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Month: March 2019

Estate Planning 101: Should I Create a Trust If I’m Not Rich?

Trust Lawyer Madison
Trust are a fantastic tool for the average person or couple, not just the rich.

It’s probably not high on your list of fun things to do, considering the way in which your assets will be distributed, when you pass away. However, consider the alternative without estate planning; family battles, unnecessary taxes, and an extended probate process. These issues and others can be avoided if you create a trust.

Barron’s recent article, “Why a Trust Is a Great Estate-Planning Tool — Even if You’re Not Rich,” explains that there are many types of trusts, but the most frequently used for these purposes is a revocable living trust. This trust allows you—the grantor—to specify exactly how your estate will be distributed to your beneficiaries when you die, and at the same time avoiding probate and stress for your loved ones.

When you speak with our Madison area estate planning attorneys about setting up a trust, we will also discuss your will, healthcare directives, a living will and powers of attorney.

Our attorneys will retitle your probatable assets to the trust. This includes brokerage accounts, real estate, jewelry, artwork, and other valuables. Your attorney can add a pour-over will to include any additional assets in the trust. Retirement accounts and insurance policies aren’t involved with probate, because a beneficiary is named.

While you’re still alive, you have control over the trust and can alter it any way you want. You can even revoke it altogether.

A revocable trust doesn’t require an additional tax return or other processing, except for updating it for a major life event or change in your circumstances. The downside is because the trust is part of your estate, it doesn’t give much in terms of tax benefits or asset protection. If that was your focus, you’d use an irrevocable trust. However, once you set up such a trust it can be difficult to change or cancel. The other benefits of a revocable trust are clarity and control— you get to detail exactly how your assets should be distributed. This can help protect the long-term financial interests of your family and avoid unnecessary conflict.

If you have younger children, a trust can also instruct the trustee on the ages and conditions under which they receive all or part of their inheritance. In second marriages and blended families, a trust removes some of the confusion about which assets should go to a surviving spouse versus the children or grandchildren from a previous marriage.

Trusts can have long-term legal, tax and financial implications, so it’s a good idea to work with our experienced Madison estate planning attorneys.

Reference: Barron’s (February 23, 2019) “Why a Trust Is a Great Estate-Planning Tool — Even if You’re Not Rich”

Creating a Will: Estate Planning for Parents with Young Children

Estate planning for parents with young children
Make sure you have a plan in place for your children, should something happen to you.

It’s a very easy thing to forget, because it’s so unpleasant to consider. The idea of becoming seriously ill or even dying while your kids are young, is every parent’s worst fear. Having an estate plan with a will that prepares for this possibility is so important. Creating an estate plan if you have minor children will provide peace of mind, and a road forward for those who survive you, if your worst fears were to come true.

Attorneys who focus their practices on estate planning, know that not every story has a happy ending. For some of them, it’s a professional mission to make sure that young parents are prepared for the unthinkable, says KTVO in the article “Family 411: Thinking about estate planning while your kids are young.”

Start with a will. In a will, you’ll name a guardian, the person who would be in charge of rearing your children and have physical custody of them. Don’t assume that your parents will take over, or that your husband’s parents will. What if both sets of parents want to be the custodians? The last thing you want is for your in-laws and parents to end up in a court battle over custody of your children.

Another important document: a trust. You should have life insurance that will be the source for paying for the children’s education, including college, summer camps, after-school activities and their overall cost of living. In addition, proceeds from a life insurance policy cannot be given to a minor.

However, what if your son or daughter turned 18 and were suddenly awarded $500,000? At that age, would they know how to handle such a large sum of money? Many adults don’t. A trust allows you to give clear directions regarding how old the child must be, before receiving a set amount of money. You can also stipulate that the child must complete college before receiving funds or reach certain milestones.

An estate plan with young children in mind, must have a Power of Attorney for financial decisions and one for medical decisions. That allows a named person to make important financial and medical decisions on behalf of the child. You may not want to have their legal guardian in charge of their finances; by dividing up the responsibilities, a checks and balances system is set into place.

However, for medical decisions, it is best to have one primary person named. In that way, any care decisions in an emergency can be made swiftly.

