Preparing for an Emergency Includes Power of Attorney

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Unexpected events can happen at any time. Without a backup plan, finances are vulnerable. The importance of having an estate plan and organized legal and financial documents on a scale of one to ten is fifteen, advises the article “Are you prepared to hand over your finances to someone in an emergency?” from USA Today. Maybe it doesn’t matter so much if your phone bill is a month late but miss a life insurance premium payment and your policy may lapse. If you’re over 70, chances are slim to none that you’ll be able to purchase a new one.

When estate plans and finances are organized to the point that you can easily hand them over to a trusted spouse, adult child, or other responsible person, you gain the peace of mind of knowing you and your family are prepared for anything. Someone can take care of you and your family, in case the unexpected happens.

A financial power of attorney (POA) gives another person the legal authority to take financial actions on your behalf. The person you give this responsibility to should be someone you trust and who will put your best interests ahead of their own. An estate planning attorney will be able to create a power of attorney that can be very specific about the powers that are granted.

You may want your POA to be able to pay bills and manage your investment accounts, for instance, but you may not want them to make changes to trusts. A personalized power of attorney document can give you that level of control.

Consider your routine for taking care of household finances. Most of us do these tasks on autopilot. We don’t think about how it would be if someone else had to take over, but we should. Take a pad of paper and make notes about every task you complete in a given month: what bills do you pay monthly, which are paid quarterly and what comes due only once or twice a year? By making a detailed record of the tasks, you’ll save your spouse or family member a great deal of time and angst.

Is your paperwork organized so that someone else will be able to find things? Most people create their own systems, but they are not always understandable to anyone else. Create a folder or a file that holds all of your important documents, like insurance policies and investment accounts, legal documents, and deeds.

If you pay bills online, naming someone else on the account so they have access is ideal. If not, then try consolidating the bills you can. Many banks allow users to set up bill payments through one account.

Keep legal documents and records up to date. If you haven’t reviewed your estate planning documents in more than three years, now is the time to speak with your estate planning attorney to ensure that your estate plan still reflects your wishes. Call your estate planning attorney to discuss your next steps.

Reference: USA Today (March 20, 2020) “Are you prepared to hand over your finances to someone in an emergency?”

Why Is Walt Disney’s Grandson Unable to Claim his $200 Million Inheritance?

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Los Angeles County Superior Court Judge David J. Cowan recently claimed that Walt Disney’s grandson Bradford D. Lund had Down Syndrome—despite being presented with DNA evidence proving the opposite. The judge also ruled Lund to be “unfit” to receive his $200 million inheritance from Walt Disney and appointed him a temporary guardian to make all his legal decisions. This was all ordered without a hearing. Lund’s legal team is now trying to contest the rulings.

Inside the Magic’s recent article entitled “Walt Disney’s Grandson Sues Judge Claiming He Has Down Syndrome Without Evidence, Blocking $200 Million Inheritance” says that in the complaint, Lund’s attorney Lanny Davis alleges that the probate court’s action is “all too reminiscent of a perspective where facts do not matter but alternative facts do, where the constitution does not matter…”

The alternative facts Davis spoke of are from a 2016 court decision by Superior Court Judge Robert Oberbillig from a 10-day trial brought on by “disgruntled relatives” against Lund. The trial came after seven years of litigation questioning whether Lund was required to have a limited guardianship. In that trial, Lund was examined by two court-appointed physicians, one court-appointed expert and by Judge Oberbillig himself in open court.

From the investigation, Judge Oberbillig rejected the family’s claims that Lund needed guardianship and ruled that Lund was “not incapacitated.” However, Judge Cowan ignored Oberbillig’s ruling and the DNA evidence that showed Lund doesn’t have Down Syndrome. Instead, Cowan stated from the bench: “Do I want to give 200 million dollars, effectively, to someone who may suffer, on some level, from Down syndrome? The answer is no.”

