Unattended Life Insurance Policies Can Subvert the Best Laid Estate Plans
May 30, 2009
Many people count on life insurance to pay their estate tax when they pass away (allowing their heirs to keep non-liquid assets such as real estate without having to sell immediately), and this has always been a fairly safe and reliable strategy—as long as you’re keeping track of your policy. Arden Dale’s article in the Wall Street Journal warns that current low interest rates are wreaking havoc on some insurance policies, leaving the owners without that safety net when the time comes to pay estate taxes.
“The policies are imploding because of low interest rates. An insurance plan issued years ago, when interest rates were higher, may no longer be earning the investment returns it needs to pay premiums as drafted. That shortfall leaves the owner on the hook for unexpected costs.
“If the worst happens and a policy collapses, its demise can even result in a big tax bill.”
If you aren’t sure of the status of your insurance policy talk to your financial planner or insurance representative to find out, then be sure to call your estate planning attorney to update your estate plan as needed to protect your heirs and family from the burden of unexpected estate taxes.
How Well Do You Know Your Power of Attorney?
May 29, 2009
Imagine for a moment that you (or you and your spouse) are in a car accident, knocked on the head, and suffer brain injuries great enough to put you into a coma for 2 weeks and require a full seven months of nursing and rehabilitative care. Thankfully, you make a full recovery of all your cognitive powers; but in the meantime, who has been taking care of all of your responsibilities? Have you lost your home because nobody was paying the bills? Did you end up in a sub-standard recovery facility because nobody could sign the nursing home contract on your behalf? Do you have a living trust that addresses this situation but was never brought into play because it languished in a safe deposit box to which nobody had access but you?
An essential part of any trust or estate plan is the execution of a Durable Power of Attorney. This is the document that gives your nominated agent the power to do all of the things you would normally do: sign legal documents, write checks, access safe deposit boxes, and more. A Power of Attorney—if it’s done right—is an extremely comprehensive document (as described in this article in the New York Times), and as such can make many clients nervous about signing it. Does this mean you should go without? Absolutely not! Note: the Times’ article is based upon New York law, but it does have a message for all:
“…Even if signing a power of attorney makes the client feel vulnerable, it’s far better than living without one. If you become incompetent, you lack the capacity to make legally binding commitments. Without a durable power of attorney, your family might have no choice but to ask a court to appoint a guardian to oversee your finances. This can be an expensive and sometimes embarrassing ordeal and can involve unpleasant, even acrimonious, exchanges.”
Trusting another person with such power may be difficult, but the alternative can be far worse. Executing a power of attorney doesn’t have to be a nerve-wracking ordeal; talk to your lawyer about your concerns, work with him or her to choose an agent with whom you feel comfortable, and discuss the circumstances in which a power of attorney might be necessary. The last thing you want is for your home and finances to deteriorate because you were out of commission for a couple of months, and this is exactly what a power of attorney is designed to prevent. And remember: in California, it should be designated as “durable” , which means it survives your incapacity, as that is when you will need it most. If it is not created to be ‘durable’, your agent may have difficulty using it just when it is most needed, and its primary purpose will have been lost.
You Ought To Be In Pictures: When and How To Create A Video Will
May 28, 2009
The process of creating a last will and testament hasn’t changed much over the centuries, and the requirements are few: Paper, pen, witnesses, and a testator who is of sound mind. This endurance and simplicity is one of the hallmarks of estate planning—and yet there are plenty of ways to incorporate technology into our practices and use it to our clients’ advantage. One way to do this is with the use of video wills.
A video will is created when the testator reads his or her will in front of a video camera, and occasionally explains why certain gifts were granted and why some were not. It may include some discussion back and forth between the drafting attorney and the client, in regard to selected provisions of the Will, some detail in regard to family members mentioned or omitted, and perhaps some general colloquy to show that the person making the Will was of sound mind. The benefit of creating a video will is that it can be used to establish the mental competence of the testator. As such, a video will can be especially helpful to elderly clients whose heirs might be inclined to contest the will on the grounds that the testator was not of sound mind, or was making the Will subject to the undue influence of others.
Although a video will can be a helpful addition to your estate plan, it can in no way replace an official paper copy, signed in the presence of witnesses. A physical writing of your will—drafted by a knowledgeable attorney and with your official signature made in the presence of the required witnesses—is the only valid legal evidence of your wishes for the distribution of your property. A video will by itself will not hold up in probate court.
Technology brings great improvements to our lives, but adaptation takes time. Talk to your attorney first if you are considering incorporating a video will into your estate plan. Although it can be helpful, a video will is not always necessary, and could in some cases be detrimental if not done correctly. You should only film under the advice and supervision of your trusted attorney.
When Should I Update My Estate Plan?
May 23, 2009
You’re one of the smart ones: You already have an estate plan that you and your spouse created it back in 1996; it’s sitting snugly in a safety deposit box, gathering dust until the (hopefully) far-off day when it will be needed. You’re done, right?
Wrong.
Kudos to you if you’ve already created your estate plan, you are one step ahead of the rest of the pack; but people and families grow and change, and your estate plan should change as your life does. Your estate plan should be reviewed regularly (we recommend the tax season as a good time to review your plan), but listed here are some life changes that will definitely require you to update your estate plan:
The birth or death of a beneficiary or fiduciary. This includes the addition of new children or grandchildren, or the loss of a parent or sibling.
Your own marriage or divorce, or the marriage or divorce of one of your beneficiaries. If you named your daughter’s husband in your plan five years ago when they were happily married, you’ll want to be sure to remove him after they go through that messy divorce.
