Blended Families Need More Thoughtful Estate Plans

Estate planning for blended families is like playing chess in three dimensions: even those who are very good at chess can struggle with so many moving parts in so many dimensions. Preparing an estate plan requires careful consideration of family dynamics, and those are multiplied in blended families. This is another reason why estate plans need to be tailored for each family’s circumstances, as described in the article “Blended families have unique considerations in estate planning” from The News Enterprise.

The last will and testament is often considered the key document in an estate plan. But while the will is very important, it has certain limitations and a few commonly used estate planning strategies can result in unpleasant endings, if this is the only document used.

Spouses often leave everything to each other as the primary beneficiary on death, with all of their children as contingent beneficiaries. This is based on the assumption that the second spouse will remain in the family home, then will distribute any proceeds equally between the children, if and when they move or die. However, the will can be changed at any time before death, as long as the person making the will has mental capacity. If when the first spouse dies, the relationship with the surviving children is not strong, it is possible that the surviving spouse may have their will changed.

If stepchildren don’t have a strong connection with the surviving spouse, which occurs frequently when the second marriage occurs after the children are adults, things can go wrong. Their mutual grief at the passing of the first spouse does not always draw stepchildren and stepparents together. Often, it divides them.

The couple may also select different successor beneficiaries. The husband may name his wife first, then only his children in his will, while the wife may name her husband and then her children in her will. This creates a “survival race.” The surviving spouse receives the property and the children of the spouse who passed won’t know when or if they will receive any assets.

Some couples plan on using trusts for property distribution upon death. This can be more successful, if planned properly. It can also be just as bad as a will.

Trust provisions can be categorized according to the level of control the surviving spouse has after the death of the first spouse. A trust can be structured to lock down half of the trust assets on the death of the first spouse. The surviving spouse remains as a beneficiary but does not have the ability to change the ultimate distribution of the decedent’s portion. This allows the survivor the financial support they need, giving flexibility for the survivor to change their beneficiaries for their remaining share.

Not all blended families actually “blend,” but for those who do, a candid discussion with all, possibly in the office of the estate planning attorney, to plan for the future, is one way to ensure that the family remains a family, when both parents are gone.

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 TrustsEstate Planning, Probate, 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.

Reference: The News Enterprise (November 4, 2019) “Blended families have unique considerations in estate planning”

 

Should I Use a Trust to Protect My Children’s Inheritance?

Should I Use a Trust to Protect My Children’s Inheritance? Parents with savings have several options for their children’s future inheritances.

nj.com’s recent article answers this question: “We have $1.5 million. Should we get a trust for our children’s inheritance?” According to the article, parents could create lifetime trusts or trusts in their wills for the benefit of the surviving spouse during the spouse’s lifetime.

After that, they can have the remainder of the assets pass in trusts for each of the children, until they reach a certain age or ages.

A lifetime trust is a type of trust that’s created during an individual’s lifetime. This is different from a testamentary trust, which is a trust created after a person’s lifetime through the operation of that person’s will.

Usually the individual who settles the trust (the “Grantor”) will retain control over the assets in the trust, including the right to revoke the assets during his or her lifetime. These forms of lifetime trusts are known as grantor trusts.

Another option is to have these types of trusts continue for the benefit of the grandchildren.

The children’s trusts can have instructions that the assets and income are to be used for the health, maintenance, education and support of the child.

The parents would need to name a trustee or co-trustee. This is the person who’s responsible for investing the assets, filing tax returns and paying taxes (if necessary). He or she will also distribute the assets, according to the terms of the trust.

Trusts are complicated business, so meet with an experienced estate planning attorney to determine the best strategies based on your circumstances and goals.

Reference: nj.com (October 16, 2019) “We have $1.5 million. Should we get a trust for our children’s inheritance?”

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 TrustsEstate Planning, Probate, 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”

 

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.

Living Trusts Play an Important Role in Estate Planning

A primary purpose of estate planning is making sure your assets are designated correctly so that they pass automatically, allowing an estate to avoid probate.

Some common examples of assets that are not subject to probate include:

  • A life insurance policy or annuity payable to a specific recipient
  • A joint bank account or investment account that includes right of survivorship
  • Real property titled as “joint tenants with right of survivorship”
  • Property owned jointly by spouses as “tenants by the entirety”
  • Assets placed into a revocable living trust or an irrevocable trust
  • Assets removed from an estate via lifetime gifts or qualifying trusts
  • Accounts designated as “payable on death” or “transfer on death”

Simply having a will that subjects your estate to probate is not sufficient to protect assets against taxes, including income tax, capital gains tax, estate tax, inheritance tax, generation skipping transfer tax and gift tax.