From this statement, Lund’s legal team brought an additional cause of action that claims Judge Cowan and the Los Angeles Court violated an anti-discrimination law, when Judge Cowan made this “indisputably false” statement and “perception.” They claim this resulted in discrimination against Lund and his loss of freedom regarding the right to counsel and property rights without due process of law.

On Feb. 27, 2020, Lund’s counsel also filed a federal civil rights case in the U.S. District Court for the Central District of California against Judge Cowan for alleged violation of Lund’s constitutional due process rights in the appointment of a limited guardian ad lit em.

Lund was supposed to have received his portion of his mother’s trust fund when he was 35, which was 15 years ago. He is now 50 years old.

Reference:  Inside the Magic (March 25, 2020) “Walt Disney’s Grandson Sues Judge Claiming He Has Down Syndrome Without Evidence, Blocking $200 Million Inheritance”

Five Estate Planning Mistakes to Avoid

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While it’s true that no estate is completely bulletproof, there are mistakes that people make that are big enough to walk through, while others are more like a slow drip, draining retirement finances in a slow but steady process. There are mistakes that can be easily avoided, reports Comstock Magazine in the article “Five Mistakes to Avoid When Planning Your Estate.”

  1. Misunderstanding Estate Law. Some people are so thrown by the idea of an estate plan, that they can’t get past the word “estate.” You don’t need a mansion to have an estate. The term is actually used to refer to any and all property that a person owns. Even modest people need a plan to help beneficiaries avoid unnecessary costs and stress. Talk with an estate planning attorney to learn what your needs are, from a will to trusts. Make sure that this is the attorney’s key practice area. A real estate or personal injury attorney won’t have the same knowledge and experience.
  2. Getting Bad Advice. It takes a team to create a strong estate plan. That means an estate planning attorney, a financial advisor and an accountant. Be wary of firms that focus entirely on selling trusts. There’s definitely a role for trusts in estate plans, but there are many other tools that are needed. Buying an insurance policy or an annuity is not an estate plan.
  3. Naming Yourself as a Sole Trustee. Naming yourself as a sole trustee puts you and your estate in a precarious position. What if you develop Alzheimer’s or are injured in an accident? A trusted individual, a family member, a longstanding friend or even a professional trustee, needs to be named as a backup trustee to protect your interests if you should become incapacitated.
  4. Losing Track of Assets. Without a complete list of all assets, it’s nearly impossible for someone to know what you own and who your heirs may be. Some assets, including retirement funds, life insurance policies, or investment accounts, have named beneficiaries. Those people will inherit these assets, regardless of what is in your will. If your heirs can’t find the assets, they may be lost. If you don’t update your beneficiaries, they may go to unintended heirs—like ex-spouses. Your attorney should help you compile that list to make sure that your successor agents and beneficiaries are informed.
  5. Deciding on Options Without Being Fully Informed. When it comes to estate planning, the natural tendency is to go with what we think is the right thing. However, unless you are an estate planning attorney, chances are you don’t know what the right thing is. For tax reasons, for instance, it may make sense to transfer assets, while you are still living. And for other reasons, it might be best to wait until you pass to transfer the assets. However, that might also be a terrible idea, if you choose the wrong person to hold your assets or don’t put them in the right kind of trust.

Estate planning is still a highly personal process that depends upon every person’s unique experience. Your family situation is different than anyone else’s. An experienced estate planning attorney will be able to create a plan and help you to avoid the big, most commonly made mistakes.

Reference: Comstock Magazine (Dec. 2019) “Five Mistakes to Avoid When Planning Your Estate” 

Why Is a Power of Attorney Important?

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A son who is preparing to help his mother with her legal and financial affairs asks what legal documents he needs to obtain in the article “Tips for becoming a power of attorney” in Hometown Life. He is concerned about a sibling who is estranged from the family and could cause problems in the future. Can he protect his mother and himself?

The first thing he needs to do is obtain a medical power of attorney and a durable power of attorney for his mother. These are two separate powers of attorney that will give the son the legal right to handle both her financial affairs and her medical care.