While you are creating an estate plan with your children in mind, make sure your estate plan has the same documents for you and your spouse: Power of Attorney, medical Power of Attorney, a HIPAA release form and a living will.

Speak with one of our local estate planning attorneys who are experienced in planning for young families.

Reference: KTVO.com (Feb. 6, 2019) “Family 411: Thinking about estate planning while your kids are young”

Estate Planning and Pets: Who Cares For Them When You Can’t?

Pet Trusts
Do you have a plan in place for your pets after you’re gone?

Here’s a sad fact: The Humane Society of the United States estimates that as many as 100,000 to 500,000 pets end up in shelters, after their owners die or become incapacitated. So, while we spend upwards of $60 billion on food, supplies and veterinary care, says The National Law Review in “Estate Planning For Your Pets,” we also allow many beloved pets to end their lives in shelters.

The answer is to include your pet’s care in estate planning, just as we do for our family members. The first major consideration is to name who you would want to be responsible for your pet, if you should become incapacitated. Make sure that person is willing to take on the role of caretaker and that they have sufficient room in their homes (and their hearts) for your pets.

If they agree, then start by preparing a sheet with this basic information:

  • What does your pet eat? Do you give him/her treats, and if so, what kind?
  • Medical records for your pet: vaccinations, surgery, special medications.
  • The name of the veterinarian and any specialists.
  • What does your pet do, when she/he is nervous or anxious? What calms them down?
  • What other information would you want someone to know, in your absence?

Speak with your estate planning attorney to see if they have a “Pet Care Authorization” form. This is a form that is similar to something you would use for a child staying with a relative who might need care. The form would designate the agent to act on your behalf for a variety of situations, including medical care.

For planning for your pets after you die, you can designate a caretaker. This may be the same person who agreed to care for your pet, if you became incapacitated. You can do this in a last will and testament or a revocable living trust. You’ll also need to provide funding for the care of your pet.

You can use a trust as an alternative to an outright distribution of funds to the caretaker. The pet trust would be overseen by a named trustee, who would be responsible to ensure that funds are used to benefit your pet(s). Make sure to allot a reasonable amount of money to cover the cost of veterinary care, grooming, feeding, training and any additional expenses.

You don’t have to be a wealthy person to have this arrangement in place. It is simply a practical matter to ensure that your furry family members are taken care of, after you pass away. Another factor to consider: what is the average age expectancy of your pet? A parrot could easily live 60 to 80 years, and a horse could live for four decades. The care and feeding of a horse will be considerably higher, than for a golden retriever or house cat.

Speak with one of our experienced estate planning attorneys to learn how pet care can be built into your estate plan, so next time your pet welcomes you home you will know you’ve planned for their future.

Reference: The National Law Review (Feb. 18, 2019) “Estate Planning For Your Pets”

When Should I See My Estate Planning Attorney to Review Plan?

Estate Planning Attorney
Sit down with your estate planning attorney on a regular basis to review your estate plan

Maintaining your estate plan can be compared to maintaining your car. You wouldn’t put oil in your vehicle one time and never again. You change the oil on a regular basis. In the same way, you shouldn’t create your estate plan and never revisit it again. Laws change. Goals change. Family situations change. These are a few reasons why you should meet with your estate planning attorney on a regular basis to review your estate plan.

When a person hits the age of 18, they should at least have powers of attorney to designate who will make their healthcare decisions and handle their finances, in the event of any incapacity. When a person starts to accumulate assets and have children, it’s critical to have an estate plan in place.

Bankrate’s recent article, “Estate planning triggers: When to re-evaluate your estate planning strategy,” says the risk of not having a current estate plan and will that state your wishes is significant. When  people fail to put any plan into place, it leads to confusion, chaos and unintended consequences. Use this list of important life events as triggers to remind you to discuss your current situation with a trusted Krause Donovan estate planning attorney.

