Month: February 2019

Still Wondering Why You Need to Review Your Estate Plan?

One of the most common mistakes in estate planning is thinking of the estate plan, as being completed and never needing to be reviewed. That is similar to taking your car for an oil change and then simply never returning for another oil change. The years go by, your life changes and you need to review your estate plan.

The question posed by the New Hampshire Union Leader in the article “It’s important to periodically review your estate plan” is not if you need to have your estate plan reviewed, but when.

Most people get their original wills and other documents from their estate planning attorney, put them into their safe deposit box or a fire-safe file drawer and forget about them. There are no laws governing when these documents should be reviewed, so whether or when to review the estate is completely up to the individual. That often leads to unintended consequences that can cause the wrong person to inherit, fracture the family and leave heirs with a large tax liability.

A better idea: review your estate plan on a regular basis. For some people with complicated lives and assets, that means once a year. For others, every three or four years works. Some reviews are triggered by changes in life, including:

  • Marriage or divorce
  • Death
  • Large changes in the size of the estate
  • A significant increase in debt
  • The death of an executor, guardian or trustee
  • Birth or adoption of children or grandchildren
  • Change in career, good or bad
  • Retirement
  • Health crisis
  • Changes in tax laws
  • Changes in relationships to beneficiaries and heirs
  • Moving to another state or purchasing property in another state
  • Receiving a sizable inheritance

What should you be thinking about, as you review your estate plan? Here are some suggestions:

Have there been any changes to your relationships with family members?

Are any family members facing challenges or does anyone have special needs?

Are there children from a previous marriage and what do their lives look like?

Are the people you named for various roles—power of attorney, personal representative, guardian and trustees—still the people you want making decisions and acting on your behalf?

Does your estate plan include a durable power of attorney for healthcare, a valid living will, or if you want this, a DNR (Do Not Resuscitate) order?

Has your estate plan addressed the possible need for Medicaid?

Do you know who your beneficiary designations are for your accounts and are your beneficiary designations still correct? Your beneficiaries will receive assets outside of the will and nothing you put in the will can change the distribution of those assets.

Have you aligned your assets with your estate plan? Do certain accounts pass directly to a spouse or an heir? Have you funded any trusts?

Finally, have changes in the tax laws changed your estate plan? Your estate planning attorney should look at your state, as well as federal tax liability.

Just as you can’t plant a garden once and expect it to grow and bloom forever, your estate plan needs to be reviewed, so that it can protect your interests as your life and your family’s life changes over time. Our experienced estate planning attorneys can review your existing estate plan to determine if your goals are still being met.


Reference: New Hampshire Union Leader (Jan. 12, 2019) “It’s important to periodically review your estate plan”

Why is Estate and Succession Planning a Process?

If you hear of someone heading off to her attorney to do their succession planning, it’s really just one of several meetings that are necessary to draft a sound succession plan, says Dairy Herd in the article “Estate Planning Is A Process, Not An Event.”

In fact, succession planning is a process. Ten years of time can fly by very quickly, so the earlier you can start having these conversations with your attorney, the better.

The amount of time needed to draft a solid succession plan is different for every family. If things are fairly straightforward, it may take only six to nine months. However, it’s not uncommon for this process to take a year or more.

That’s especially true in the ag sector, because once the good weather arrives, this process slows down to a halt—good weather means that everyone is focused on crop production.

There’s no magic age to start the process, but again, sooner is better.

You can spend your entire career building your business. However, very few people have really spent  much time thinking about how they will effectively exit from it.

You may not be thinking of retiring or transitioning the farm operation for 15 or 20 years but having an idea of where you’re trying to get, gives you a better track on which to run.

Succession planning should happen well before retirement, so that’s why the best plans are flexible and adaptable.

Every plan is unique to each family’s particular farm operation (or business) and circumstances.

The best plans are dynamic and draw on the expertise of an entire team of professionals. That way you’re seeing all of those issues and changes along the way.


Reference: Dairy Herd (January 15, 2019) “Estate Planning Is A Process, Not An Event”

How Can Trusts Keep My Family From An Undesirable Lifestyle?

Some people are hesitant to use trusts in their estate planning. Some have the notion that if you leave money in trust, it will make “trust fund babies” of your children or grandchildren.