With these documents, he will be able to speak directly to her healthcare providers, including her doctors, and to make end-of-life decisions on her behalf. An unhappy family member could indeed cause problems, especially when it comes to major decisions. When medical staff and institutions see fighting in the family, they will not act unless they see a legal document granting authority to make these decisions.

The durable power of attorney, in contrast, is created for legal or financial issues, including handling the mother’s day-to-day money tasks and making decisions about her investments and assets, including the family home. With a power of attorney, he will be able to move money when needed, and even assist with selling assets or stocks, if necessary.

Having both of these documents gives the son the ability to do what is necessary for his mother, while also protecting him from an uncooperative family member. However, there are more tasks to be done.

First, he needs to find out if she has an estate plan, including a will, a trust or even any other powers of attorney. He should find out if they are current, and if they still reflect her wishes.

If she has an estate plan, he’ll need to find out when it was last updated and see if it needs to be revised. If there are no documents, or existing documents need to be updated, she needs to meet with an experienced estate planning attorney to create a plan to distribute assets according to her wishes and create any needed trusts.

He should also collect her medical information, so he knows who her doctors are and what medications she is taking. He also needs to understand her medical insurance coverage and see if she has the protection that she needs from health care costs.

For her financial affairs, the son needs to gather up information about her accounts, including passwords and login information. The mother should add the son as a signatory to her bank and brokerage accounts.

He should also get the names and contact information of any financial professionals she works with. That includes financial advisors, insurance agents and CPAs. It would also be wise to get the last two years of her tax returns. This could be invaluable in helping to understand her assets.

Reference: Hometown Life (Dec. 6, 2019) “Tips for becoming a power of attorney”

Gig Workers, Don’t Forget Retirement Savings

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For better or worse, the gig economy is here to stay. It offers flexible hours, choice in their clients and projects, and the benefits of working remotely. However, freelancers and other gig workers miss out on the benefits offered by more traditional employment, says Forbes in the recent article “What Gig Workers Should Know About Self-Directed Retirement Accounts.” One aspect that can have significant implications is that they are completely responsible for their own retirement savings, health care expenses and any other forms of long-term savings.

How can a freelancer build a nest egg? It can sound quite simple: establish a retirement account early on and start contributing, no matter what the amount. There is no lack of retirement plans available today for self-employed professionals and part-time workers, including traditional IRAs, self-employed 401(k) plans, and simplified employee pension IRAs, among others. The challenge comes from having the income and the discipline to do this.

IRAs: Freelancers may set up individual retirement accounts directly with a custodial institution, contributing up to $6,000 annually. For those who are 50 and over, there’s an additional catch-up contribution of $1,000 permitted. A freelancer can decide to go with a traditional IRA or a Roth IRA.

SEP IRAs: Simplified Employee Pension IRAs allow freelancers to contribute up to 25% of their income, or $56,000, whichever is less. This may be a good option if you are a one-man show and intend to keep it that way. If you are an employer, you have to contribute to the SEP-IRA of every eligible employee whenever you contribute to your own SEP-IRA.

Self-employed 401(k) or solo 401(k): This plan offers the most flexibility for retirement contributions. The person can contribute up to $62,000 each year. These plans also have a lower maintenance cost and investment options that go beyond the stock market, since there is no requirement that the plan has a custodian. The accounts can include real estate property, commercial property, private lending, tax liens or multifamily syndication.

The Good and the Bad of Self-Directed Retirement Plans

Self-directed retirement accounts allow participants to invest in alternative investments. That can be a good thing; for example, a self-employed professional can leverage their industry experience to make long-term limited period investments, and not be limited to the offerings of a traditional custodian. For a self-directed IRA, the plan holder does need a custodian to act as a trustee of the account. That could be a bank, brokerage firm, insured credit union or a legal entity approved by the IRS. The custodian is not authorized to provide investment advice to plan participants.

The self-directed solo 401(k) is structured with a 401(k) trust, used as a vehicle to hold the assets. The account holder is the trustee and has total control over how the assets are used. Solo 401(k) plans allow post-tax Roth contributions to be made to a separate designated Roth account under the same plan. That lets investments grow tax-free, as well as tax-free qualified distributions.

