Off to College? Don’t Forget Your Health Directive!
August 25, 2011
The hot and lazy days of summer are almost over; parents are thinking about back-to-school sales, kids are making the most of their final days of freedom, and college freshmen are getting ready to embark on their first year of adult-hood. Most of these college students have a list (whether mental or physical) of all the things they’ll need as they leave the nest for the first time, but most of these lists will be missing two key items: A Healthcare Directive and a HIPAA Form.
You may be wondering why a college student needs estate planning documents—aren’t those just for older, established people? Not at all.
Most incoming college students are now (or will soon be) 18, and considered adults under the law. This means that hospitals and medical personnel are no longer required to ask the parent’s permission before performing medical procedures. In fact, once your child is 18 health care providers are no longer required to share information with the parents at all.
Most college students (and parents) are unaware of this side-effect of turning 18, and parents and children alike can run into frustrating roadblocks should an accident occur. You can avoid these roadblocks by simply having your young adult execute the two simple documents mentioned in this blog post.
A Healthcare Directive can be an in depth document or a very simple one, but the most important part for your new 18 year old will be the nomination of a healthcare agent. A healthcare agent is the person who will make medical decisions for your child if he or she is unable to make them alone.
A HIPPA Authorization Form addresses the issue of security and privacy of health data. In a HIPAA form your child can list the people who have permission to receive information about his or her medical records and status.
For a fledgling 18 year old these two documents are of the utmost importance, and with the right help, they are very easy to execute. Don’t wait until it’s too late; make sure your young adult has these documents completed before they leave the nest.
Estate Planning for Beginners Part 3: Powers of Attorney
June 29, 2011
Once you are secure in the knowledge that you’ve provided for your family and ensured that your wishes for the distribution of your hard-earned fortune are clear, it’s time to take steps to ensure that YOU will be protected and financially secure during your lifetime. It is not uncommon for seniors to need help with the finer details of their finances as they age, or in rarer circumstances for someone who is injured or incapacitated to require an agent to make financial decisions for them. A Power Of Attorney is the document that gives your chosen agent permission to make choices on your behalf, as well as giving instructions as to how those choices should be made.
Here are some of the most important things you should know about your Power of Attorney:
- A Power of Attorney is only effective during your lifetime; it gives your agent (or attorney-in-fact) the power to act for you while you are alive.
- A Power of Attorney can be created to go into effect immediately or only become effective when you become incapacitated. This latter Power of Attorney is called a Springing Power of Attorney because it “springs” into effect once it is proven that the predetermined conditions (generally incapacity of you, the principal) have been met.
- A Power of Attorney can be revoked at any time so long as you have mental capacity.
- A Power of Attorney is for financial and legal issues only. A health care agent is appointed in a separate document (to be discussed in our next blog post.)
Because your Power of Attorney grants your agent-in-fact such broad powers it is of the utmost importance to choose an agent who will not only be able to make wise decisions for you, but who will also have your best interests at heart. While a Power of Attorney does grant an agent very broad powers, there are ways to build a system of checks and balances into the document; some of these include requiring your agent to keep detailed records and present these records to the principal (you) or other named individuals, or using restrictive language in the document itself which sets limits on the agent’s power.
Estate Planning for Beginners Part 2: Trusts
June 28, 2011
We’ve said it before on our blog and we’ll say it again: It doesn’t matter whether you’re a billionaire business executive or a teacher with a modest salary, it doesn’t matter whether you’re the patriarch of a large family or a stay-at-home mom of a newborn, a revocable living trust may be exactly what your family needs to protect family assets and their best interests. This is because a trust is probably the most comprehensive and versatile tool in your estate plan, and is a key part of helping you accomplish your goals.