Getting married. You and your future spouse probably have had some financial conversations before getting engaged. However, if you haven’t, once wedding plans are set, it’s vital to discuss all aspects of each partner’s financial situation and the desired distribution of assets. You should decide whether to sign a prenuptial agreement, the totals of your separate and joint assets and who you want inherit those assets should on or both spouses pass on. In light of these factors and the prenuptial agreement, an estate plan that satisfies both parties must be created.

Starting a family. The decision to have a child comes with the responsibility of planning for that child’s care. You and your partner will want to determine the amount of your assets you want to pass to your children in the case of a death, at what age your children will inherit those assets and name a legal guardian.

Divorce. If a couple decides to divorce, it’s important to update their separate estates. If you fail to change the beneficiary designations for a trust or life insurance policy after getting divorced, your ex-spouse may receive the life insurance that was supposed to be paid out to the trust to provide liquidity to pay off debts and administration expenses.

Retirement. Beneficiaries are named when setting up a 401k or Roth IRA account. If you started the account years ago, the beneficiaries may be out-of-date. Retirees should look at their total retirement assets and update their beneficiaries to reflect their current relationship and financial circumstances.

Other life events. Any significant change in assets, a move to another state, the death or disability of a person named in your estate plan, a change in tax laws, a disability of a beneficiary that arises after the initial plan is executed, and/or the birth, adoption, or death of a child are all important life events that should trigger a revision of your estate plan.

If your estate plan hasn’t been reviewed recently, we invite you to request a consultation with an experienced Krause Donovan estate planning attorney.

Reference: Bankrate (March 4, 2019) “Estate planning triggers: When to re-evaluate your estate planning strategy”

Digital Assets in Estate Planning: The Brave New World of Estate Planning

Digital Assets in Estate PlanningCryptocurrency is almost mainstream, despite its complexity, says Insurance News Net in the article “Westchester County Elder Law Attorney… Sheds Light on Cryptocurrency in Estate Planning.” The IRS has made it clear that as far as federal taxation is concerned, Bitcoin and other cryptocurrencies are to be treated as property. However, since cryptocurrency is not tangible property, how does one incorporate digital assets in estate planning?

For starters, recordkeeping is extremely important for any cryptocurrency owner. Records need to be kept that are current and income taxes need to be paid on the transactions every single year. When the owner dies, the beneficiaries will receive the cryptocurrency at its current fair market value. The cost basis is stepped up to the date of death value and it is includable in the decedent’s taxable estate.

Here’s where it gets tricky. The name of the Bitcoin or cryptocurrency owner is not publicly recorded. Instead, ownership is tied to a specific Bitcoin address that can only be accessed by the person who holds two “digital keys.” These are not physical keys, but codes. One “key” is public, and the other key is private. The private key is the secret number that allows the spending of the cryptocurrency.

Both of these digital keys are stored in a “digital wallet,” which, just like the keys, is not an actual wallet but a system used to secure payment information and passwords.

One of the dangers of cryptocurrency is that unlike other financial assets, if that private key is somehow lost, there is no way that anyone can access the digital currency.

It should also be noted that cryptocurrency can be included as an asset in a last will and testament as well as a revocable or irrevocable trust. However, cryptocurrency is highly volatile, and its value may swing wildly.

The executor or trustee of an estate or trust must take steps to ensure that the estate or the trust is in compliance with the Prudent Investor Act. The holdings in the trust or the estate will need to be diversified with other types of investments. If this is not followed, even ownership of a small amount of cryptocurrency may lead to many issues with how the estate or trust was being managed.

Digital currency and digital assets are two relatively new areas for estate planning, although both have been in common usage for many years. As more boomers are dying, planning for these intangible assets has become more commonplace. Failing to have a plan or providing incorrect directions for how to handle digital assets, is becoming problematic for many individuals.

Speak with a Krause Donovan estate planning attorney who has experience in digital and non-traditional assets to learn how to protect your heirs and your estate from losses associated with these new types of assets.

Reference: Insurance News Net (Feb. 25, 2019) “Westchester County Elder Law Attorney… Sheds Light on Cryptocurrency in Estate Planning”

Why Is a Revocable Trust So Valuable in Estate Planning?

Revocable Trust
A revocable trust can do a lot to solve big estate planning and tax problems.