However, with all this freedom comes risk. If investments don’t work out, there’s no safety net.  There are also many regulations around these self-directed accounts. Some transactions are prohibited and there are rules regarding withdrawals and participant loans. If you are a freelancer, you should consult with an attorney or financial advisor to figure out the best way you can contribute to your own future.

Reference: Forbes (December 5, 2019) “What Gig Workers Should Know About Self-Directed Retirement Accounts”

What Estate Planning Do I Need with a New Baby?

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Congratulations parent! You have a new baby. There’s a lot to think about, but there is a vital task that should be a priority. That is making an estate plan. People usually don’t worry about estate planning when they’re young, healthy and starting a new family. However, your new baby is depending on you to make decisions that will set them up for a secure future.

Motley Fool’s recent article, “If You’re a New Parent, Take These 4 Estate Planning Steps” says there are a few key estate planning steps that every parent should take to make certain they’ve protected their child, no matter what the future holds.

  1. Purchase Life Insurance. If a parent dies, life insurance will make sure there are funds available for the other spouse to keep providing for the children. If both parents die, life insurance can be used for a guardian to raise the child or to fund the cost of college. For most parents, term life insurance is used because the premiums are affordable, and the coverage will be in effect long enough for your child to grow to an adult.
  2. Draft a Will and Name a Guardian for your Children. For parents, the most important reason to make a will is to name a guardian for your children. If you designate a guardian, you can select the person that you think shares your values and who will do a good job raising your children. This way, it’s not left to a judge to make that selection. Do this as soon as your children are born.
  3. Update Beneficiaries. Your will should say what happens to most of your assets, but you probably have some accounts with a designated beneficiary, like a 401(k), IRA, or life insurance. When you have children, you’ll need to update the beneficiaries on these accounts for your children to inherit these assets as secondary beneficiaries, so they will inherit them in the event of your and your spouse’s death. Be careful, however, to designate a custodian to take care of those funds while your children are still minors.
  4. Look at a Trust. If you die prior to your children turning 18, they can’t directly take control of any inheritance you leave for them. This means that a judge may need to appoint someone to manage assets that you leave to your child. Your child could also wind up inheriting a lot of money and property free and clear at age 18. To have more control, like who will manage assets, how your money and property should be used for your children and when your children should directly receive a transfer of wealth, ask your estate planning attorney about creating a trust. With a trust, you can designate an individual who will manage money on behalf of your children and provide instructions for how the trustee can use the money to help care for your children, as they age. You can also create conditions on your children receiving a direct transfer of assets, such as requiring your children to reach age 21 or requiring them to use the money to cover college costs. Trusts are for anyone who wants more control over how their property will help their children after they’ve passed away.

When you have a new baby, working on your estate planning probably isn’t a big priority. However, it’s worth taking the time to talk to an attorney for the security of knowing your bundle of joy can still be provided for, in the event that the worst happens to you.

Reference: Motley Fool (September 28, 2019) “If You’re a New Parent, Take These 4 Estate Planning Steps”

How Joint Tenancy Creates Problem for Seniors

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Parents putting children or other family members as joint owners of their assets is another example of what seems like a simple solution for a complex problem. It doesn’t work, even though it seems like it should.

As explained in the article “Beware the joint tenancy trap” from Monterey Herald, putting another person on an account, even a trusted child or life-long friend, can create serious problems for the individual, their estate, and their heirs. Before going down that path, there are several issues to consider.

When another individual is placed as an owner on an account or on the title to real property, they have legal ownership in that property equal to that of the original owner. This is called joint tenancy. If a child is made a joint tenant on a parent’s accounts, they would be entirely within their rights to withdraw every single asset from those accounts and do whatever they wanted with them. They would not need the original owner’s consent, counsel, or knowledge.

Giving anyone that power is a serious decision.

