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Here’s Why You Need an Advance Health Care Directive

Advance Health Care Directive
Who will make health care decisions for you when you are unable?

Advance health care planning comes into play, if a person becomes incapacitated, whether that status is permanent or temporary. This is part of a comprehensive estate plan, and why you’ll want to take care of this before something occurs. That’s the recommendation from the McPherson Sentinel article “Advance health care directives important to all adults.”

Documenting your wishes about future health care lets a cognitively healthy person express their wishes with a clear perspective. Unfortunately, only one in four American adults have their advance health care directive in place. Many wait to begin the planning process, until they are in their 50s or 60s. The problem is, life doesn’t have a plan. At any time in life, tragedy can strike. A serious illness or an accident can occur, and leave the family wondering what the person would have wanted.

The most common advance directives including a durable power of attorney for health care, living will, and pre-hospital do not resuscitate directive, known also as a “DNR.”

The durable power of attorney for health care allows you to name a person to make medical decisions for you, in the event you cannot. They are also referred to as “medical power of attorney” or “health care agent.”

This is different than a durable power of attorney, which gives a person the right to act as another person’s agent and conduct all business and financial matters on their behalf.

It’s very important that the people you name to fulfill these roles are told that they have been named. They need to fully understand what your wishes are, what kinds of treatments are and are not acceptable for you, your preferences for doctors and where you would like the treatment to take place.

If you live in a small rural town that does not have specialists, and there is a hospital nearby that offers excellent care, your durable power of attorney for health care can include your wish to be taken to the hospital to receive more specialized care.

The person selected will need to be trustworthy and have the ability and willingness to communicate your wishes, even if family members don’t agree with your choices. They will need to follow your wishes, even if they are not the same as their own.

Keep family dynamics in mind. If a younger sibling is selected to be your health care agent and they have been dominated throughout their life by an older sibling, will your wishes be honored, or will they become the subject of an extended argument?

A living will is a document that details the type of care you want to receive at the end of life. It explains your wishes about accepting life-sustaining procedures, like being placed on a ventilator, receiving artificial nutrition and hydration, if at least two physicians deem that your condition would otherwise be terminal.

These documents should be prepared for you as part of your overall estate plan, with the guidance of an estate planning attorney. Be aware that the laws vary from state to state, so you’ll want to work with an attorney who knows your state’s laws. If you relocate to another state, you will need to have your estate plan updated to ensure that it is still valid.

Finally, make sure to tell several people about these documents, and have the health care documents located in a place, where they can be easily found in an emergency. If you keep them in a bank safe deposit box, it is unlikely that they will be found in a time of crisis.

The attorneys at Krause Donovan Estate Law Partners, LLC, are well versed in creating comprehensive estate plans that include advance health care directives. To request a consultation with one of our experienced attorneys, we invite you to submit our online form.

Reference: McPherson Sentinel (April 17, 2019) “Advance health care directives important to all adults”

Why Do Even the Middle Class Need Estate Planning?

Estate Planning
Estate planning is for every adult.

When it comes to estate planning, you may think that you don’t have the wealth that would require you to engage in extensive estate planning. If you have a will, you might think that’s good enough.

Forbes’ recent article, “Why Estate Planners Aren’t Just for the Ultra-Rich,” says that nothing could be further from the truth.

Although some estate plans are more complicated than others, just about everyone can benefit from having one. Let’s examine the main reasons why:

Avoiding probate. This is a big reason why the importance of estate planning is for everyone. You don’t have to be part of the 1% to want to avoid putting your family through the stress and expense of probate. Creating a trust and strategically placing assets within its control, eliminates many headaches.

Maintaining control from the grave. Even after death, you can still impact how your assets are distributed, as well as to whom and when.

Protecting your legacy. When you consider leaving a legacy for the next generation, it may have lofty pursuits. However, those aren’t necessarily reasonable goals for everyone. Leaving a legacy can also mean making certain that heirs properly respect all the effort and sacrifice that it took to save and create a retirement fund—whatever its size.

