Should You Share Your Estate Plan With Your Heirs?
March 27, 2009
If you have a significant estate to leave to your heirs—but you are still alive and well—to whom does that significant estate belong, you or them? This seems a silly question: of course the property belongs to you, but many adult children have come to count on the property their parents will leave them, and—rightly or wrongly—to feel a sense of ownership over it. As potential beneficiaries, do your heirs have the right to be informed ahead of time of your plans for your own estate?
David Cay Johnston, in his article Learning to Share, suggests that although parents have no responsibility to inform their children of their plans, not talking to your kids about your estate plan is a surefire way to foster hurt feelings and interfamily fights after you pass away. Sharing your plans for your wealth may not always be easy, but even the most ardent supporters of the privacy of the would-be decedent will have to agree with the logic of Johnston’s argument.
Our office understands that every family and situation will be different, and some parents will have good reasons for keeping their plans under wraps. But in many circumstances, whether your intention with your estate plan is to ease the way for your heirs or merely to ensure that your wishes are carried out to the letter, open communication with your children or potential heirs is the best way to support the accomplishment of those goals.
Organize Your Estate for Your Successor Trustee
March 25, 2009
If you’ve ever been unlucky enough to have to execute a deceased loved one’s estate, then you know what an overwhelming job it can be. Think about your own method of organization. Do you keep all of your financial papers in one place? Do you keep your birth and marriage certificates nearby and easily accessible? What about insurance forms, information about retirement plans and beneficiaries, cemetery plots? Are all of those things located with your estate planning documents? This isn’t even getting into the more personal areas such as club memberships and online accounts and passwords.
Organizing your estate for your successor trustees can be a huge task, but one well worth the effort. It will not only make it easier on them, it can also make life a lot easier on you. Here’s how to do it: Use a large binder or collection of binders, and keep them clearly labeled, both inside and out. You can use the following bullet-points as a guideline for tabbed sections (and if you aren’t sure in which section something belongs, don’t be afraid to make copies for both, with a note as to where the original is located):
- Instructions and letter to trustee: Contact information for your Estate Planning attorney and trustees, instructions on how to begin the process.
- Minor children: Information about your minor children, nearby guardians or relatives, medical and health insurance information.
- Personal Information: Birth and marriage certificates, passports, family, friends and contact people.
- Estate Planning Documents: Trust, Wills, any amendments, personal property memorandum.
- Employment/Business Information: Contact information for supervisors, client information if you are a small business owner.
- Health Care: Advanced Health Care Directive, HIPAA, emergency contact information, phone numbers for doctors, health insurance particulars.
- Financial Powers of Attorney
- Real Estate and Tangible Property: Deed to your home, mortgage information, homeowners and fire insurance, vehicle records, artwork and antiques.
- Bank Accounts and Investments: Account numbers and locations, contact information.
- Monthly Expenses and Bills: A copy of one monthly statement for each.
- Taxes
- Retirement Accounts/Government Benefits: Account numbers, beneficiary information.
- Life Insurance: Account numbers, beneficiary information, premium payment information.
- Memorial and Burial/Cremation: Preferences, pre-paid arrangements, phone numbers.
- Memberships/Secured Accounts/Passwords
Once you are organized, keep your information in an accessible place and make your executor aware of the location. Keeping as much information as possible in a computer file is also a good idea. Then you can easily re-print a page when something changes. Don’t forget to back up your data onto a CD ROM disk or USB Drive, and keep that somewhere else for safekeeping.
Organize now to make things easier for yourself and your loved ones. You will enjoy the benefits now, and they will thank you later.
The Sleepy Field of Estate Planning—Until Now
March 21, 2009
When people think of lawyers they usually think of the fast-paced lives of the characters in John Grisham’s legal dramas, or maybe the dramatic and exciting courtroom scenes from the movie A Few Good Men. But Estate Planning Law has never been like that. Estate Planning has always been a calm and sedate area of law—until now. According to this article in The Wall Street Journal’s Smart Money.com longer life spans and shifting familial roles is changing not only the face of Estate Planning, but also values and traditions going back hundreds of years.
“It’s rare that an inheritance passes from one generation to the next without leaving some scars. But smooth transitions are becoming even rarer thanks to the growing influence of a new player: the second spouse. As Americans live longer, they’re more likely to move into second marriages, and legal experts and financial planners say the resulting friction with the kids is steadily mounting. In more cases grown children are going to court against their parents even while they’re still alive, only to run up against a legal framework that leaves them with surprisingly few rights compared with their parents’ new spouses. The once-sleepy field of trust and estates law is now brimming with hardened litigators. In Texas, personal-injury lawyers in search of big paydays have begun taking on will contests. And just as court squabbles are on the rise, so are prenups and sophisticated trusts that are designed to forestall them.”
All of these changes mean that we lawyers have a lot more to learn and anticipate, but so do our clients. The best way to keep the values of your family intact is to talk about them ahead of time and take steps to protect those values. As Chris Leyerle says at the end of the article, “You do it… out of love.”