You may be afraid that they’ll become spoiled brats, who do nothing but spend money they haven’t earned, or invest foolishly.

FEDWeek’s recent story, “Using a Trust as an Incentive for Your Heirs” explains that trust distributions can be limited to modest amounts or left to the discretion of the trustee, who’ll manage the trust assets.

The article suggests that if you do leave money in trust, you should avoid the common practice of providing for mandatory distributions at certain ages rather than discretionary distributions.

That’s because, at those ages, most people are better off finishing their education and establishing their careers. Requiring them to take a bagful of money at that age, might decrease their drive to pursue a meaningful career.

One way to do this is what’s called an “incentive” trust. This type of trust offers rewards to trust beneficiaries who accomplish specific goals.

With an incentive trust, the beneficiaries might get a particular amount of money for getting higher education degrees, attaining certain levels of earned income or volunteering at a church or in the community. For instance, your trust could be drafted by your estate planning attorney to state that the trustee will distribute to each of your grandchildren a certain percentage (such as 25%) of earnings each year, up to a certain amount. This could be tied to a requirement that you make.

Another way to go about this trust is to leave the distributions to the discretion of the trustee. The trust might detail the types of activities that will be rewarded, then permit the trustee to make appropriate distributions.

When you’re going to depend so much on the judgment of the trustee, for this type of arrangement to work, it’s critical to choose a highly-qualified trustee.

The trustee could be a relative, friend, or professional advisor. He or she must be able to empathize with your beneficiaries but still make prudent decisions about distributions. In addition, add a plan for trustee succession, in case your first choice becomes unable or cannot serve.


Reference: FEDWeek (January 17, 2019) “Using a Trust as an Incentive for Your Heirs”

Power of Attorney: Do You Have One?

Wise incompetency planning usually includes the execution of a power of attorney. This document names an agent who can sign checks, pay bills and make other financial decisions in your stead.

FEDWeek’s recent article, “Guarding against the Chance of Incapacity,” suggests that, rather than a “regular” power of attorney, you may prefer a durable power of attorney or a springing power of attorney.

A durable power of attorney can designate a trusted friend, a close relative or an advisor to sign documents if you are unable to make knowledgeable decisions. These documents stay in effect if you become incapacitated.

Springing powers of attorney take effect, only if one or more physicians say that you’re incompetent, such as being unable to handle your own financial affairs. It is important to remember that a springing power doesn’t take effect as long as you’re competent.

While there are some costs involved in executing a power of attorney, those legal fees will be fairly modest.

Your durable power of attorney document must be notarized, but it doesn’t necessarily need to be recorded anywhere unless required by state law. You select the individual you want to handle your affairs, in case of incapacity.

You must have absolute trust in the person you name as your agent for these documents.

It’s important to know that there are financial institutions that will not accept your power of attorney form because they require the use of their own forms. Be proactive and send a copy of your form to each of your banks, brokers, mutual funds and other account administrators to determine whether there will be any problem. It’s better to know in advance and be prepared than to have your designated person unable to act on your behalf.

In addition, some companies don’t want to recognize old powers. You can provide an expiration date on the document and update it every year or two, to be sure that it’s consistent with your current wishes.

You can read more about powers of attorney in our blog post titled Is Your Estate Plan on Track?


Reference: FEDWeek (January 17, 2019) “Guarding against the Chance of Incapacity”

Why Do I Need Estate Planning If I’m Not Rich?

Many people spend more time planning a vacation than they do thinking about who will inherit their assets after they pass away. Although estate planning isn’t an enjoyable activity, without it, you don’t get to direct who gets everything for which you’ve worked so hard.

Investopedia asks you to consider these four reasons why you should have an estate plan to avoid potentially devastating results for your heirs in its article “4 Reasons Estate Planning Is So Important.”

Wealth Won’t Go to Unintended Beneficiaries. Having an estate plan may have been once considered something only rich people needed, but that’s changed. Everyone now needs to plan for when something happens to a family’s breadwinner(s). The primary part of your estate plan is naming heirs for your assets. Without an estate plan, the courts will decide who will receive your property.

Protection for Families With Young Children. If you are the parent of small children, you need to have a will to ensure that your children are taken care of. You can designate their guardians if both parents die before the children turn 18. Without a will and guardianship clause, a judge will decide this important issue.