Moving to a new state. Tax, health care, and estate planning laws vary from state to state, and your estate plan will have to change accordingly. This is especially true if you are moving from a non-community property state to a community property state.
A significant change in your financial status, or the status of your business, (if you have one). For the most part, your estate plan is designed based on the size of your assets. Different strategies are more effective for large estates than are for small; and if your financial status changes significantly, so should your estate planning strategy.
The simple passage of time. This may sound like the least important reason to update your estate plan, but it is actually the most common. Naming your parents as trustees when your children are minors is fine, but after fifteen years you may want to give your parents (who are now entering their 80s) a break and name your 37 year old son as trustee instead. In addition, there are some documents that should be re-executed from time to time to avoid them being construed as ’stale”, e.g. your Advance Health Care Directive, your Nomination of Conservator, and your Nomination of Guardain for Minor Children?
Changes in the Tax Law: changes in the tax law can really require another look at your existing plans. For example, couples who prepared “Living Trusts” back in the 1990’s often used “A–B” trust splits on the first death in order to minimize estate tax. With the increasing exemptions, those trust splits may now no longer be necessary for most couples’ estates, and may actually be a hindrance. See our Article “Review Your Living Trust: Older Ones May Need Revision”.
E-mail, Twitter, Pay Pal—Oh My! How to Protect Your Online Assets
May 22, 2009
Don’t Let Hospital Procedures Leave You In The Dark
May 19, 2009
If you or a loved one has spent any time in hospitals recently then you know that they operate under strict rules regarding privacy; rules that, according to this post by Tara Parker-Pope, can seem difficult or unfair. These rules prevent hospital staff from sharing information about patients (even with extended family members), and in some cases even prevent the staff from allowing visitors. All of this can be frustrating to say the least when you’re crazy with worry about your loved one.
There is a way around the strict privacy laws, a way that is fool-proof and perfectly legal—and it’s something our firm can help you with. A comprehensive Health Care Directive and a signed HIPAA Authorization are your tickets to a cooperative relationship with the hospital staff. But these documents, these “tickets”, require forethought and planning before you end up in the hospital.
An estate plan created with our office includes not only financial documents, but also any documents you’ll need to ensure that your wishes for medical care are followed. Don’t wait until the last minute. You never know what fate may have in store, and your procrastination can result in your loved one being left frightened and in the dark.
Maria Shriver and HBO: Bringing Alzheimer’s out of the Back Room and into the Living Room
May 17, 2009
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Every 70 seconds someone is diagnosed with Alzheimer’s
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5.3 million people are currently suffering from Alzheimer’s
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Alzheimer’s is now the sixth leading cause of death
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There are 9.9 million unpaid caregivers in America
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One in eight people over the age of 65 suffers from Alzheimer’s
(from the Alzheimer’s Association’s 2009 Alzheimer’s Disease Facts and Figures)
Alzheimer’s is a disease that touches each one of us in one way or another; whether we care for a loved one with the disease, have experienced the pain of watching a parent or grandparent slowly lose themselves to it, or live with the fear of being diagnosed with it ourselves. With one in eight people aged 65 or older already suffering from Alzheimer’s and another person diagnosed every 70 seconds, we can no longer to afford to bury our heads in the sand and hope that Alzheimer’s will pass over our family. It’s time to bring the disease into the light.
Bringing Alzheimer’s into the light is exactly what Maria Shriver is doing with her moving article in the Huffington Post and with her children’s book, What’s Happening to Grandpa? Shriver isn’t the only one who feels that Alzheimer’s deserves more attention; HBO aired their Alzheimer’s Project this past weekend, featuring, among other things, a four part documentary series.
Although the facts about this disease are frightening—especially as the Baby-Boomers near the age of 65—a common theme among experts and activists is optimism and hope. The more the public is aware of Alzheimer’s and its implications for their own futures and families, the more can be done not only for victims of Alzheimer’s themselves and in the search for treatment, but also in support of caregivers and loved ones.
How Far Would You Go To Control Your Heirs?
May 15, 2009
A trust is one of the most flexible and most powerful estate planning tools, and not just for avoiding unnecessary estate taxes. Many of the clients who come through our office choose to create trusts for other reasons as well; namely to protect their heirs from predators, creditors, and sometimes even from themselves. Sometimes a client goes even further than that, and wishes to place restrictions and attach conditions on an inheritance. In general, these conditions are enforceable—as in the case of a beneficiary being required to have graduated from college before having access to his inheritance—but is it possible to take these conditions too far? Should a grantor be able to restrict who his beneficiaries can marry?
This is the issue that is being argued right now In re Estate of Feinberg, 383 Ill. App. 3d 992, in what is being referred to as “The Jewish Clause” in this article on the Trusts and Estates website. In this case, grantor Max Feinberg:
“created a trust in which he declared that any descendant of his — that is, any descendant other than his children — ‘who marries outside the Jewish faith (unless the spouse of such descendant has converted or converts within one year of the marriage to the Jewish faith) and his or her descendants shall be deemed to be deceased for all purposes of this instrument as of the date of such marriage.’”
At first the Illinois court ruled that such a clause was invalid as going against public policy, but one judge’s strong dissenting opinion has resulted in the Illinois Supreme Court agreeing to hear the case.
Although the case is being heard in Illinois, the decision could eventually have an impact on trusts created in other states, and so we put this question to our readers: How far should a grantor be able to go in placing conditions on an inheritance?
Jinies.com