Smart estate planning, including the use of a living trust, can help your heirs avoid the time and expense of probate and ensure they inherit the funds you intend for them to receive in a timely manner.

If you would like more information on how the use of trusts in estate planning can help you protect your assets, contact our Fort Myers law firm to schedule your free consultation.

Making Sure Your Aging Parent has the Correct Estate Plan in Place

It’s a delicate discussion, but when parents are aging, their children should find out if their parents have several basic estate planning documents in place and talk about their final wishes. If they have not done any planning, now is the time—before a crisis occurs.  Here at The Dorcey Law Firm, our goal is to transform families for generations to come; something we can only do through proper proactive planning.

The Monterey Herald’s recent article, “Financial planning: Making sure Mom is taken care of,” says to first make sure that they have their basic estate planning documents – a will or trust, power of attorney, and advanced healthcare directives – in place. It is important to be sure these documents fully reflect your parent’s desires. An advanced healthcare directive lets them name a person to make health care decisions on their behalf, while a power of attorney allows a named person to make financial decisions.

Based on the way in which the forms are written, the agent or surrogate can have broad authority, including the ability to access bank accounts, consent to or refuse medical treatment, or to leave instructions for health care.  Big decision, such as whether or not to be resuscitated or have life prolonged artificially, can also be put in writing, thus removing this tough choice from a child or other loved one. To limit these instructions in any specific way, it is important to talk with an experienced attorney, and have these wishes in writing.

Another key document to have is a last will & testament or living trust.  When determining if a trust is advisable, there are many factors to consider, particularly when the goal is to avoid probate after passing away.  These factors include the type of assets, and whether they are held jointly or allow for beneficiary designations; the beneficiaries ages and financial stability; whether planning for future divorce or creditor is a concern; and many more. You should conduct a full inventory of your parent’s accounts, including where they are held and how they are titled, as well as gathering the named beneficiaries on all accounts and policies.

It is also important not to make any major changes without consulting your attorney first.  For example, if your parent has a brokerage account with low-cost basis investment, you will not want to change this to a joint ownership account. The step-up in cost basis that assets receive at the time of death makes it better for the account to remain in their individual name. While you may gain control of the asset doing that (something that can also be accomplished through the power of attorney), you will lose the step up in basis.  A beneficiary designation may suffice.

To inquire more on how our law firm helps families plan for their long-term care needs, whether years in advance or after a health care crisis has occurred, please contact our office for a free consultation at (239) 418-0169.

What Can I Do with a Trust to Help My Kids?

Young people like to keep things simple. Millennials don’t want their parents’ furniture or antiques. They want to be able to move easily without a lot of headache. Millennials are okay with jewelry, art, and cash. Likewise, with estate planning, Millennials want a simple will. This can be a wise choice if they’re just married and under the estate tax threshold. But when they have children of their own, they should consider a trust.

Forbes’s recent article, “Why A Simple Will Won’t Cut It If You Have Young Children,” explains that without a trust, minor children inherit assets outright when they turn 18. And that may be a problem if your kids are apt to blow through their inheritance in a few years, instead of using the money wisely.

But an inheritance could last a lifetime if the beneficiary lives within her means, doesn’t tap into the principal, and works to help support her lifestyle and supplement her income. But this isn’t always the case.

A trustee can make certain that your children and young adults are cared for long-term. If you’re not alive to guide and direct your children, a trust can set the necessary limitations for their finances. Also, the trustee can help with your children’s financial literacy, so they’ll possess tools if and when they’re given additional responsibility for their inherited assets.

This isn’t just for minor kids who are under 18 years old, but also for young adults. The fact that a child is “legal” in the eyes of the law doesn’t mean she’s responsible enough to invest a million-dollar inheritance. A trust sets up an experienced advisor to manage inherited assets along the way.

One option, when they’re mature enough, is to set up the trust so they will become a co-trustee. This lets them have a say with the trustee and to make decisions about the management of the trust assets. Your trust can also give them access to distributions of principal slowly over time, so they get used to managing large sums of money.

Other options include appointing a Trust Advisor/Trust Protector that can oversee and protect the trust, its assets & the beneficiaries as time goes on and things change regarding same.

Simple solutions can work for some people, and there are definitely situations in which a simple will is appropriate. But if you have minor children, you usually don’t want to allow them to inherit money at 18.

Ask your estate planning attorney about the options available to set up a trust to work for your family.