There’s quite a bit that a trust can do to solve big estate planning and tax problems for many families. As Forbes explains in its recent article, “Revocable Trusts: The Swiss Army Knife Of Financial Planning,” trusts are a critical component of a proper estate plan. There are three parties to a trust: the owner of some property (settler or grantor) turns it over to a trusted person or organization (trustee) under a trust arrangement to hold and manage for the benefit of someone (the beneficiary). A written trust document will spell out the terms of the arrangement.

One of the most useful trusts is a revocable living trust where the grantor creates a trust, funds it, manages it by herself, and has unrestricted rights to the trust assets (corpus). The grantor has the right at any point to revoke the trust, by simply tearing up the document and reclaiming the assets, or perhaps modifying the trust to accomplish other estate planning goals.

After discussing trusts with your attorney, he or she will draft the trust document and re-title property to the trust. The assets transferred to a revocable trust can be reclaimed at any time. The grantor has unrestricted rights to the property. During the life of the grantor, the trust provides protection and management, if and when it’s needed.

Let’s examine the potential lifetime and estate planning benefits that can be incorporated into the trust:

  • Lifetime Benefits. If the grantor is unable or uninterested in managing the trust, the grantor can hire an investment advisor to manage the account in one of the major discount brokerages, or he can appoint a trust company to act for him.
  • Incapacity. A trusted spouse, child, or friend can be named to care for and represent the needs of the grantor/beneficiary. She will manage the assets during incapacity, without having to declare the grantor incompetent and petitioning for a guardianship. After the grantor has recovered, she can resume the duties as trustee.
  • This can be a stressful legal proceeding that makes the grantor a ward of the state. This proceeding can be expensive, public, humiliating, restrictive and burdensome. However, a well-drafted trust (along with powers of attorney) avoids this.

The revocable trust is a great tool for estate planning because it bypasses probate, which can mean considerably less expense, stress and time.

In addition to a trust, ask your attorney about the rest of your estate plan: a will, powers of attorney, medical directives and other considerations.

Any trust should be created by a very competent trust attorney, after a discussion about what you want to accomplish. We invite you to start that discussion with one of our estate planning attorneys.

Reference: Forbes (February 20, 2019) “Revocable Trusts: The Swiss Army Knife Of Financial Planning”

Grieving Children Wish Mom Had an Estate Plan

No Estate Plan
Times of grief can be especially hard, if the departed failed to leave any estate planning whatsoever.

When a parent dies somewhat unexpectedly, adult children may be overcome by grief. However, they then may become overwhelmed by frustration.

It’s almost too difficult to mourn right now—because the family can be too busy trying to take care of her estate.

This time can be especially hard, if the recently departed parent failed to leave a will, a trust or any estate planning whatsoever.

The recent article published on WSAV’s website entitled “Family warns others to not put off estate planning” says that in one instance, the family was forced to leave their mom while she was dying in the hospice to try and organize the paperwork done for her estate.

An estate plan is a guide for your family. A good estate plan will include not only a will, but also a health care power of attorney and a living will.

Work with an experienced estate planning attorney and try even harder to get everyone to the table to discuss the issues.

One way to approach aging parents, is to say “You are helping me, if you could write this down.”

Many regret not taking action sooner to save stress and energy.

“You have every emotion you could ever have, because you are about to lose your loved one and you have to deal with everything else on top of it,” one woman commented.

Because many families are caught off guard and unprepared when incapacity or death strikes, don’t wait until it’s too late for you and your family. We invite you to request an estate planning consultation with one of our experienced, Madison area estate planning attorneys.

Reference: WSAV (February 26, 2019) “Family warns others to not put off estate planning”

Guns and Dementia: A Dangerous Combination

Guns and Dementia
Guns are the most common method of suicide for people with dementia.

Here’s a worrisome statistic: 45% of all adults age 65 or older, either own a firearm or live with someone who owns a gun. That’s a lot of people and a lot of guns. Firearms are the most common method of suicide for people with dementia, says the article “Guns and Dementia: Dealing With a Loved One’s Firearms” from J.D. Supra.