Creating a business succession plan. Among the countless small businesses in the U.S., most will continue to remain viable after the legacy owner dies. A business owner can plan for this within an estate plan, which details exactly what they want to happen if they die unexpectedly. That could include outlining specific roles and responsibilities for surviving heirs or putting into place a buy-sell agreement with a business partner and directing the distribution the proceeds of the sale.

Be sure to revisit your estate plan regularly, especially if your life includes big events, like the birth of a child, a divorce, or an irreconcilable difference with a loved one.

It’s a myth that estate planning is something only wealthy people do. It’s for everyone. We invite you to submit our online form to request a consultation with one of our experienced estate planning attorneys.

Reference: Forbes (April 15, 2019) “Why Estate Planners Aren’t Just For The Ultra-Rich”

Why Do I Need an Executor (or Personal Representative)?

Executor
If someone asked you to be their Executor, would you know what to do?

What would happen if someone you were close to, asked you to be their Executor? Would you be honored, or would you be uncomfortable with the responsibility? What do you need to do, when do you need to handle these tasks and how much time will it take?

In Wisconsin we refer to this position as a Personal Representative, or PR, but the term Executor is commonly understood by most of the public.

These are the questions often asked about the role of an Executor, as reported in The Huntsville Item in the article “Role of an executor.”

A person having a will prepared is called the “Testator” if male and a “Testatrix” if female. The person they appoint to take care of distributing their assets and carrying out the instructions in their will is called the “Executor” if male and the “Executrix” if female. That person also pays the estate’s debts and taxes. Note that the debts and taxes are not paid from the Executor’s personal accounts, but from the proceeds of the estate.

The Executor has several responsibilities and power. Therefore, it’s important to choose an individual who is organized, good with finances and knows how to get things done. An Executor could be a person or an institution, like a bank. Here are some things to consider when selecting an Executor:

  • Are they good with handling their own personal business?
  • Do they have some familiarity with your business, finances and property?
  • Are they willing and able to act as your Executor?
  • Do they have the time to devote to serving as Executor?
  • Can they work with your estate planning attorney and your accountant?
  • If you own a business, will they be able to keep it going during a transition period?

There should always be a Plan “B” and perhaps even a Plan “C,” if the first person you wish either cannot or will not serve as Executor. If you do not have a Plan “B” or “C,” the court may name an Executor. That may be a person you don’t know, who does not know you, your family or your business.

The Executor’s tasks vary, depending upon the laws of the state. However, in general, these are the Executor’s tasks. Note that an estate planning attorney usually assists with this process.

  • The will is probated, which requires filing an application with the probate court in the decedent’s jurisdiction.
  • The court issues Letters Testamentary to the individual designated in the will as the Executor.
  • A general notice is given to unsecured creditors within 30 days of being appointed Executor.
  • Notice is given to each secured creditor, by certified or registered mail.
  • Documents need to be gathered, including insurance policies, bank statements, income tax returns, car titles, leases, home deeds, home titles, mortgage paperwork, property tax bills, birth, death and marriage certificates and unpaid bills.
  • The post office, relatives, friends, employers, insurance agents, religious, fraternal, veterans’ organizations, unions, etc., all need to be notified.
  • The personal property of the estate needs to be collected, preserved and appraised.
  • The residence needs to be secured and maintained, including a review of insurance coverage.
  • An inventory of the estate’s assets needs to be prepared.
  • The Executor needs to apply for Social Security benefits and an employee identification number (EIN) for the estate’s bank account.
  • Once the EIN number has been created, open a bank account on behalf of the estate and pay all valid debts from the estate account.
  • Determine any tax liability and prepare for a final tax return to be filed.
  • Distribute the assets and property of the estate, according to the directions in the will.

Our experienced estate planning attorneys can handle many of these tasks and work closely with the Executor. Some Executors are compensated by the estate for their time and effort, but that is not always the case. When creating your estate plan, discuss with your estate planning attorney in advance, about any compensation for your Executor. Whether you’re creating or updating your estate plan, or an Executor to someone’s will and confused about what to do, you can request a consultation with one of our attorneys by submitting our online form.