Avoid Taxes. Having an estate plan is also about protecting your loved ones from the IRS. A comprehensive estate plan transfers assets to your family, with an attempt to create the smallest tax burden for them as possible. A little planning can reduce much or even all of their federal and state estate taxes or state inheritance taxes. There are also ways to reduce the income tax beneficiaries might have to pay. However, without an estate plan, the amount your heirs will owe the government could be substantial.

No Family Fighting (or Very Little). One sibling may believe she deserves more than another. This type of fighting can turn ugly and end up in court, pitting family members against each other. However, an estate plan enables you to choose who controls your finances and assets, if you become mentally incapacitated or after you die. It also will go a long way towards settling any family conflict and ensuring that your assets are handled in the way you wanted.

To protect your assets and your loved ones when you no longer can do it, you’ll need an estate plan. Without one, your family could see large tax burdens, and the courts could say how your assets are divided, or even who will care for your children. We invite you to request a consultation with one of our experienced attorneys.


Reference: Investopedia (May 25, 2018) “4 Reasons Estate Planning Is So Important”

Include a Letter with Your Estate Plan

You have your vital documents in order, and you keep them current. You have a will or trust. Your health care power of attorney is complete, and you have spoken with the person you have named as your health care decision-maker about your end-of-life wishes. You have taken care of all your legal and financial issues, including final instructions and a list of who will receive particular items.

While your loved ones will appreciate that you have thoughtfully taken care of these essential issues and will not leave them with a mess to clean up one day, there is one more thing you should do. You need to sit down and create something your family members and close friends will treasure for the rest of their lives. You should write and include a letter with your estate plan.

Words are Important

People can carry sadness for a lifetime because a parent never said “I love you” to the child. The parent might be shocked that the child felt unloved. Some people think they do not have to tell someone they love them because they show their affection in the daily tasks of providing a home and upbringing for the child.

In addition to the worldly goods that you give to your loved ones, leaving a “last letter” behind can help them deal with their grief at losing you. You can use the letter to accomplish things you might not have done as much as you wish you had. You can write one letter that speaks to several people or write multiple letters.

What to Put in the Letter

You can begin by telling the people in the letter that they are important to you. You should tell them that you love them and let them know in writing how proud you are of them. No matter how many times you have spoken these words to them before, they can hold a letter in their hands for years and read it over and over.

Sometimes people write letters of apology to those they have hurt at some point in their lives. Apologies are helpful in making peace with one’s life. If you cannot bring yourself to say the words during your lifetime or you anticipate that the person would respond in an unacceptable manner, you can do your part by putting the apology in a letter.

If you can forgive someone who did something wrong to you, it can be cathartic to write a letter of forgiveness. These letters take great care, as they can be interpreted as sanctimonious or judgmental.

What Not to Put in the Letter

While it might be tempting to take one last jab at someone you feel wronged you, the last letter is no time to be spiteful. If you cannot write something kind to a person, do not write anything.

What to Do with the Letter

All you need to do is tuck the letter in with your legal papers. One day, when your loved ones go through your will or trust, they will get a pleasant surprise and something to cherish.

You should talk with our elder law attorneys about the ways that your state rules might vary from the general law of this article.


References:

AARP. “How to Write a Last Letter to Your Loved Ones.” (accessed January 8, 2019) https://www.aarp.org/retirement/planning-for-retirement/info-2018/letter-to-remember.html

No Estate Taxes? You Still Need an Estate Plan

Increases in the estate tax exemption has an impact on how some people are thinking about life insurance, says ThinkAdvisor in the article “Estate Planning Is Still Important.” However, before making any changes, consider the larger picture and think long, not short, term.

Let’s start with why many people buy life insurance policies. As young parents, they buy life insurance so a surviving spouse and family will be able to continue to live in their home, pay the mortgage and send children to college. Another reason for life insurance is to cover the cost of estate taxes.

Remember the new higher estate tax exemption is federal. Your heirs may still have state estate taxes and inheritance taxes, depending upon where you live. Having an insurance policy will still help with the costs of settling an estate and paying any taxes that are due.

