk about that with your spouse and that person to make sure they are willing to serve. You can also name a second person to be in charge of finances for the children. Your estate planning lawyer will talk with you about the role of trusts to provide for the children.

Think about your overall goals. How do you see your legacy? Do you want to leave some funds for a charity that has meaning to you and your family? Do you want your children to receive equal shares of your entire estate? Does one child require special needs planning, or are you concerned that one of your children may not be able to manage an inheritance? These are all topics to discuss with your estate planning attorney. Their experience will help clarify your goals and create a plan so that you are prepared for the unthinkable.

Estate planning touches on topics people would prefer to avoid thinking about, but avoiding planning for the unthinkable will not protect you from it.

Reference: The Press Enterprise (Feb. 2, 2020) Yes, you must go there: Think about the unthinkable, plan for the worst”

Do You Want to Decide or Do You Want the State to Decide?

  • Post author:

A will allows you to direct your assets to the people you want to receive them, rather than the alternative, which is relying on the laws of your state to direct who receives your assets, says the article “Will you plan now or pay later?” from the Chron.com.

A will is also the document used to name an independent executor with successors, in the unlikely chance that the first executor fails, refuses or becomes unable to serve. Your estate planning attorney will discuss the use of special trusts to provide for family members who are disabled, trusts for minors or special needs family members or even adult children.

There are three big considerations you may not have even considered that would require you to have an estate plan created in recent years to be reviewed or revised. Years ago, the federal tax exemption, which allows a person to leave a certain amount of money to beneficiaries, was much smaller than it is now.

This was a “use it or lose it” exemption. Here’s an example of how things have changed. In 1987, when the exemption was $600,000 per taxpayer, a couple would use a by-pass trust to shelter the first $600,000 upon the first to die to take advantage of the exemption. In 2020, the exemption is $11.58 million. The “use it or lose it” law is different. Therefore, if your will/trust still has a by-pass trust for this reason, it may be best to discuss it with your estate planning attorney. It is likely that you don’t need it anymore.

You also want a will to have some control over what happens to your assets when you die. Let’s say Betty and Bob have three children. Bob dies, leaving his assets to Betty, then Betty dies and leaves all of her assets to her three children. One of the children, Bea, dies shortly after Betty dies. Bea’s will leaves all of her assets to her husband Bruce.

Bruce remarries. When Bruce dies, the share of the family’s assets that Bruce inherited from his wife Bea may be left to Bruce’s second wife or the couple may spend them all during their marriage. If Bruce divorces his second wife, she may win those assets in a divorce settlement. Would Betty and Bob have wanted their assets to go to their grandchildren, instead of their son-in-law’s second wife and children?

An estate plan can be created to protect those assets, so they remain within the family, going to grandchildren or to the children of Betty and Bob.

While most people think of an estate plan as a plan for death, it’s also a plan for illness and incapacity. A perfectly healthy person is injured in a car accident or suffers a stroke. Without having documents like a power of attorney, power of attorney for health care, living will and medical privacy documents, the family will spend a great deal of time and money trying to establish legal control over the estate.

Speak with an estate planning attorney today to update your current will or create a will and the necessary documents to protect yourself and your family.

Reference: Chron.com (January 16, 2020) “Will you plan now or pay later?”

Be Aware of Probate

  • Post author:

Probate is the legal process that happens after a person dies without a proper estate plan. The court accepts the deceased’s last will, and then the executor can carry out the instructions for the deceased’s estate. However, first he or she must pay any debts and sell assets before distributing any remaining property to the heirs.

If the deceased doesn’t have a will, the probate court will appoint an administrator to manage the probate process, and the court will supervise the process. The Million Acres article entitled asks, “Probate Explained: What Is Probate, and How Does It Work?”

When the will is proven to be legal, the probate judge will grant the executor legal rights to carry out the instructions in the will.

When there’s no will, the probate process can be complicated, because there’s no paper trail that shows what assets belong to what heirs. Tracking down heirs can also be challenging, especially if there’s no surviving spouse and the next of kin is located in a different state or outside the U.S.

Many executors will partner with a probate attorney to help them through the probate process, as well as to assist in filing the required paperwork, notifying creditors, filing taxes and distributing assets. The deceased’s assets must first be located and then formally appraised to determine their value.  Creditors must also be notified after death within a specified period of time.

After the creditors, taxes and fees have been paid on behalf of the estate, any leftover money or assets are distributed to the heirs.

The probate process can be lengthy. Things that can lengthen the process include the state when the deceased was a resident, whether there is a will and whether it is contested by the heirs. The more detailed the will, the simpler the probate process.