Reference: The Huntsville Item (April 13, 2019) “Role of an executor”

What Are the Five “Must Have” Estate Planning Documents?

Estate Planning Documents
What documents must be included in your estate plan?

It’s important to have certain binding legal documents in place, if you become disabled due to an illness or accident. These aren’t easy things to talk about, but attorneys say every adult needs them. WTHR 13’s recent article, “The 5 legal documents every adult should have” lists the five key documents involved in estate planning.

  1. General Durable Power of Attorney. This document states who you want to make decisions, if you’re unable to do so for yourself. Without it, your family may have to petition the courts to become your legal guardian, which can be time consuming and expensive. A power of attorney allows the person whom you select, to pay your mortgage or rent and your bills.
  2. Health Care Power of Attorney. This document plans for the situation, if you are unable to make your own health care decisions. You name someone you trust, like family members or friends, to do this on your behalf.
  3. Will. This says that when you pass away, here’s what I want to happen. A will states who will get your assets after your death. If you don’t have a valid will in place, the state laws of intestacy will govern what will happen to your estate—which may not be what you want.
  4. Living Will. This is the document in which you state your instructions for end-of-life care, such as life support. This document is used to make certain that your family and physicians know what you want your end-of-life care to be. A living will is much different than a will.
  5. Revocable Living Trust. This document can be important, if you’re a parent with young children and would like your assets passed down properly to your children, if you die. Typically, if children are under 18 or 21, they’re legally minors and can’t receive assets. A trust can help coordinate their receiving your property.

Our experienced estate planning attorneys can help you with the creation of these documents, while creating an overall plan so that your wishes are followed, your legacy is protected and your family is secure. To take the first step in creating your estate plan, we invite you to request a consultation.

Reference: WTHR 13 (April 17, 2019) “The 5 legal documents every adult should have”

Common Mistakes that People Make with Beneficiary Designations

Beneficiary Designations
Avoid common beneficiary designation mistakes.

Many people don’t understand that their will doesn’t control who inherits all of their assets when they pass away. Some of a person’s assets pass by beneficiary designation. That’s accomplished by completing a form with the company that holds the asset and naming who will inherit the asset, upon your death.

Kiplinger’s recent article, “Beneficiary Designations: 5 Critical Mistakes to Avoid,” explains that assets including life insurance, annuities and retirement accounts (think 401(k)s, IRAs, 403bs and similar accounts) all pass by beneficiary designation. Many financial companies also let you name beneficiaries on non-retirement accounts, known as TOD (transfer on death) or POD (pay on death) accounts.

Naming a beneficiary can be a good way to make certain your family will get assets directly. However, these beneficiary designations can also cause a host of problems. Make sure that your beneficiary designations are properly completed and given to the financial company, because mistakes can be costly. The article looks at five critical mistakes to avoid when dealing with your beneficiary designations:

  1. Failing to name a beneficiary. Many people never name a beneficiary for retirement accounts or life insurance. If you don’t name a beneficiary for life insurance or retirement accounts, the financial company has it owns rules about where the assets will go after you die. For life insurance, the proceeds will usually be paid to your estate. For retirement benefits, if you’re married, your spouse will most likely get the assets. If you’re single, the retirement account will likely be paid to your estate, which has negative tax ramifications. When an estate is the beneficiary of a retirement account, the assets must be paid out of the retirement account within five years of death. This means an acceleration of the deferred income tax—which must be paid earlier, than would have otherwise been necessary.
  2. Failing to consider special circumstances. Not every person should receive an asset directly. These are people like minors, those with specials needs, or people who can’t manage assets or who have creditor issues. Minor children aren’t legally competent, so they can’t claim the assets. A court-appointed conservator will claim and manage the money, until the minor turns 18. Those with special needs who get assets directly, will lose government benefits because once they receive the inheritance directly, they’ll own too many assets to qualify. People with financial issues or creditor problems can lose the asset through mismanagement or debts. Ask our attorneys about creating a trust to be named as the beneficiary.
  3. Designating the wrong beneficiary. Sometimes a person will complete beneficiary designation forms incorrectly. For example, there can be multiple people in a family with similar names, and the beneficiary designation form may not be specific. People also change their names in marriage or divorce. Assets owners can also assume a person’s legal name that can later be incorrect. These mistakes can result in delays in payouts, and in a worst-case scenario of two people with similar names, can mean litigation.
  4. Failing to update your beneficiaries. Since there are life changes, make sure your beneficiary designations are updated on a regular basis.
  5. Failing to review beneficiary designations with your attorney. Beneficiary designations are part of your overall financial and estate plan. Speak with our estate planning attorneys to determine the best approach for your specific situation.