The new tax exemption also has a sunset date. The year 2026 may seem far away. However, it will arrive, while we are busy with our lives. It may be much harder and more expensive for an individual to purchase a life insurance policy in 2026 than it is right now.

If someone is very old or in ill health, they have a different window of time for planning. However, if you are in your middle years or relatively healthy, now is not the time to put off purchasing life insurance or to let an existing policy lapse.

We know that political landscapes change. If they do, and you want to buy a policy, there may be additional obstacles in the future.

Life insurance also serves as a tool for your estate. If your estate plan seeks to distribute an inheritance equally from assets in a traditional IRA, life insurance can become an equalizer. Let’s say one child is in a much higher tax bracket than the others. Upon receiving the IRA, they will have to pay more in taxes than the others. The child in the lower bracket will end up with a larger sum of money, having lower taxes on their inheritance. This could lead to sibling arguments, which are not uncommon when brothers and sisters become heirs. The insurance policy proceeds can be used to make up the difference.

Another point to consider is who owns the insurance policy? If it is owned by a trust, you may not have the legal right to make a change. If the trustee does not agree that the policy should be liquidated or canceled, they may not allow the change to go forward.

Our estate planning attorneys will be able to review your life insurance policies when they review your overall estate plan. Each part of an estate plan works best when all parts work in concert.


Reference: ThinkAdvisor (Jan. 11, 2019) “Estate Planning Is Still Important”

Legacy Planning for Family Farms, Ranches, and Businesses

An inheritance is more than money or property, especially when it comes to family farms, ranches, and businesses. Many survive for multiple generations, says the Woodward News in the article “Plenty to consider in legacy planning,” but it takes planning.

Knowing that one day your grandchildren, and hopefully, their children, will walk the land their great-grandparents did, and take the same satisfaction in knowing that the work they do, is a part of our country’s economy. Every family’s situation is different but one thing they all share in common, is that succession goals need to be evaluated critically, even though there is great emotion involved in passing on a legacy.

Dividing assets, sharing control and management decisions and transferring ownership are all things that must be examined and formalized as part of a succession plan.

For starters, determine the overall goal. Every family’s goals are different. Should assets be held for end-of-life-care for aging parents, passed on to children, donated to charity or are they needed to ensure the successful transition of the business to the next generation?

People work hard their whole lives to accumulate assets, so it’s important to have a legacy plan.  In this way, everything you’ve worked for is preserved for the next generation or available for your needs as you age.

In 2019, gift and estate tax exemptions are up dramatically, but strategic planning still needs to be done.

For farm families, the Farm Journal Legacy Project offers printable downloads, including a succession planning action guide, family meeting agenda, conversation starters and a goals clarification worksheet.

Family meetings will need to tackle some topics that may benefit from the presence of an estate planning attorney, who is experienced with family farms and succession planning.

  • How will the transfer of property, including farm equipment, property, and livestock, be done with minimal taxes due?
  • How can the non-farming members of the family receive their fair share of their inheritance, without taking away valuable resources needed to keep the farm or ranch going?
  • What resources will be available for the older parents to live on when they retire?
  • Can the farm support multiple generations?

Succession planning that works best, begins long before the farm family is thinking about retirement. Determining roles and responsibilities and setting accountability for those roles must start happening long before the oldest generation steps away from the day-to-day operations of the farm or ranch.


Reference: Woodward News (Jan. 2, 2019) “Plenty to consider in legacy planning”

Should I Use an Online Will Service?

More than 50% of Americans don’t have a will, according to a 2017 survey by Caring.com. Spelling out how your assets should be divided, is an essential start to estate planning that can be easily overlooked. Many people turn to an online will service, thinking this choice is better than doing nothing.

A U.S. News & World Report’s article asks “Should You Make a Free Will Online?” According to the article, before writing your will or using an online service, you need to know the legal requirements in your area. In many instances, this is best left to a legal professional in your state.

There are plenty of online tools that will help you create a will. However, before clicking on a website’s promise, you need to evaluate the available options. There are three main ways to write a will:

  1. Do it yourself;
  2. Use a do-it-yourself program; or
  3. Get help from our qualified estate planning attorneys.

If you draft a will on your own, you’ll need to be absolutely certain you understand all of the applicable probate, tax and property laws. People who’ve written their own wills are usually those with very basic estates, like a person with a single piece of real estate and a small amount in investments.

