Do Your Credit Card Debts Die with You?
Do Your Credit Card Debts Die with You?

Do Your Credit Card Debts Die with You?

Can you imagine what people would do, if they knew that credit card debt ended when they passed away? Run up enormous balances, pay for grandchildren’s college costs and buy luxury cars, even if they couldn’t drive! However, that’s not how it works, says U.S. News & World Report in the article that asks What Happens to Credit Card Debt When You Die?”

The executor of your estate, the person you name in your last will and testament, is in charge of distributing your assts and that includes paying off your debts. If your credit card debt is so big that it depletes your assets, your heirs may be left with little or no inheritance.

If you’re concerned about loved ones being left holding the credit card bag, here are a few things you’ll need to know. Note that some of these steps require the help of an experienced estate planning attorney.

Who pays for those credit card debts when you’re gone? Relatives don’t usually have to pay for the debts directly, unless they are entwined in your finances. Some examples:

  • Co-signer for a credit card or a loan
  • Jointly own property or a business
  • Lives in a community property state (Alaska, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin
  • Are required by state law to pay a debt, such as health care costs, or to resolve the estate.

A spouse who has a joint credit card account must continue to make on-time payments. A surviving spouse does not need the shock of learning that their spouse was carrying a massive credit card debt, since they are liable for the payments. A kinder approach would be to clear up the debt.

How do debts get paid? The probate process addresses debts, unless you have a living trust or make other arrangements. The probate court will determine the state of your financial affairs, and the executor, one you name or if you die without a valid will, the administrator named by the court, will be responsible for clearing up your estate.

An unmarried person who dies with debt and no assets, is usually a loss for the credit card company, if there’s no source of assets.

If you have assets and they are left unprotected, they may be attached by the creditor. For instance, if there is a life insurance policy, proceeds will go to beneficiaries, before debts are repaid. However, with most other types of assets, the bills get paid first, and then the beneficiaries can be awarded their inheritance.

The first debt that must be paid is secured debt, like the balance of a mortgage or a car loan. The administration and lawyer fees are paid next, and then unsecured debt, including credit cards, are paid.

How can you protect loved ones? A good estate plan that prepares for this situation is the best strategy. Having assets placed in trusts protects them from probate and creditors. A trust also allows beneficiaries to save time and money that might otherwise be devoted to the probate process. It also puts them in a better position, if the executor needs to negotiate with the credit card company.

Talk candidly with your estate planning attorney and your loved ones about your debts, so that a plan can be put into place to protect everyone.

Reference: U.S. News & World Report (August 19, 2019) “What Happens to Credit Card Debt When You Die?”

 

Florida Estate Planning Tips for New Parents

In the excitement of doing all the practical things expectant parents must do to prepare for the arrival of a new baby, there are some very important practical estate planning issues that are often overlooked.  Part of the responsibility of being a parent is to oversee the welfare of your children; if you are expecting, you may want to consider taking these estate planning steps now:

Life insurance – purchase a life insurance policy to provide support for your new child if one wage-earning parent dies unexpectedly.

Trust – setting up a trust for your child with a distribution option for when he or she reaches adulthood will help protect assets as well as provide for your child.

Gifts – there are tax advantages to gifting portions of your estate to your children while you are still alive, which can reduce your estate taxes.

Guardian – select a guardian for your child as part of a comprehensive Florida estate plan.

Will – create or update a will to include your new child.

The Dorcey Law Firm, PLC is a Florida Estate Planning, Asset Protection and Business Planning law firm with offices in Fort Myers, Florida and Naples, Florida. Our firm is dedicated to its clients, the rule of law and the betterment of the Southwest Florida community.

It is our goal to provide our clients with the highest level of legal services in the areas of Last Will and Testaments, Living Trust, Irrevocable Trusts, Estate Planning, Asset Protection, and complete Business Planning. If you or someone you know needs information on Florida estate planning, please contact us today at 239-418-0169 to schedule your free consultation.

Common Estate Planning Mistakes to Avoid

Estate planning attorneys see them all the time: the mistakes that people make when they try to create an estate plan or a will by themselves. They learn about it, when families come to their offices trying to correct mistakes that could have been avoided just by seeking legal advice in the first place. That’s the message from the article “Five big estate planning ‘don’ts’ from Dedham Wicked Local.

