Living Together Isn’t as Simple as You Think

Living Together Isn’t as Simple as You Think:  One reason for the popularity of living together without marriage, is that many in this generation have experienced one or more difficult divorces, so they’re not always willing to remarry, says Next Avenue in the article “The Legal Dangers of Living Together.” However, like many aspects of estate planning, what seems like a simple solution can become quite complex. Unmarried couples can face a variety of problematic and emotionally challenging issues, because estate planning laws are written to favor married couples.

Consider what happens when an unmarried couple does not plan for the possibility of one partner losing the ability to manage his or her health care because of a serious health issue.

If a spouse is rushed to the hospital unconscious and there is no health care power of attorney giving the other spouse the right to make medical decisions on his or her behalf, a husband or wife will likely be permitted to make them anyway.

However, an unmarried couple will not have any right to make medical decisions on behalf of their partner. The hospital is not likely to bend the rules, because if a blood relative of the person challenged the medical facility’s decision, they are wide open to liability issues.

Money is also a problem in the absence of marriage. If one partner becomes incapacitated and estate planning has not been done, without both partners having power of attorney, an illness could upend their life together. If one partner became incapacitated, bank accounts will be frozen, and the well partner will have no right to access any assets. A court action might be required, but what if a family member objects?

Without appropriate advance planning, courts are generally forced to rely on blood kin to take both financial and medical decision-making roles. An unmarried partner would have no rights. If the home was owned by the ill partner, the unmarried partner may find themselves having to find new housing. If the well partner depended upon the ill partner for their support, then they will have also lost their financial security.

Unmarried couples need to execute key estate planning documents, while both are healthy and competent. These documents include a durable power of attorney, a medical power of attorney and a living will, which applies to end of life decisions. A living trust could be used to avoid the problem of finances for the well partner.

Another document needed for unmarried couples: a HIPAA release. HIPAA is a federal health privacy law that prevents medical facilities and health care professionals from sharing a patient’s medical information with anyone not designated on the person’s HIPAA release form. Unmarried couples should ask an estate planning attorney for these forms to be sure they are the most current.

If one of the partners dies, and if there is no will, the estate is known as intestate. Assets are distributed according to the laws of the state, and there is no legal recognition of an unmarried partner. They won’t be legally entitled to inherit any of the assets.

If a married partner dies without a will in a community property state, the surviving spouse is automatically entitled to inherit as much as half the value of the deceased assets.

Beneficiary designations usually control the distribution of assets including life insurance policies, retirement accounts and employer-sponsored group life insurance policies. If the partners have not named each other as beneficiary designations, then the surviving partner will be left with nothing.

The lesson for couples hoping to avoid any legal complications by not getting married, is that they may be creating far more problems than are solved as they age together. An experienced estate planning attorney will be able to make sure that all the correct planning is in place to protect both partners, even without the benefit of marriage.

It is our goal to provide our clients with the highest level of legal services in the areas of Last Will and TestamentsLiving TrustIrrevocable TrustsEstate PlanningAsset 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.

Reference: Next Avenue (Aug. 28, 2019) “The Legal Dangers of Living Together.”

 

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?”

 

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.

Times Are Tough: Could Your Children Use Some Money Now?

In these tough economic times, those parents who have buttoned up their Florida estate plan to leave everything to their children and grandchildren upon their deaths may want to think about loosening the strings a little before they go and receive the added benefit of saving on estate taxes as well.

A married couple can provide a gift of $30,000 per year to a child or grandchild with no gift tax due.  In 2019, the number of gifts you can give as a couple is unlimited, but it is restricted to no more than $30,000 per calendar year per married couple, or $15,000 per year per spouse.

Generally speaking, the recipient of your gift will not have to pay any federal gift tax or income tax.  And it shouldn’t affect your federal income tax either.

With many adults jobless and their children struggling as well, this could be a financial lifesaver for family members who need the help now, not when you’re gone.  Even if the recipient is not jobless, the extra money can help fund retirement accounts or pay off debt that will result in a much better financial life for your loved ones.

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.

It is our drive 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 assistance with Florida estate planning, please contact us today to schedule your free consultation.

Thoughtful Retirement Planning Leaves Wives More Financially Stable

Thoughtful Retirement Planning Leaves Wives More Financially Stable:  Statistics show that typically, wives outlive their husbands by up to a decade.  Sadly, the incidence of poverty for women older than 65 is over 12 percent, considerably more than for men within the same age group.

The key reason is that most of the couples’ financial resources will likely be spent during the last few years of the husband’s life on healthcare costs as well as long-term care.

What do you do?  Here are some ideas:

Ascertain how much you will need to save for retirement in order to produce a dependable life-long income.