The probate process can be expensive, because of court filing fees, creditor notice fees, appraisal fees, tax preparation and filing fees and attorney fees. All of these fees are subtracted from the proceeds of the estate.

Estate planning with a qualified estate planning or elder law attorney involves taking the proper actions to avoid probate. This can reduce the burden for the surviving heir(s) and reduce costs, fees and taxes. Ask your attorney about some of the steps you can take before death to avoid probate.

Reference: Million Acres (Jan. 17, 2020) “Probate Explained: What Is Probate, and How Does It Work?”

Aretha Franklin’s Niece Resign as Executor

  • Post author:

Sabrina Owens, the niece of soul singer Aretha Franklin, recently announced her resignation as executor in court filings, stating: “Given my aunt’s love of family and desire for privacy, this is not what she would have wanted for us, nor is it what I want … I hope that my departure will allow the business of the estate to continue, calm the rift in my family and allow me to return to my personal life.”

Rolling Stone’s recent article entitled “Aretha Franklin’s Niece Resigns as Estate Executor” reminds us that Franklin died in August of 2018, and, because she reportedly was intestate, Michigan law states that her assets are to be distributed equally among her four sons. Her sons agreed upon Owens as executor, but new family politics came up last May after three wills allegedly authored by Franklin were discovered in a notebook under some couch cushions.

“That is when relationships began to deteriorate with the heirs,” Owens wrote of the discovery of the wills. She added that she accepted the executor role on the condition that “no fractured relationships develop within the family” and that the family “did not end up in court disputes over disagreements with the Estate.” Both, Owens wrote, have happened.

Owens’ resignation, however, will not become effective immediately. Instead, she will keep serving as executor for the immediate future. It’s also unknown who will be appointed executor after she does leave.

Franklin’s youngest son, Kecalf, has attempted to gain control since one of the documents from 2014 appears to state that Franklin wanted him to take on that role (in August, a probate judge approved Kecalf’s request to have a handwriting expert analyze the documents that were found).

Although Kecalf has the support of his brother Edward, his plan is opposed by Franklin’s third son, Ted White, as well as the guardian for her eldest son, Clarence, who has special needs.

A hearing on the future of the estate is scheduled for early this spring.

The ongoing battles surrounding Franklin’s estate continue, as it gets ready for two significant posthumous projects: one is a biopic movie starring Jennifer Hudson, “Respect.” The other is an installment in the biographical anthology series, “Genius,” with Cynthia Erivo playing Franklin (both are currently in production).

In the last year, Owens, as executor, oversaw the release of the documentary, ‘Amazing Grace,” while at the same time managing the estate’s complicated finances, including $6.3 million owed to the IRS in back taxes.

Reference: Rolling Stone (Feb. 3, 2020) “Aretha Franklin’s Niece Resigns as Estate Executor”

Start the New Year with Estate Planning To-Do’s

  • Post author:

Families who wish their loved ones had not created an estate plan are far and few between. However, the number of families who have had to experience extra pain, unnecessary expenses, and even family battles because of a lack of estate planning are many. While there are a number of aspects to an estate plan that takes some time to accomplish, The Daily Sentinel recommends that readers tackle these tasks in the article “Consider These Items As Part of Your Year-End Plan.”

Review and update any beneficiary designations. This is one of the simplest parts of any estate plan to fix. Most people think that what’s in their will controls how all of their assets are distributed, but this is not true. Accounts with beneficiary designations—like life insurance policies, retirement accounts, and some bank accounts—are controlled by the beneficiary designation and not the will.

Proceeds from these assets are based on the instructions you have given to the institution, and not what your will or a trust directs. This is also true for real estate that is held in JTWROS (Joint Tenancy with Right of Survivorship) and any real property transferred through the use of a beneficiary deed. The start of a new year is the time to make sure that any assets with a beneficiary designation are aligned with your estate plan. Request a copy of your beneficiary designations from the institutions that administer your plans, and make changes if needed.

Take some time to speak with the people you have named as your agent, personal representative or successor trustee. These people will be managing all or a portion of your estate. Make sure they remember that they agreed to take on this responsibility. Make sure they have a copy of any relevant documents and ask if they have any questions.

Locate your original estate planning documents. When was the last time they were reviewed? New laws, and most recently the SECURE Act, may require a revision of many estate plans, especially if you own a large IRA. You’ll also want to let your executor know where your original will can be found. The probate court, which will review your will, prefers an original. A will can be probated without the original, but there will be more costs involved and it may require a few additional steps. Your will should be kept in a secure, fire and water-safe location. If you keep copies at home, make a note on the document as to where the original can be found.