Here are the five estate planning mistakes that you can easily avoid:

Naming minors as beneficiaries. Beneficiary designations are a simple way to avoid probate and be certain that an asset goes to your beneficiary at death. Most life insurance policies, retirement accounts, investment accounts and other financial accounts permit you to name a beneficiary. Many well-meaning parents (and grandparents) name a grandchild or a child as a beneficiary. However, a minor is not permitted to own an asset. Therefore, the financial institution will not name the minor child as the new owner. A conservator must be appointed by the court to receive the asset on behalf of the child and they must hold that asset for the minor’s benefit, until the minor becomes of legal age. The conservator must file annual accountings with the court reflecting activity in the account and report on how any funds were used for the minor’s benefit, until the minor becomes a legal adult. The time, effort, and expense of this are unnecessary. Handing a large amount of money to a child the moment they become of legal age is rarely a good idea. Leaving assets in trust for the benefit of a minor or young adult, without naming them directly as a beneficiary, is one solution.

Drafting a will without the help of an estate planning attorney. The will created at the kitchen table or from an online template is almost always a recipe for disaster. They don’t include administrative provisions required by the state’s laws, provisions are ambiguous or conflicting and the documents are often executed incorrectly, rendering them invalid. Whatever money or time the person thought they were saving is lost. There are court fees, penalties and other costs that add up fast to fix a DIY will.

Adding joint owners to bank accounts. It seems like a good idea. Adding an adult child to a bank account, allows the child to help the parent with paying bills, if hospitalized or lets them pay post-death bills. If the amount of money in the account is not large, that may work out okay. However, the child is considered an owner of any account they are added to. If the child is sued, gets divorced, files for bankruptcy or has trouble with creditors, that bank account is an asset that can be reached.

Joint ownership of accounts after death can be an issue, if your will does not clearly state what your intentions are for that account. Do those funds go to the child, or should they be distributed between heirs? If wishes are unclear, expect the disagreements and bad feelings to be directly proportionate to the size of the account. Thoughtful estate planning, that includes power of attorney and trust planning, will permit access to your assets when needed and division of assets after your death in a manner that is consistent with your intentions.

Failing to fund trusts. Funding a trust means changing the ownership of an asset, so the asset is owned by the trust or designating the trust as a beneficiary. When a trust is properly funded, assets funding the trust avoid probate at your death. If your trust includes estate tax planning provisions, the assets are sheltered from estate tax at death. You have to do this before you die. Once you’re gone, the benefits of funding the trust are gone. Work closely with your estate planning attorney to make sure that you follow the instructions to fund trusts.

Poor choices of co-fiduciaries. If your children have never gotten along, don’t expect that to change when you die. Recognize your children’s strengths and weaknesses and be realistic about their ability to work together, when deciding who will make financial decisions under a power of attorney, health care decisions under a health care proxy and who will best be able to settle your estate. If you choose two people who do not get along, or do not trust each other, it will take far longer and cost more to settle your estate. Don’t worry about birth order or egos.

The sixth biggest estate planning mistake people make, is failing to review their estate plan every few years. Estate laws change, tax laws change and lives change. If it’s been a while since your estate plan was reviewed, make an appointment to meet with your estate planning attorney for a review.

If you would like more information on how estate planning can help you protect your assets from incapacity or other threats, contact our Fort Myers law firm to schedule your free consultation.

Reference: Dedham Wicked Local (May 17, 2019) “Five big estate planning ‘don’ts’”

 

Why You—and Everyone—Needs an Estate Plan

Why You—and Everyone—Needs an Estate Plan:    At its essence, estate planning is any decision you make concerning your property if you die, or if you become incapacitated. There are a number of things to keep in mind when creating an estate plan, says KTUU in the article “Estate planning dos and don’ts.”

The first task is not what most people think. It’s very basic: making a list of all of your assets and how they are titled. Remember, the estate plan is dealing with the distribution of your assets—so you have to first know what those assets are. If you are old enough to have lived through the sale of several different financial institutions, do you know where your accounts are? Not everyone does!

Next, you need to be clear on how the assets are titled. If they are joint with a spouse, Payable on Death (POD) or Transfer on Death (TOD), jointly with a child, or owned by a trust, they may be treated differently in your estate plan, than if you owned them outright.