Beneficiary designations are designed to make certain that you have the final say over who will get your assets when you die. Take the time to carefully and correctly choose your beneficiaries and periodically review those choices and make the necessary updates to stay in control of your money.

To start a discussion with one of our experienced estate planning attorneys about your beneficiary designations and how they line up with your estate planning goals, submit our online form to request a consultation.

Reference: Kiplinger (April 5, 2019) “Beneficiary Designations: 5 Critical Mistakes to Avoid”

What’s Happening with Tom Petty’s Estate?

Tom Petty's Estate
The battle over Tom Petty’s estate.

Rocker Tom Petty’s widow, Dana York Petty, planned to include unreleased tracks from her late husband’s celebrated 1994 solo album as part of a 25th anniversary edition box set.

However, Tom’s daughters Adria and Annakim, his children from a previous marriage, have blocked the release, according to iHeartRadio’s article, “Tom Petty’s Widow, Daughters Battling Over His Estate.”

Dana says the daughters are interfering with her ability to manage Tom’s legacy. She’s reportedly requested that a judge name a day-to-day manager for the estate.

Adria argues that she and her sister were promised an equal share of control in their father’s estate, according to his will. She says her father’s “artistic property” was supposed to be placed into a separate company to be jointly administered by the three women. However, Dana disagrees.

Annakim seems to reference the battle in a recent Instagram post. She displayed a photo of her father with the caption, “We don’t sell out. No Vampires 2019.”

A subsequent reply in the comments section mentions Petty’s will.

Wildflowers was initially designed to be a double album, with Petty completing more than 25 songs in the initial sessions. However, he was convinced by his record label to take some some songs off for the final version.

Throughout the years, a few of the extra songs were released on various collections. However, Tom never relinquished his idea of releasing the set as a double LP.

Petty was reportedly planning a Wildflowers tour, before his death in October of 2017, to showcase all the leftover material.

We may not all have rock star estates to worry about. However, leaving loose ends or unclear intentions can lead to family fighting. You can avoid leaving your family unprepared by making sure your have a comprehensive estate plan in place. We invite you to request a consultation with one of our experienced estate planning attorneys to discuss the best way to achieve your goals.

Reference: iHeartRadio (April 3, 2019) “Tom Petty’s Widow, Daughters Battling Over His Estate”

How Will You Pass the Family Vacation Home to the Next Generation?

pass family vacation home
Keeping your vacation home in the family takes planning.

The generous exclusion that allows wealthy individuals to gift up to $11.4 million and not get hit with federal estate taxes, came from the Tax Cut and Jobs Act of 2017. However, it’s not expected to last forever, according to the article “What to Know When Gifting the Family Vacation Home” from Barron’s Penta. Those who can, may want to take advantage of this window to be extra-magnanimous before the exemption sunsets to about $5 million (adjusted for inflation) in 2025. Before gifting a holiday property, an individual or couple (who can gift up to $22.8 million against their lifetime estate-tax exclusion through 2025), should find out whether their children want it.

At issue for potentially giving, is that when someone transfers property, the recipients must account for it, according to the original price paid for the property. This is known as the basis. For example, shares of stock valued at $5 million today that were originally purchased for $1 million 10 years ago, would be subject to income taxes only on $4 million, if the recipient were to sell the stock.

Advice given to wealthy individuals is to make use of that higher estate tax exclusion while it’s still in place, and that may include property that they expect to gift to beneficiaries. The most likely asset would be the family vacation home, whether it’s a ski chalet or a beach house.