Create an inventory of your online accounts and login data for each one. Many people open a new online account on a regular basis, so it is important to keep track of the login information. That should include email, personal photos, social media, and any financial accounts. This information also needs to be stored in a safe place. Your estate planning document file would be the logical place for this information but remember to update it when changing any information, like your password.

If you have a medical power of attorney and advance directive, ask your primary care physician if they have a means of keeping these documents, and explain how you wish the instructions on the documents to be carried out. If you don’t have these documents, make them part of your estate plan review process.

A cover letter to your executor and family that contains complete contact information for the various professionals—legal, financial, and medical—will help them know who your trusted professional team is in the case of an unexpected event.

Remember that life is always changing, and the same estate plan that worked so well ten years ago may be out of date now. Speak with an experienced estate planning attorney in your state who can help you create a plan to protect yourself and your loved ones.

Reference: The Daily Sentinel (Dec. 28, 2019) “Consider These Items As Part of Your Year-End Plan”

How Does Power of Attorney Work?

  • Post author:

Questions often arise about how different estate planning documents work together, and they are frequently very good questions. Powers of Attorney (POA) are some of the most commonly used estate planning documents and they are also some of the most misunderstood estate planning documents, says nwi.com in a recent article “Estate Planning: Do Powers of Attorney lapse?”

A POA is a document that authorizes another person to act on behalf of the person making or signing the document. The person named in a POA can also be referred to as the Attorney-in-Fact, or AIF. The authority granted to the AIF is usually spelled out in the document itself. Some POA documents grant a wide range of authority, while others are limited to a specific action. An estate planning attorney can create a POA that suits a person’s particular needs, which is far better than a generic document that may not be accepted because it is too broad.

There are also different types of POAs. Durable POAs usually do not terminate upon a person’s incapacity and are frequently drafted for the purpose of caring for a person in case they are incapacitated. There are also other limited or special POAs that only work for a specific date or time frame. At the end of that time frame or upon that date, the POA terminates.

It’s important to note, however, that all POAs terminate upon the death of the maker or principal. The only power that can survive after the death of the maker is the authority to dispose of the maker’s remains, and that varies by state. This means that the POA will not nominate an executor, and cannot do anything to give someone authority over your body or your property after you die.

A POA can also be terminated at any time by the principal. This termination should be in writing, and it can be terminated by revoking the POA within the terms of a new POA, or by execution of a revocation. Either way, the person should notify the AIF that they no longer have the authority to act under the revoked POA, and any entity who may have a copy of the revoked POA should be notified that it is no longer valid. The revocation can also be recorded at the county recorder’s office. An estate planning attorney in your state will know what rules apply in your area.

When a POA was created is also important. Although a POA signed years ago is still legally valid, estate planning attorneys often look at the date of execution for the simple fact that banks and other financial institutions are reluctant to accept POAs that were created too long ago. In that case, institutions sometimes will require an affidavit affirming that the document is still valid and that the AIF has the authority to act under it.

However, it is recommended that when you have your estate plan reviewed every three or four years, you also have your estate planning attorney update the Power of Attorney. This way there is less of a chance that a bank or other institution will balk at the document. The same goes for your health care proxy, also known as a Health Care Power of Attorney.

Reference: nwi.com (November 3, 2019) “Estate Planning: Do Powers of Attorney lapse?”

‘Bye Bye Love’ Rocker Ric Ocasek Cuts Wife Out of Will

  • Post author:

In a world where many stars have their estates dragged through the probate court, it can be a relief to see a celebrity use estate planning documents to accomplish their post-death goals. One example is Ric Ocasek.

The language in the will was very clear, according to the article “Cars singer Ric Ocasek cuts supermodel wife Paulina Porizkova out of will” from Page Six. There was no provision for his wife Paulina since they were in the process of divorcing. He added that even if he died before their divorce was finalized, she was not to receive any elective share “… because she has abandoned me.” This highlights the fact that Ocasek thought through different possibilities, and the lack of ambiguity makes it easier for a court to administer the will.

It was Porizkova who found Ocasek’s body in September while bringing him coffee as he recovered from recent surgery. The couple had two sons together and had called it quits in May 2018, after being married for 28 years. They met on set during the making of the music video for the Cars’ song “Drive.”

A filing with Ocasek’s will stated that his assets included $5 million in copyrights, but only $100,000 in tangible personal property and $15,000 in cash. The document did not detail the copyright assets.

That may seem like a small estate for someone with Ocasek’s fame. However, an attorney who examined the document told The New York Post that it was likely the Cars’ frontman probably had more assets protected through trusts, yet another indication that Ocasek was very intentional about his estate plan.