Roughly fifty percent of all adults don’t make a plan for their estate. That becomes a huge headache for their loved ones. If you don’t have an estate plan, your property will be distributed according to the laws of your state. What you do or don’t want to have happen to your property won’t matter, and in some instances, your family may be passed over for a long-lost sibling. It’s a risk.

In addition, if you don’t have an estate plan, chances are you haven’t done any tax planning. Some states have inheritance taxes, others have estate taxes, and some have both. Even if your estate’s value doesn’t come anywhere close to the very high federal estate tax level ($11.4 million per person for 2019), your heirs could inherit far less, if state and inheritance taxes take a bite out of the assets.

For a blended family, there are a number of rules in different states that divide your assets. In Alaska, for instance, if some of the children of one spouse are not the children of the other spouse, there is a statutory formula that depends on how many children there are and which of them are living. Different percentages of money are awarded to the children, which becomes complicated.

Another reason to have an estate plan has to do with incapacity. This is perhaps harder to discuss than death for some families. Estate planning includes preparing for what the individual would want to happen, if they were injured or too sick to convey their wishes to others. Decisions about health care treatments and end-of-life care are documented with a Living Will (sometimes called an Advanced Care Directive), so your loved ones are not left wondering what you would have wanted and hoping that they got it right.

One last point about an estate plan: be sure to check beneficiary designations while you are doing your estate plan. If you own retirement accounts, life insurance policies, or other assets with named beneficiaries, the assets will pass directly to the named beneficiary, regardless of the instructions in your will. If you opened an IRA when you had one child and have had other children since then, make sure to include all of those children and the proportion of their shares. There may be tax implications, if only one child receives the assets, and there may also be family fights if assets are not distributed equally.

Reference: KTUU (August 14, 2019) “Estate planning dos and don’ts”

 

Where There’s A Will, There’s Not Always An Estate Plan

When I ask retirees if they have an updated estate plan in place, I get a mix of responses. Some people recognize their estate plan is lacking, as millions of Americans either don’t have one or have an outdated plan that doesn’t align with their life anymore. Other people believe they have an updated estate plan, but even this group is mistaken. Their “estate plans” are really just wills.

Wills have been the go-to estate planning documents for generations. They dictate guardianship guidelines and transfer aspects of your property and assets. Wills are an important component of estate planning, however they’re just one piece of it.

In order to control the spending or investing of your assets after death, you need to use a trust (living or Testamentary) or other instrument. If you give your money to someone in your will, including your feelings or best wishes likely won’t have any binding effect on their spending. A trust manages assets after your death and controls the spending patterns of your heirs – a must-have if you’re worried about their spending behavior.

A proper estate plan will need to address items like liquidity for the estate and naming heirs. This requires a thorough review of potential estate costs, income taxes and any potential estate taxes (either federal or state). Factor in your heirs to see if they’ll need cash or income after you pass away. If the estate has a significant liquidity need or heirs have an income need, life insurance could be used as a tax efficient way to pass wealth and liquidity to heirs or the estate.

In addition to liquidity reviews, you also need to review your assets. You need to know where they’re located and who has title to them. Incorrect titling or improper ownership of assets causes huge headaches for estates. Examples of improper ownership include: outright owning all your property and not splitting ownership with your spouse; owning business assets personally; owning assets a trust should. These mistakes can undermine an otherwise well put-together estate plan.

Estate Planning In This Day and Age

Technology nowadays brings new challenges to estate planning. In the past few years, most states have passed a law called the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). It allows wills, trusts, power of attorney and other documents to provide written instructions about granting access to digital assets to designated fiduciaries.

Under RUFADAA, if proactive planning and language specific to digital asset communications aren’t added into estate planning documents, access could be denied and the assets would be lost forever. If you haven’t updated your estate plan in the last two years, it likely doesn’t incorporate digital assets. An out-of-date plan places families, estates and businesses at risk.

Another aspect of estate planning that’s often overlooked is beneficiary designation planning. While wills, trusts, contracts, and how assets are titled control a lot of the estate planning process, beneficiary designations are extremely important.

The Benefit of Designations

Beneficiary designations transfer retirement accounts, taking precedence over a will or trust. If you don’t update your beneficiary designations or fill them out properly for your life insurance, 401(k) or IRAs, you could be undercutting your estate plan. Review these every few years or after major life events like divorce, marriage, birth of a child or a death of a loved one to make sure they’re still working in relation with your overall estate planning goals.