Making a child a joint owner of assets also exposes those assets to claims by the child’s creditors. If they file for bankruptcy, the original asset owner may have to buy back one-half of the asset at its current market value. Another example: if the child is in an accident and a judgment is recorded against the child, you may have to buy back one-half of your joint tenant property at its current market value to settle the claims.

There are other complications that come with the title. If one joint owner of the asset dies, joint tenancy provides for the right of survivorship. The property transfers to the surviving joint tenant without going through probate and with no reference to a will. Even though it can bypass the probate process, it means that the distribution won’t necessarily follow what the parent intended in his estate plan. If the parent dies and the asset transfers directly to the joint tenant—let’s say a daughter—but the will says the assets are to be split between all of the children, her claim on the asset is “senior” to the rest of the children. That means she has the right to keep all of the assets that were held in joint tenancy and all four siblings split the remaining assets.

If there is any friction between siblings, not having equal inheritances could create a fracture in the family that can’t easily be resolved.

Tax exposure is another risk of joint tenancy. When someone is named a joint owner, they have the original owner’s cost basis. When one owner dies, the remaining owner gets a step up in basis only on the proportion of the assets the deceased person owned at death.

Let’s say a son and father are joint owners on an account. When the father dies, the son gets a step-up in basis on one-half of the assets—the assets that the father owned. However, the son’s half retains the original basis. In contrast, if that account was owned solely by the father, all the heirs will inherit the property with a full step-up in basis on the father’s death.

Given the complexities that joint tenancy creates, parents need to think very carefully before putting children’s names on their assets and real property. A better plan is to make an appointment to speak with an estate planning attorney and find out how to protect the parent’s assets through other means, which may include trusts and other estate planning tools.

Reference: Monterey Herald (Sep. 11, 2019) “Beware the joint tenancy trap”

How Do I Deed My Home into a Trust?

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Say that a husband used his inheritance to purchase the family home outright. The wife signed a quitclaim deed to him to put the property into his individual living trust with the condition that if he died before his wife, she could live in the home until her death.

But what if the husband or the creator of the trust never signed the living trust? In that case, what would happen to the property if the husband were to die before the wife?

This can quickly become even more complicated if it’s a second marriage for each of the spouses and they have adult children from prior marriages.

The Herald Tribune’s recent article, “Home ownership complications need guidance from estate planning attorney,” says that in this situation it’s important to know if the quitclaim deed was to the husband personally or to his living trust. If the wife quitclaimed the home to her husband personally, he then owns her share of the home, subject to any marital interests she may still have in the home. However, if the wife quitclaimed the home to his living trust, and the trust was never created, the deed may be invalid. The wife may still own the her original interest in the home.

It’s common for a couple to own a home as joint tenants with rights of survivorship. This would have meant that if the wife died, her husband would own the entire property automatically. If he died, she’d own the entire home automatically.

If the wife signed a quitclaim deed over to him or his trust, and the deed was recorded, then she would have transferred her ownership rights to her husband and he would be the sole owner of the home.  If the deed was never even filed or recorded, the wife could simply destroy the document and keep the status of the title as it was.

If the trust doesn’t exist, her quitclaim deed transfer to an entity that doesn’t exist would create a situation where she could claim that she still owned her interest in the home. However, the home may now be owned by the spouses as tenants in common, rather than as joint tenants with rights of survivorship.

To complicate things further, if the husband fully owned the home at the time of his death and the wife has marital rights in the home, then she may still be entitled to a share of the home under her husband’s will, if he has one, or by the laws of intestacy. However, the husband’s children would also own a share of his share of the home. At that point, the wife would co-own the home with his children.

You can see how crazy this can get. It’s best to seek the advice of a qualified estate planning attorney to guide you through the process and make sure that the proper documents get signed and filed or recorded.

Reference: The (Sarasota, FL) Herald Tribune (September 8, 2019) “Home ownership complications need guidance from estate planning attorney”

Why Are the Daughters of the Late Broncos Owner Contesting His Trust?