Make the Most of IRA Distributions—Carefully
March 19, 2009
When we talk to clients about “the estate” they will pass on to their heirs, that estate includes a number of components: home, life insurance, bank accounts, investment accounts, secondary properties, and IRAs or other retirement assets. Many people consider their IRA the least of the assets in their estate, because they intend to spend down the IRA before they die, leaving nothing (or almost nothing) to pass on to their heirs. But should you die before that IRA is spent down it can end up being a significant inheritance over time to your beneficiaires, provided you—and your beneficiaries—play your cards right.
According to this article by Dan Caplinger, one of the biggest mistakes you can make is to name your “estate”, rather than named family members, as beneficiary for your IRA: “[B]ased on how the tax laws treat IRA money that goes through your estate, your heirs may miss out on a tax break that could save them thousands of dollars over their lifetimes.” Caplinger’s article continues to explain what he thinks is the best way to designate a beneficiary for your IRA, and how your loved ones can spread out distributions over time to make the most out of their inherited investment.
Of course, at our firm we know that every situation is unique, and there may be times when perhaps it will be more beneficial to your purpose to distribute your IRA to your heirs through your trust or even your estate. We therefore always recommend that you ask us or your financial advisor, or both, before making changes that will affect the distribution of any part of your estate, and especially your IRA’s, 401K’s or other retirement assets.
Choosing A Fiduciary: Some Special Thoughts
March 17, 2009
Choosing your fiduciaries can be one of the most difficult parts of creating your estate plan, especially choosing trustees for your trust, which, depending on the circumstances, you may hope will be in existence for quite a long time. Most people’s first instinct is to choose a family member, someone they know and trust, perhaps even the most responsible of their children; but this article from Elder Law Answers explains why that might not be the best course of action.
Many people, when choosing their trustees, don’t consider the whole picture. They are inclined to choose their trustees based on fear of being taken advantage of, which is why many people choose a trusted family member. But it’s also important to consider knowledge and expertise. A situation in which a fiduciary acts dishonestly and takes advantage of your beneficiaries is far less likely a scenario than one in which a fiduciary does your beneficiary a disservice out of ignorance and inexperience.
Choosing your fiduciaries is a critical step; it requires thought and consideration, and depending on your ultimate goal for your estate plan, it requires the advice or recommendation of an expert. When you go to visit your estate planning attorney bring with you a list of potential fiduciary candidates… but also an open mind.
Time and Tide Wait for No Man, It’s Time to Update Your Estate Plan
If you are one of the thoughtful people who already have an estate plan you may be looking at the news stories about President Obama and his changes to the estate tax and wondering if it will affect your plan. “How long ago did I create my plan?” is the inevitable question we ask ourselves, “What has changed? Has it been long enough that I have to update it?” Well, we’re here to tell you that if you have to ask the question then, yes, it’s time to update your plan.
You may think that your plan is simple, your assets haven’t changed, and so changes in the estate tax law won’t affect you, but as this article points out, it’s not just changes in the estate tax law that can impact your estate plan. “A law change that inadvertently has affected some estate plans in recent years is the law protecting medical privacy (commonly referred to as HIPAA or Health Insurance Portability and Accountability Act). This law, while protecting your privacy, can be a problem if you become incapacitated, and someone who is supposed to act on your behalf cannot get the necessary information.” Does your estate plan include an updated HIPAA? Ours do.
Inevitable life changes are another reason to update your estate plan regularly. These include changing friendships or family relationships, the births or deaths of family members, your own changing medical needs, and more.
It’s not so hard to make an appointment with your estate planning attorney for a quick review of your plan to determine if it should be updated. And chances are that most years changes won’t be sweeping but small, such as the inclusion of a HIPAA Authorization provision in your documents, or the addition of a new grandchild in your plan of bequests. Don’t let the passage of time render your plan obsolete.
Young or Old—Love is in the Air, part 2
March 12, 2009
When elderly parents fall in love it affects more than just the lovers, it has an impact on their concerned children as well. This is especially true when the lovebirds want to make significant changes in their lives; things such as getting married or moving in with each other. In Monday’s post we shared a news story about 5 things you should talk about before a late in life marriage. Today we’d like to look at the flip side: What is a son or daughter to do when mom or dad falls in love?
Anne Underwood, guest writer on the New Old Age Blog, shares the story of her father’s new love at the age of 86, and his decision to leave the retirement community where he lived and move to another state to be with the object of his affection. Underwood writes in poignant detail as she describes something more and more adult children are experiencing as their parents age: The struggle between her desire to support her father and the decisions he makes, and the need to protect him as he ages.
Providing for the Special Heroes in Your Life
March 9, 2009
As an estate planning law firm we often have to take on the role of encouraging our clients to think and talk about difficult and sometimes sad issues. Sometimes, however, we have the joy of sharing something truly heartwarming. This video about autistic high school basketball player Jason McElwain is one of those things.
Many of our clients have children with special needs, and know that a basic estate plan is not going to have what it takes to protect and provide for those special needs after our clients have gone. If you have a child you would like to provide for, please contact our office to find out which may be the best tool for your family.
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