Here’s an example of why staying on top of beneficiary designations is so critical. If you had a 401(k) and got divorced, your ex-spouse could’ve received a divided lump-sum payout of your account under a qualified domestic relations order. However, if you forgot to remove the ex-spouse from the beneficiary designation on the 401(k) and died years later, they could be entitled to the entire 401(k) – even if you remarried and changed your will.

Too often we focus on the now at the cost of long-term planning and the future. But long-term planning, like estate planning, is crucial to protecting what we have today and taking care of our loved ones for the future.

Out of date estate plans could cause assets to pass to undesirable parties like the government or an unintended beneficiary, or to be taxed at higher rates. Estate plans don’t only involve a will. It needs to include titling of assets, beneficiary designations, valuation of property, liquidity and keeping things updated. Take the time to update your estate plan, because it’s more than just a will – it’s a way.

Forbes 

Planning for the Unexpected

Planning for the Unexpected: Sadly, this is not an unusual situation. The daughter spoke with her mother once or twice a week, and the fall happened just after their last conversation. She dropped what she was doing and drove to the hospital, according to the article “Parents” in BusinessWest.com. At the hospital, she was worried that her mother was suffering from more than fractures, as her mother was disoriented because of the pain medications.

The conversation with her brother and mother about why she wasn’t notified immediately was frustrating. They “didn’t want to worry her.” She was worried, and not just about her mother’s well-being, but about her finances, and whether any plans were in place for this situation.

Her brother was a retired comptroller, and she thought that as a former financial professional, he would have taken care of everything. That was not the case.

Despite his professional career, the brother had never had “the talk” with his mother about money. No one knew if she had an estate plan, and if she did, where the documents were located.

All too often, families discover that no planning has taken place during an emergency.

The conversation took place in the hospital, when the siblings learned that documents had never been updated after their father had passed—more than 20 years earlier! The attorney who prepared the documents had retired long ago. The originals? Mom had no idea. The names of her banks and financial institutions had changed so many times over the years, that she wasn’t even sure where her money was.

For this family, the story had a happy ending. Once the mother got out of the hospital, the family made an appointment to meet with an estate planning attorney to get all of her estate planning and elder law planning completed. In addition, the family updated beneficiaries on life insurance and retirement accounts, which are now set to avoid probate.

Both siblings have a list of their mother’s assets, account numbers, credit card information and what’s more, they are tracking the accounts to ensure that any sort of questionable transactions are reviewed quickly. They finally have a clear picture of their mother’s expenses, assets and income.

If your family’s situation is closer to the start of the story than the end, it’s time to contact a qualified estate planning attorney who is licensed to practice in your state and have all the necessary preparation done. Don’t wait until you’re uncovering family mysteries in the hospital.

If you would like more information on how to start your estate planning now, contact our Fort Myers law firm to schedule your free consultation 239-418-0169

Reference: BusinessWest.com (Aug. 1, 2019) “Parents”

 

7 Tips on How to Avoid a Will Contest

7 Tips on How to Avoid a Will Contest:  The last few years have seen a noticeable increase in the number of will contest cases being litigated in the U.S.  Florida probate law does not allow for no-contest provisions in a will; however there are other strategies to head off a potential will contest.

Here are seven tips that estate planning experts advise clients to take to minimize the chance their wills will be contested:

  1. Hire a good estate planning lawyer. While it is fairly easy to draft a will online these days, these wills do not always take into consideration your individual circumstances and the family dynamics that could trigger a will contest.
  2. Choose the right executor and trustees. Don’t appoint relatives who don’t get along.
  3. Talk to your family about your intentions now. Inform family members of your intentions to alleviate future misunderstandings.
  4. Be aware of state laws. Laws vary from state to state; if you hire a good estate planning attorney, you can avoid probate and sidestep other pitfalls.
  5. Confirm your estate plan over time. If you confirm your estate plan, it makes it harder to contest your estate.
  6. Make sure you have titled assets clearly and correctly. And ensure they match the provisions of your will.
  7. Don’t try to manage your estate from the grave. Consider letting heirs make some minor determinations on how assets like tangible personal property are divided.

The best way to help avoid a will contest is to be sure your will is prepared by a legal professional.  Contact our Fort Myers estate planning law firm to learn more about creating a will.