The person who has the larger salary history (generally the husband) will be able to maximize their Social Security benefits by not taking them until age 70 or beyond.

Plan for your 401(k) accounts and retirement savings to last until both of you are gone.

Have a good system for dealing with long-term health care expenses.

If one of you has a considerable benefit from a pension plan and you have a choice to elect a joint and survivor annuity, take it — the majority of retired people outlive a lump sum payment.

Attempt to keep in top shape through employing healthy and balanced habits.

Make an effort to retire without having lots of debt – specifically, try to pay off your mortgage loan prior to retirement.

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.

It is our drive 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 assistance with Florida retirement planning, please contact us today to schedule your free consultation.

5 Things to Know to Reduce Tax on Capital Gains

Although it is often said that nothing is certain except death and taxes, the one tax you may be able to avoid or minimize most through planning is the tax on capital gains. Here’s what you need to know to do such planning:

What is capital gain?  Capital gain is the difference between the “basis” in property (usually the purchase price of property) and its selling price. So, if you purchased a house for $250,000 and sold it for $450,000 you would have $200,000 of gain ($450,000 – $250,000 = $200,000). However, the basis can be adjusted if you spend money on capital improvements. For instance, if after buying your house you spent $50,000 updating the kitchen, the basis would now be $300,000 and the gain on its sale for $450,000 would be $150,000 ($450,000 – ($250,000 + $50,000) = $150,000). Just make sure you keep good records of any capital improvements in order to prove them in the event of an audit.

Exceptions to the tax?  First, if you owned the property for less than a year, you would be subject to short-term capital gains tax rates, which are essentially the same rates as income tax. Second, if your taxable income, including the capital gains, is $38,600 or less for a single person and $77,200 for a married couple (in 2018), there’s no federal tax on capital gain. But beware that the capital gains will be included in the calculation and could put you over the threshold. Third, if your income is more than $425,800 for a single person and $479,000 for a married couple (in 2018), the federal capital gains tax rate is 20 percent, bringing the combined federal and assumed state rate up to just over 25 percent.

Personal Residence Exclusion. You may exclude up to $250,000 for an individual, or $500,000 for a married couple, of gain on the sale of your personal residence. To qualify, you (or your spouse) must have lived in and owned the house for at least two out of the five years prior to the sale. If you are a nursing home resident, the two-year requirement is reduced to one year.

Carry-Over v. Step-Up in Basis. If you give property to someone else, they receive it with your basis. So, if your parents give you a vacation home they bought for $25,000 and now its fair market value is $500,000, your basis will also be $25,000.  If you sell it, your gain is $475,000. On the other hand, the basis in inherited property gets adjusted to the value on the date of death. If your parents passed the vacation home on to you at death rather than giving it to you during life, the basis would be adjusted to $500,000, potentially saving you hundreds of thousands on its sale. Similar types of savings can be realized with the appropriate use of trusts.

To inquire into saving on capital gains taxes, ensuring as much of your legacy gets passed on as possible, please contact our office for a free consultation at (239) 418-0169.

 

New free service alerts property owners from potential property fraud

New free service alerts property owners from potential property fraud

FORT MYERS, FLA (Aug. 19 2019) – Lee County property owners can now sign up for a new free service to alert themselves of potential property fraud, Clerk Linda Doggett announced today.

Property Fraud Alert emails notifications to subscribers within 48-hours whenever a lien, deed, mortgage or other land record with their registered name on it has been recorded into the Clerk’s Official Records. This notification does not apply to documents filed in court proceedings.

According to the FBI, property and mortgage fraud is one of the fastest growing white-collar crimes. Scammers file fraudulent deeds, making it appear as if they own the property. This type of fraud can go undetected if the property owner does not periodically check the Official Records. Although checking does not prevent the actual fraudulent activity from occurring, it does provide an early warning of what may have otherwise gone undetected.

“We invest in insurance and security systems to protect valuables inside our houses, but we often forget about our actual homes and property,” Doggett said.

All property owners in Lee County are encouraged to sign up and begin protecting their property. To subscribe or learn more, visit LeeClerk.org/propertyfraud.

After registering and confirming your email address, any time a document is recorded in Lee County that matches the name that you registered, you will be alerted by email. A link is provided in the email to easily view the recorded document.

If you register with a common name, you may receive an alert for a legitimate record that pertains to another individual with the same name.

“Reviewing your property records is an important way to protect you from fraud. I encourage you to sign up today and take advantage of this free service” Doggett said.

Anybody who believes they have been the victim of property fraud should contact the Lee County Sheriff’s Office at 239-477-1000.

https://www.leeclerk.org/about-us/spotlight

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