If you use an online will service, you’ll have access to software that walks you through the process. In this case, you’ll need to be sure that the software company has all the applicable laws covered, as required for your state. You also want a program that lets you make updates later if your situation changes.

However, if you engage the assistance of our experienced estate planning attorneys, you’ll have the opportunity to have our experts help you think through the details. This result will be a well-drafted will. Yes, it will cost a bit more, but for many situations—like those with blended families, complex investments, or property in several states—it’s worth it.

Remember that the probate laws can vary widely from state to state. For example, the basic form requirements may allow a handwritten will in some states, but in other states, the will must be typewritten. Some states require only two witnesses, and others require that the will be witnessed, notarized and typed.

If you have a larger estate or heirs with medical conditions, it may be wise to work with our attorneys who will counsel you on the best solutions for your situation. For example, if you have a child with special needs receiving government benefits, you should have our attorneys create a trust so their inheritance doesn’t negatively impact their benefits.

You should also use an attorney if you want to reduce your exposure to probate fees. Some people transfer their assets into a revocable living trust, so they are not subject to probate fees. An online service can’t give you this type of attention or personalized service.

If you have a complex situation, you may end up paying less by using an attorney. Our experienced estate planning attorneys have helped numerous families. We can offer insight into setting up guardians for minor children or appointing an individual to be in charge of the distribution of the estate. There are frequently estate and gift tax considerations about which the average person doesn’t know or monitor.


Reference: U.S. News & World Report (January 9, 2019) “Should You Make a Free Will Online?”

How Caregiving Can Impact Older Women

When an older woman takes care of a loved one, it can be at the expense of the caregiver’s physical, emotional, and financial health. Many women end up in poverty in retirement because they had to leave the workforce at the peak of their careers to care for someone. With more than 40 million people in America serving as unpaid caregivers for family members and most of the caregivers being women, we need to understand how caregiving can impact older women.

Caregiving Affects Our Entire Economy

When you have tens of millions of workers or former workers who have to reduce their hours or drop out of the workforce because a family member needs care, the caregivers face poverty, but our overall economy suffers as well. Whenever significant numbers of people are unemployed or under-employed, the economy loses those wages, the income taxes and everything that the person would have bought, if fully employed.

Caregivers Take a Hit on Social Security Benefits

The amount you receive in monthly Social Security retirement benefits will depend on several factors, including:

  • Your average wages for your 35 highest-earning years. Making less money a year because of caregiving will lower your Social Security check when you retire. If you have to quit work to take care of a family member before working for 35 years, those missed years will count as zero earnings, which can slash the amount of your average wages. Since our last working years tend to be when we make the most money, missing out on these years will leave you with a check based on things like your jobs during college.
  • When you retire. If you start collecting benefits early, your monthly Social Security check will be much smaller than if you can wait until full retirement age. If you can wait beyond your full retirement age, you will get a bonus added to every Social Security check you ever receive. The bonus gets larger the longer you wait to start collecting benefits, until age 70, when there is no additional bonus. You will still collect the bonuses for the rest of your life, but they will not increase in size, except for things like cost-of-living adjustments (COLA).

The Physical and Emotional Toll of Caregiving

Being responsible for someone with fragile health puts a mountain of stress on your shoulders.  Unless you have a large, involved family nearby, you might be carrying this responsibility by yourself. Imagine what would happen to an ICU nurse who was on duty 24 hours a day, seven days a week, 365 days a year. Before long, her health would suffer.

The physical and emotional exhaustion would be unbearable, yet millions of Americans call that description everyday life. When a caregiver who had to leave her job gets sick, she often does not have health insurance. Her medical bills then add to her already overwhelming stress.

Are There Solutions to the Caregiver Problem?

Most developed countries offer better supports to families, who have a person with care needs. As a result, women can stay in their labor force in much higher numbers, which helps the family’s income and the country’s overall economy. Without additional supports, American caregivers face a bleak future.

Talk with our elder law attorneys to see if your state’s regulations differ from the general law of this article.


References:
AARP. “The Trickle-Down Effect of Caregiving on Women.” (accessed January 8, 2019) https://www.aarp.org/caregiving/basics/info-2018/women-caregiving-trickle-down-effect.html
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