A person who has a gun and suffers from dementia can put family members or caregivers in grave danger, if the person suffers from confusion and doesn’t recognize the people around them. An investigation conducted by Kaiser Health in 2018 looked at news reports, court documents, hospital records and public death records since 2012. They found more than 100 cases, in which people with dementia used firearms to kill or injure themselves or someone else.

What is the best thing to do? Talk about the guns before they become a dangerous issue, like the moment someone is diagnosed with dementia. This is not that far from the conversation that must take place about driving and dementia, or for that matter, driving and aging.

Frame the issue as one about safety for the person and their loved ones. This is also the time to discuss guns and estate planning. Have a conversation with an elder lawyer that addresses an enforceable agreement about who has access to the guns, where the guns should be stored and what factors will determine when it is time for the guns to be taken out of the home. The gun owner may not remember the agreement, when it is necessary for it to be enforced. However, having the agreement in place will give the family member or other trusted individual clear directions about what steps to take.

What should you do with the guns themselves? You can start by separating the guns from the ammunition. If possible, have the weapons completely removed from the house. Local and state laws about the possession and transfer of firearms vary. Therefore, the family should consult our estate planning attorneys, who are experienced in the relevant laws. It may be necessary for a gun trust to be created, and for family members to undergo training and licensing, if the firearms are going to be maintained or transferred to them.

Reference: J.D. Supra (Feb. 12, 2019) “Guns and Dementia: Dealing With a Loved One’s Firearms”

Can A Cell Phone Video Become a Will?

Can a cellphone video become a will
Can a video recorded on your cellphone accomplish your estate planning goals?

What if a grandmother made a statement, while in an intensive care unit, that she wanted everything she owned to go to a grandchild and a brother-in-law? What if that statement was captured on a cellphone as a video? The question was a real one, posed by a reader of My San Antonio in the article “Can a video be used as a Will?”

There are two reasons why a cellphone video is unlikely to be accepted as a will by any court. One is that the cellphone video does not follow the formality of how a will is created and executed. Another is the statue of frauds, which basically says that to be lawfully valid, certain promises must be in writing.

Not only does a will need to be in writing, it must show clear intent to dispose of assets after death. The writing must be dated and signed by the person who is making the promise (the testator). If the will is written by the testator in his or her handwriting, it is known as a “holographic” will. If the will is typed or in someone else’s handwriting other than the testator, which is known as a “formal will,” then it must also be signed by two independent witnesses and must be notarized. The person who is having the will created (again, the testator), must also have legal capacity for the will to be valid.

In some states, including Texas, there was a time when a spoken will, known an a “nuncupative will” could have been recognized. However, that is no longer the case and a verbal will is no longer valid. Even when a nuncupative will was accepted, it was only accepted for inexpensive personal effects, not large assets or real property.

Some states, including Florida and Nevada, now allow a person to make a will online or on their computer and never have it transferred to paper. These are called “digital” or “electronic” wills. In these cases, e-signatures are allowed to be used. Other states have considered bills allowing digital wills, but the bills did not pass. The Florida law allows the digital will to be e-signed, but it must be witnessed by two independent individuals and it must be e-notarized. It should be noted that the will process is not permitted to be used by a person, who is in an end-stage illness or who is legally considered a “vulnerable adult.”

In the state of Texas, the grandmother in the example above is considered to have died without a will, meaning that she died “intestate.” Texas law will determine how her assets are distributed, and that will depend on her relationships and her survivors. If she was married and all children are from that marriage, her assets go to her spouse. If she was married and had children from a prior marriage, her assets are split unevenly between those children and her spouse. If there is no spouse, assets go to her children. There is a tremendous burden placed on the heirs of those who die without a will, since it does take a long time to figure out who their heirs are.

If she had a properly executed legal will, all these issues would be moot. Anyone who owns a home needs to have a will, and this should have been something that was taken care of, long before she became ill.

If you don’t currently have a will, or you have a will needs revision, we invite you to request an estate planning consultation with one of our experienced, Madison area, estate planning attorneys.

Reference: My San Antonio (Feb. 18, 2019) “Can a video be used as a Will?”

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