First, make sure your children want the property. There’s no sense going through all the processes, unless they plan on enjoying the vacation home. Next, figure out the best way to gift the home, while making the most of the high exclusion.

A nice point: you won’t have to give up the use or control of the house during this process. Experts advise not making an outright gift. This can lead to less control or the loss of a share to a child’s spouse, in the event of a marital split.

Another option: transfer the property into a trust. There are several kinds that would work for this purpose. Another is to consider a Limited Liability Corporation, which also serves to protect the family’s assets against any claims, if someone were to be injured on the property. The parents would transfer the property into the LLC and give children interests in the company.

A fairly common structure for vacation home ownership is called a Qualified Personal Residence Trust (QPRT). These are used by families who want to retain the right to continue using the home, usually for the rest of their lives. The property is transferred to the designated beneficiaries at death. If it is set up properly, a QPRT avoids any income or estate taxes.

A trust also lets an individual or a couple be very specific in how the property will be used, who can use it and any rules about how they want the home maintained. Making sure that a beloved family vacation home is well-cared for and not rented out for college parties, for instance, can provide a lot of comfort for a couple who have poured their hearts into creating a lovely vacation home.

Speak with our experienced estate planning attorneys to learn how you can take advantage of the current federal estate tax exemption to pass your family’s vacation home on to the next generation. You can request a consultation by submitting our online form.

Reference: Barron’s Penta (March 31, 2019) “What to Know When Gifting the Family Vacation Home”

What If My Beneficiary Isn’t Ready to Handle an Inheritance?

Beneficiary Inheritance
Can your beneficiaries handle their inheritance?

A recent Kiplinger article asks: “Is Your Beneficiary Ready to Receive Money?” In fact, not everyone will be mentally or emotionally prepared for the money you wish to leave them. Here are some things to consider when determining if your beneficiary can handle an inheritance:

The Beneficiary’s Age. Children under 18 years old cannot sign legal contracts. Without some planning, the court will take custody of the funds on the child’s behalf. This could occur via custody accounts, protective orders or conservatorships. If this happens, there’s little control over how the money will be used. The conservatorship will usually end and the funds be paid to the child, when they become an adult. Giving significant financial resources to a young adult who’s not ready for the responsibility, often ends in disaster. Work with one of our estate planning attorneys to find a solution to avoid this result.

The Beneficiary’s Lifestyle. There are many other circumstances for which you need to consider and plan. These include the following:

  • A beneficiary with a substance abuse or gambling problem;
  • A beneficiary and her inheritance winds up in an abusive relationship;
  • A beneficiary is sued;
  • A beneficiary is going through a divorce;
  • A beneficiary has a disability; and
  • A beneficiary who’s unable to manage assets.

All of these issues can be addressed, with the aid of our estate planning attorneys. A testamentary trust can be created to make certain that minors (and adults who just may not be ready) don’t get money too soon, while also making sure they have funds available to help with school, health care and life expenses.

Who Will Manage the Trust? Every trust must have a trustee. Find a person who is willing to do the work. You can also engage a professional trust company for larger trusts. The trustee will distribute funds, only in the ways you’ve instructed. Conditions can include getting an education, or using the money for a home or for substance abuse rehab.

Estate Plan Review. Review your estate plan after major life events or every few years. Talk to our qualified estate planning attorneys to make the process easier and to be certain that your money goes to the right people at the right time.

If you have any reservations about who you have in mind when writing your will, whether you’re thinking about a young child or even an older person who could be vulnerable to scams, a trust could make a lot of sense. Our experienced estate planning attorneys can help you determine the best way to make sure your beneficiaries are wise with their inheritance. Submit our online form to request a consultation.

Reference: Kiplinger (April 1, 2019) “Is Your Beneficiary Ready to Receive Money?”

Estate Planning is Not Just About Taxes or Asset Distribution

Estate Planning Taxes
Decision making in estate planning is not something that happens instantly.