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Beth Wallace and Amie Klemmer, the two oldest daughters of the late owner of the Denver Broncos, Pat Bowlen, filed a lawsuit in a Denver area court challenging the validity of their father’s trust. Specifically, they are arguing that their father didn’t have the mental capacity to properly execute documents and was under undue influence when he signed his estate planning documents in 2009, according to Colorado Public Radio’s recent article “Pat Bowlen’s Kids Are Still Fighting Over Inheritance As 2 Daughters File Lawsuit.”

Dan Reilly, a lawyer for the Patrick Bowlen Trust, said in a statement that it is “sad and unfortunate that Beth Bowlen Wallace and Amie Bowlen Klemmer have elected to contest their father’s plan and attack his personal health,” adding the lawsuit was the “latest effort in their public campaign to circumvent Pat Bowlen’s wishes.”

Bowlen died in June at age 75 after a long battle with Alzheimer’s. He put the trust in place hoping that one of his seven children would succeed him in running the Broncos, a team he purchased in 1984. In addition to the two daughters, he had with his first wife, Sally Parker, Pat Bowlen had five children (Patrick, Johnny, Brittany, Annabel, and Christianna) with his widow, Annabel.

Wallace said in 2018 that she wanted to succeed her father, but the trustees said she was “not capable or qualified.” Likewise, Brittany Bowlen said last fall that she wanted to become the next controlling owner of the Broncos team. She will become part of the team in November in a management position to begin that process.

Reilly said that Wallace and Klemmer never raised the issue of mental capacity until after 2014 “when Ms. Wallace was privately told by the trustees that she was not capable or qualified to serve as controlling owner.”

Last month, Arapahoe County Court Judge John E. Scipione dismissed a lawsuit filed by Bowlen’s brother, Bill. That suit that sought to oust team president and CEO Joe Ellis, team counsel Rich Slivka, and Denver lawyer Mary Kelley as trustees. Bill argued that they weren’t acting in good faith or in Pat’s best interests.

The judge ruled in a separate case over the trust that the court and not the NFL would decide the question of Pat’s mental capacity at the time he updated his estate planning documents 10 years ago.

The trust also has a no-contest clause. In electing to challenge the validity of the trust in court, Wallace and Klemmer are putting themselves at risk of being disinherited, if they’re found in violation of the no-contest clause, and the 2009 trust is upheld in court. Their rights as beneficiaries would bypass them and go to their children.

Reference: Colorado Public Radio (September 14, 2019) “Pat Bowlen’s Kids Are Still Fighting Over Inheritance As 2 Daughters File Lawsuit”

Don’t Forget to Update Your Estate Plan

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There are some people who sign their will once in their life and never change it. They may have executed their estate plan late in life, or after they were diagnosed with a serious disease. However, even if your family life and finances are pretty basic, there are still changes in the law that you may need to incorporate into your estate plan.  Some of the people that you named in your will could also have died or moved away.

Forbes’ recent article, “Why You Should Change Your Will Now,” warns us that if you’ve taken the “one and done” approach to your estate plan, think again. In addition to the reasons already mentioned, your assets may have changed dramatically since you signed your will and other estate plan documents. The plan you put in place years ago may not have considered new federal and state estate taxes. Now that you’ve accumulated significant wealth that will be passed on to your children, you might need to review your plans for that wealth for your children.

You may want to include grandchildren to help pay for their college education. It is also not uncommon for parents to want to protect their children from themselves. This can be because of addiction issues or a lack of financial literacy. If that’s an issue, some parents elect to hold monies in trust for adult children, as a way to ensure that the funds will be there throughout the child’s lifetime.

A person’s estate plan should grow with them over time. An estate plan for a twenty-something may be very basic, but a newly-married couple will want to include provisions for their spouse. Parents need to think about providing for and protecting their children. Adult children have another set of concerns and you need to prepare for the possibility of divorcing spouses, poor life choices, addiction issues, and just poor money management. There are many stages in life when you may need to readjust the provisions for your children in your estate planning documents.

If you haven’t looked at your estate plan in a while, do it now.

Reference: Forbes (August 27, 2019) “Why You Should Change Your Will Now”