Like other high-profile performers who have considerable assets and who are savvy about finances, it’s possible that he has many more millions of dollars. Thanks to proper planning, however, they will not pass through probate and will be protected from the public view and scrutiny. That is why people use trusts, especially when they are public figures.

The Cars’ singer also seems to have left two of his six sons out of the will. The children he had with Porizkova were not left out of the will. Even though this may seem harsh, it’s possible that the sons who were left out of the will were compensated through other means. There may have been trusts set up for them, or life insurance proceeds.

The document indicates that the will was signed on August 28, less than a month before his death.

Ocasek died of heart disease on September 15. At the time, he also suffered from pulmonary emphysema. Mario Testani, his friend, and business manager is named as the executor.

The advance planning done in Ocasek’s estate is a lesson in how trusts and other estate planning methods can be used to maintain an individual’s privacy, even if some of their other assets pass through a will.

Reference: Page Six (Nov. 7, 2019) “Cars singer Ric Ocasek cuts supermodel wife Paulina Porizkova out of will”

Why Would I Need to Revise My Will?

  • Post author:

OK, great!! You’ve created your will! Now you can it stow away and check off a very important item on your to-do list, right? Well, not entirely.

Thrive Global’s recent article, “7 Reasons Why You Need to Review your Will Right Now,” says it’s extremely important that you regularly update your will (and other documents, such as a revocable living trust) to avoid any potential confusion and extra stress for your family at a very emotional time. As circumstances change, you need to have your will reflect changes in your life. As time passes and your situation changes, your will may become invalid, obsolete or even create added confusion when the time comes for your will to be administered.

New people in your life. We all know life changes. If you have more children after you’ve created your will, review your estate plan to make certain that the wording is still correct. You may also marry or re-marry, or you may have grandchildren that you now want to include. Make a formal update to your estate plan to include the new people who play an important part in your life and to remove those with whom you lose touch.

A beneficiary or other person dies. If a person you had designated as a beneficiary or executor of your will has died and there is no backup, you must make a change or it could result in confusion when the time comes for your estate to be distributed. You should update your will if an individual named in your estate plan passes away before you.

Divorce. If your will was created prior to a divorce, you will probably want to remove your ex from your estate plan. If you have minor children with your ex, you may also want to change your distribution and nominate a guardian of the estate to take care of any money you want to pass to your children. Talk to an estate planning attorney about the changes you need to make.

Your spouse dies. Even though wills should be written in such a way as to always have a backup plan in place, that’s not what always happens. For example, if your husband or wife dies before you, their portion of your estate might go to another family member or another named individual. If this happens, you may want to redistribute your assets to other people.

A child becomes an adult. When a child turns 18 and comes of age, she is no longer a dependent.  Your documents might have included provisions for dependents that now no longer apply to your children, but you would like to still help them out if you were to die. Therefore, you may need to update your will in any areas that provided additional funds for any dependents.

You experience a change in your financial situation. This is a great opportunity to update your will to protect your new financial situation. If you now have more than the minimum amount needed for probate, you may also want to create a trust to avoid probate. In California, if a person has more than $150,000 in their estate when they die (including the value of any houses), they will have to go through probate. Create a trust and change your will to a pour-over will to save your loved ones the trouble of going to court.

You change your mind. It’s your will, and you can change your mind whenever you like.

Reference: Thrive Global (June 17, 2019) “7 Reasons Why You Need to Review your Will Right Now”

What Do I Need to Do Financially, When We Have a Baby?

  • Post author:

In addition to all the logistics involved with a new baby, new parents should also take care of financial and legal matters in the months leading up to the big day.

U.S. News & World Report’s recent article, “Financial Steps to Take When You’re Pregnant” reminds us that pregnancy is a terrific time to review your financial life. It’s a great time to assess your budget, emergency savings, estate planning documents, and insurance needs to see if anything needs to be refreshed.

Here are a few things to do to prepare for a new baby:

Employee Benefits. Take a look at your employee benefits or have a conversation with HR to determine how much time you can take off and whether you’ll be paid your salary while on parental leave. This is important because many families are faced with higher living costs by the presence of a new baby, which is often combined with taking parental leave that may cut their take-home pay. New parents may have to use the Family and Medical Leave Act (FMLA), which offers eligible employees 12 weeks of unpaid leave, or tap into short-term disability insurance, which typically only replaces a portion of your salary. The amount you receive in short-term disability will also be impacted by whether you pay premiums with pre-tax or post-tax dollars. If you pay with pretax, your benefit will be subject to taxes, which will decrease the overall amount received.