Tax planning is part of the estate plan, but it is just a part of it. Here’s one example, as described in the article “Planning Ahead: Estate planning is not just tax planning” from the Daily Times. Wills that were drafted for people in upper tax brackets in the past, often read more like whiteboard equations in a physics class than documents about assets and what belongings should be passed to children and grandchildren. This was because federal estate exemptions were very different than they are now.

Many of those documents are no longer relevant. However, the big question, then as now, is does the estate plan achieve the goals desired?

The new tax laws have not made estate planning any easier. Estate, retirement and disability planning all must work together. It should be noted that laws and goals change, and estate plans need to be updated accordingly.

Here are some of the questions to ask:

  • What do I own?
  • Can I maximize what I own?
  • Where will my assets go upon my death?
  • Who will care for minor children or disabled relatives, if I die?
  • What will happen, if I become disabled?
  • Will I have enough to pay for my children’s education, my retirement, or for even my potential disability or that of my spouse?

Estate planning goes beyond drafting a simple will, or even a living trust. Wills and trusts are personal documents. Sometimes people decide that other things are more important than taxes. That’s why a simple online form does not answer all the questions when creating a will.

An unmarried couple may decide there are more tax benefits to being married, if a state has an inheritance tax that is higher for people who are not related.

It makes the most sense to name a young person as a beneficiary of an IRA, so the asset can grow (“stretch”) over the years. However, you may have someone else in mind for the IRA.

Decision making in estate planning is not something that happens instantly, and it does change over time. That is why it is important to review an estate plan every few years.

The critical thing is to have an estate plan in place. You can adjust it as time goes by, but without one, your family faces many added difficulties and costs. Give yourself and your family the gift of an estate plan. Request a consultation using our online form to discuss creating a comprehensive estate plan with one of our experienced attorneys.

Reference: Daily Times (April 9, 2019) “Planning Ahead: Estate planning is not just tax planning”

Passing the Family Business to the Next Generation

Family Business
Passing on the family business requires planning.

Creating a succession plan for a family business needs awareness of more than just spreadsheets, says the article “How to plan for a smooth transition of your family business” from North Bay Business Journal. Family owned vineyards or farms face challenges, when one or two children have chosen to work in the business. Sometimes there is preferential treatment, either with economics or voting and control of the business.

Our estate planning attorneys can serve as sounding boards in creating a balance between what will be best for the business and what will work to maintain peace and cohesiveness in the family. With experience in guiding families through this process, they are able to provide an unbiased view and can be helpful, when hard decisions need to be made.

Another part of the plan is having the family include other professionals, such as a wealth manager and CPAs in their estate planning meetings. This is especially helpful when the owners are reluctant to talk about what is happening in the business with their children, before clarifying their own thoughts about the business.

Taking time to step back and gain some perspective before holding a family meeting where decisions are made, will give the owners more clarity.

A succession plan often starts a business plan. Once there is a plan for the future of the business, it’s an easier transition to financial and estate planning. Taking these steps, can help the business’ success. Any business will run better when the numbers and projections for future growth are in place. Banks and other lenders look favorably on a company that has its financial reports in place.

This also permits tax planning to be done properly. In some cases, transferring a business or other asset, while the owner is still living, can be beneficial in the long run, even with today’s higher federal estate tax exemptions.

Lifetime gifts can be a way to reduce estate taxes because making a gift today before there has been substantial appreciation, is one way to leverage the gift and estate tax exemption. Let’s say an asset is valued at $1 million, but at the time of your death it may be valued at $8 million. By giving it today, you can use less of your lifetime exemption.

To transfer the business to one or more children and give them an opportunity to succeed on their own, through their own efforts, consider bringing them in as a responsible manager with some ownership.

A gradual approach in transferring control of a business is a wise move, say experts. One family put their real estate holdings into an entity that gave some ownership interests to each of their children, but one of them was appointed as the manager.

The estate planning attorneys at Krause Donovan Estate Law Partners, LLC, will help guide you in your succession plan. If you would like to discuss transitioning your family business to the next generation, we invite you to request a consultation with one of our experienced attorneys.

Reference: North Bay Business Journal (April 9, 2019) “How to plan for a smooth transition of your family business”

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