Reference: Forbes (July 12, 2019) “Why A Simple Will Won’t Cut It If You Have Young Children”

 

Next Steps When the Diagnosis is Alzheimer’s

Next Steps When the Diagnosis is Alzheimer’s: We hope to enjoy out golden years, relaxing after decades of working and raising children. However, as we age, the likelihood of experiencing health issue increase. That includes Alzheimer’s disease and other forms of dementia.

Learning that a loved one has Alzheimer’s or other diseases that require a great deal of health care is devastating to the individual and their families. The progressive nature of these diseases means that while the person doesn’t need intensive health care yet, eventually they will. According to an article from Newsmax, “5 Insurance Steps After Alzheimer’s Strikes Loved One,” the planning for care needs to start immediately.

Alzheimer’s Disease International predicts that 44 million individuals worldwide have Alzheimer’s or a similar form of dementia, and 25% of those living with it never receive a diagnosis. Healthcare, including assisted living, memory care and in-home care is expensive. Health insurance is an important component of managing the ongoing expenses of living with Alzheimer’s.

Look at your existing policies. There are different types of coverage, depending on the policy type and company. Review current insurance policies to determine if the level of coverage is acceptable and how much will be required to be paid out-of-pocket. See if there’s existing coverage for long-term care, hospital care, doctors’ fees, prescriptions and home health care.

Maintain those policies. The Patient Protection and Affordable Care Act does offer some protections for those diagnosed with early onset Alzheimer’s. They can now access government subsidies to help them purchase health insurance and the Affordable Care Act prohibits pre-existing condition exclusions and cancellation, because the policyholder is considered high cost.

Look into long-term care insurance. This is a way to protect the patient and the family financially, when the day arrives when long-term care is necessary. When diagnosed with Alzheimer’s, a person isn’t eligible for long-term care insurance.

In addition to verifying and reviewing insurance coverage, there are some additional tasks that every family should address in the early stages of a diagnosis.

Sign an advance directive. This document allows patients to voice how they want their healthcare and decisions handled, before they are no longer capable of making decisions for themselves. In addition, they should have a living will that states their wishes for medical treatment, a designated power of attorney to can make financial decision, and a DNR (Do Not Resuscitate) order, if that is their wish.

Get estate planning done. Time is of the essence, as the estate plan must be completed while the person still has the mental capacity to understand what they are doing. Three documents are necessary: a last will and testament, a power of attorney so that an agent be named can handle finances and a health care power of attorney for health care decisions. An estate planning attorney will be able to work with the family to make any necessary legal preparations.

Reference: Newsmax (June 28, 2019) “5 Insurance Steps After Alzheimer’s Strikes Loved One”

 

 

Helping Parents Be Sure Their Families are Protected

Helping Parents Be Sure Their Families are Protected:  Yes, it is old-school, but if your family is on the traditional side, headed up by a breadwinner dad who runs the finances, then you need to make plans to ensure that your family will be okay, if something should happen to you.

This advice also applies to mothers who are the main breadwinners and run their family’s finances, even though the title of this Forbes article is “How Fathers Can Make Sure Their Families Are Financially Protected.”

Do you have enough life insurance? Be sure you’re adequately insured, so your family won’t struggle to pay the bills without your income. Many employees only have enough life insurance from work to cover a year’s worth of salary, which may be enough for some families. However, if your spouse can’t make the mortgage payment on their own, and if they would be unwilling or unable to sell the home, you might want to at least make sure you have enough life insurance to pay off the mortgage. Once you know how much you need, buy a low-cost term policy for the maximum length of time you might need the coverage.

Are your beneficiaries updated on retirement accounts, annuities, and life insurance policies? This is an often overlooked issue. An outdated beneficiary designation could result in your ex-spouse inheriting most of your assets, your latest child being disinherited, or your family having to pay higher taxes and probate fees than is necessary.

Can you add a “payable on death” or a “transfer on death” form on any accounts? You can generally add beneficiaries to bank and investment accounts, saving your family from the time and cost of probate. In some states, you can add beneficiaries to your home and vehicles. Ask your bank for a “payable on death” form and your investment company for a “transfer on death” form.

Is your will drafted?  You need a will to name a guardian for your minor children in most states. It’s a good idea to have a qualified estate planning attorney help you.

Are you organized? Keep a record of where everything and everyone is. You can draft an “In Case of Emergency” folder that has copies of your will, revocable trust, life insurance policy and a summary of brokerage and bank accounts. Let your family know where to find it. You should also share your passwords to your digital accounts.

Making sure that your loved ones are protected when you are too sick or die unexpectedly, is a gift to them, and one that will be long remembered. Make some time in your hectic schedule to prepare your family and yourself for the future.

Reference: Forbes (June 16, 2019) “How Fathers Can Make Sure Their Families Are Financially Protected”