4 Estate Planning Steps to Protect Assets from a Dementia Diagnosis

It is estimated that 1 in 8 Americans will suffer from some form of dementia after the age of 65; here are 4 estate planning steps that can help protect assets in case you or someone you love becomes incapacitated:

Assemble a team of elder care experts – this can include an elder law and/or estate planning attorney, a financial planner, a CPA, etc.  A team of trusted advisors is essential to help you plan for how your assets will be managed and how decisions will be made about your care in case of
incapacity.

Establish advance directives – advance directives – including a living will, financial power of attorney, health care power of attorney, and medical health care power of attorney – provide for the seamless transfer of decision-making abilities for your care.

Establish a revocable living trust – this will allow your assets to be managed by who you want and how you want without the court getting involved in your affairs.

Have a long-term plan – the time to create a long-term plan is before you need it. People with dementia can live for many years, and the cost to maintain a good quality of life can be a heavy financial burden for a family.   A long-term plan may include funding a long-term care insurance policy, or strategies for spending down assets to qualify for state or federal assistance programs.

If you would like more information on how estate planning can help you protect your assets from incapacity or other threats, contact our Fort Myers law firm to schedule your free consultation. 239-418-0169.

 

Best Place to Retire Depends on Advance Planning

There are a variety of “Best Places to Retire” lists and websites, and DavidRamsey.com recently studied them all to compile a “2019 Best Cities to Retire” list when it comes to choosing where you want to live when you retire.

However, as the article notes, where you spend your retirement years depends on a lot more than just whether you like the ocean or the mountains.  It depends on how well you plan for retirement and several other factors, including:

How many kids you have and when you have them.  Older parents will spend more on raising kids today than those who started young, with college expenses conceivably carrying over into the retirement years.  Those with large families also spend more rather than being able to sock money away for retirement.

When you begin saving for retirement.  The earlier, the better is the guideline for retirement saving.  Those who begin saving at 25 rather than 45 have 20 more years of growth to enjoy in retirement.

What you spend your money on now.  If you like to spend your money on big-ticket items like expensive cars, boats or luxury vacations, that is less you could be saving for retirement.  People who keep their debt low and bargain shop are statistically better prepared for retirement.

Your occupation.  Chances are that higher earning professionals like doctors and lawyers can afford to put more money away for retirement in later years.

So what places make the Top 10 Best Places to Retire lists consistently?  They are:  (1)Lancaster, Pennsylvania (2)Fort Myers, Florida (3)Sarasota, Florida, (4)Austin, Texas (5)Pittsburgh, Pennsylvania (6)Grand Rapids, Michigan (7)Nashville, Tennessee (8)San Antonio, Texas (9)Dallas-Fort Worth, Texas (10) Lakeland, Florida.

The Dorcey Law Firm, PLC is an Estate Planning, Asset Protection and Business Planning law firm with offices in Fort Myers, Florida and Naples, Florida. Our firm is dedicated to its clients, the rule of law and the betterment of the Southwest Florida community

5 Great Reasons to Start Your Estate Planning Now

5 Great Reasons to Start Your Estate Planning Now

We will continue to stress that planning ahead is key; it is essential to providing for your family in a meaningful way, and the only way to transform your family for generations to come. 

  1. The plan the state has provided for you. If you don’t create your own estate plan, the state has provided one for you. In this situation your property goes through the probate process, which is not only lengthy and expensive, but in the end the courts get to decide where your assets will go.

  2. The foster care system. Neglecting to nominate guardians for your minor children means that the state is responsible for them should something happen to you. Without any direction on your part, your children could end up in the care of your nearest living relative, being put in the care of whoever happens to step forward, or—worst case scenario—in the foster care system.

  3. Estate taxes and administrative expenses. With no plan, much of your estate could end up going to the government or being drained by unnecessary administrative expenses rather than going to your heirs in a safe and efficient manner.

  4. Your ex-spouse. If you are separated or divorced, your ex-spouse could still be listed as the recipient on the retirement accounts or life insurance policies obtained while you were still married.

  5. Your family’s financial privacy. Once a will has been submitted to the probate courts it becomes a public document. Only a trust will keep your financial affairs away from the prying eyes of possible predators.

If you would like more information on how to start your estate planning now, contact our Fort Myers law firm to schedule your free consultation.