While reviewing these policies, look at your health insurance and see what kind of prenatal visits and pediatric care are covered. You should also look at the terms of your health insurance policy since you could be liable for health insurance premiums during periods where you are taking leave from work. Also, remember that you’ll need to add your baby to your medical insurance within 30 days of the birth.

Budget. Create a new budget that takes into account changes in your income from taking leave and new expenses from having a new baby. You may have to survive several weeks without your normal level of income, so be sure that you have enough saved up to get through that period. After that, create another budget that considers more long-term expenses associated with the new one, such as the cost of childcare, diapers, and formula, all of which can add up.

Life Insurance. Determine if your current life insurance will meet your needs. If you need more, look at term life insurance. It’s usually affordable and expires after a set term, typically anywhere from 10 to 30 years. This policy payout would help a surviving parent or guardian care for your child.

Estate Planning. Consider who would care for your child if both parents were to die before they turn 18. Talk to family or close friends about who you’d like as the guardian of the child. Talk to an estate planning attorney to update (or create) a will and guardianship choices. In addition, ask about formulating a plan for how inheritance, insurance, and other assets will be handled and disbursed if you die while the child is a minor. A revocable living trust can be one way to direct a future inheritance. You can designate your child as the beneficiary and a relative or close friend as the trustee. The trustee will help decide how the money is spent. This trust is usually included in the will and activates after the death of the person who created it.

Beneficiary Designations. Update any beneficiary designations on your retirement and insurance accounts to include your child, but make sure and ask about meeting requirements for how minors can own property.

529 College Savings Account. You should also look into funding a 529 college savings account but don’t feel pressure to contribute a lot. Making certain that your budget, estate, and insurance needs are tailored to meet your new family dynamic are more pressing concerns.

Reference: U.S. News & World Report (August 29, 2019) “Financial Steps to Take When You’re Pregnant”

How Does a Probate Proceeding Work?

  • Post author:

Many people have heard of “probate,” but there are a lot of misconceptions floating out there about it. First and foremost, many people believe they can avoid going to court and going through probate if they have a Will.

In reality, a Will, also known as Last Will and Testament, is the legal document that is to be used in probate court if a person dies with assets that are in their name alone without a surviving joint owner or beneficiary designated, says the Record Online in the article “Anatomy of a probate proceeding.” The probate process proves the will is valid.

Probate is a judicial or court proceeding where the probate court has jurisdiction over the assets of the person who has died. The court oversees the payment of debts, taxes and probate fees, in addition to supervising the distribution of assets to the person’s beneficiaries. The executor of the will is the person responsible for managing the probate assets and then reporting the activities to the judge.

Without a will, things can get messy. A similar court proceeding takes place, but it is known as an administrative proceeding, and the manager of the estate is called an administrator, and not the executor.

To start the probate proceeding, the executor completes and submits a probate petition with the probate court. Some executors do this on their own, but most hire an estate planning attorney to help. The attorney knows the process, which keeps things moving along.

The probate petition lists the beneficiaries named in the will, plus certain relatives who must, by law, receive legal notice in the mail. Let’s say that someone disinherits a child in their will. That child must receive notice to learn he or she has been disinherited. Beneficiaries and relatives alike must return paperwork to the court stating that they either consent or object to the provisions of the will.

A disinherited child has the right to file objections with the court, and then begin a battle for inheritance that is known as a will contest. This can become protracted and expensive, drawing out the probate process for years. A will contest places all of the assets in the will in limbo. They cannot be distributed unless the court says they can, which may not occur until the will contest is completed.

The will contest can be resolved in two ways: with a settlement between the parties involved, or with a jury trial. It is always possible that the disinherited person could prevail and be awarded a certain amount of the inheritance, regardless of what the decedent said in their will.

In addition to the expense and time that probate takes, while the process is going on, assets are frozen. After the court is satisfied with who the executor should be, the judge will issue “Letters Testamentary”. Only then can the executor start doing anything with the property. They must open an estate account, apply for a taxpayer ID for the account, collect the assets and ultimately, distribute them, as directed in the will to the beneficiaries. Keep in mind, however, that distribution cannot happen until the court gives the all-clear.

Can a will contest or probate be avoided? Avoiding probate, or having selected assets taken out of the probate estate, is one reason that people use trusts as part of their estate plan. Assets can also be placed in joint ownership, and beneficiaries can be added to accounts so that the asset goes directly to the beneficiary.

By working closely with an estate planning attorney, you’ll have the opportunity to prepare an estate plan that addresses how you want assets to be distributed, which assets may be placed outside of your estate for an easier transfer to beneficiaries and what you can do to avoid a will contest, if there is a disinheritance situation looming.

Reference: Record Online (August 24, 2019) “Anatomy of a probate proceeding”