There are two basic kinds of trusts—revocable and irrevocable. Revocable means that it can be revoked or changed so long as the grantor (the person who created the trust) is still living and is competent to do so. Logically enough, an irrevocable trust generally cannot be changed once it has been signed. The reason this question of revocability is so important is because a trust is not merely a set of instructions for how your wealth should be distributed, a trust actually owns the property placed within it, with the person or people serving as trustee (usually for a revocable trust this is the grantors themselves, while they are living) controlling the trust property within. It is for this very reason that trusts can be such a powerful and flexible tool for tax planning and estate planning.
The specifics of your trust will vary greatly depending on what you hope to accomplish. Parents of young children may wish to include a general trust for the benefit of all the children, with distributions made to their guardians as necessary. This general trust can be split into separate individual trusts when all of the children have reached a certain age or graduated from college. Parents (and often grandparents) may want to include education trusts under the umbrella of their revocable living trust. Many families feel it is important to include instructions for charitable giving in their estate plan, and may choose to set up a charitable trust with their children or grandchildren as trustees. Pet owners often create pet trusts to ensure that their animals will be well cared after the owner has died.
A trust, much more than a simple will, allows the grantor far greater control over his or her assets—and for a longer period of time—which is why trusts are particularly useful for anybody entering into a second or third marriage, or for any parent who worries about the choices a beneficiary might make once they come into their inheritance. Unlike a simple will, trusts are designed to withstand the test of time, allowing you to leave a legacy that can last for decades.
Estate Planning for Beginners Part 1: Wills
June 25, 2011
Every new project has to begin somewhere, and most newcomers to estate planning choose to begin with a will. A will is the most well-known of all estate planning documents, it is generally the simplest and easiest to create (although some wills can be very lengthy and complex), and in most states a will can contain within it instructions for peripheral topics such as guardianship of minor children or the final disposition of your remains.
But everybody knows that the main purpose of a will is usually to dispose of your assets and effects. In its most basic form, a will should include these important parts:
- The testator’s (Will-Maker’s) name and crucial information
- Nomination of an executor to carry out the wishes of the testator
- The names of the beneficiaries
- Instructions as to how the estate should be distributed to the beneficiaries
- Signature of the testator and the date signed
- Signature of witnesses and the date signed
As mentioned above, this is a will in its most basic form, but in fact most wills will also contain instructions for probate, instructions regarding the payment of debts and taxes, the names of any organizations to receive charitable distributions, a mention of relatives who may purposefully NOT have been named, and more.
Because a will can be so basic, many people believe that a will can easily be created on one’s own, without the help of an estate planning professional; in fact, there are plenty of companies who offer “Do It Yourself” will creation software for a fee. However, it is important to understand that while a will itself can be very simple, the federal and state tax and probate laws are rarely so. If you feel your estate is small and your wishes are modest then by all means keep your will short and sweet. However, we strongly urge ALL of our readers (even those with small and simple estates) to have an estate planning professional at least review your will and advise you as to its validity before you sign it and tuck it away.
Royal Couple Has Many Asking “How Effective Are Prenuptial Agreements?”
April 12, 2011
It’s all over the news lately that Prince William and his fiancé Kate Middleton will likely not sign a prenuptial agreement before the royal wedding on April 29th. Although many reasons have been given as to why the couple will forgo signing a prenup, one of the reasons is that “while prenuptial agreements are common in the United States, they are far less prevalent in the UK. Only in the last year have British courts agreed to recognize such deals.” This is a statement that has some Americans asking exactly how legally binding are prenuptial agreements here in the States?
The answer to that question depends on a number of factors: your state of residence, the terms of your prenuptial agreement, how long you stay married, and more. Fortunately, the longer prenuptial agreements are around, and the more common they become, the more respect they get from the courts. But if you’re worried that your prenuptial agreement won’t hold up in court, here are few tips to help ensure the validity of your agreement.
Neither party must be signing under duress. The more time each party has to review the agreement before the wedding the better. Any prenuptial agreement signed the day of or the day before the wedding could be looked upon as being signed under duress.
The agreement should include full disclosure of income and assets. If you live in a state where it is possible to waive full disclosure of assets then BOTH parties should specify that they do so knowingly.
Each party should have their own legal representation. In order to be sure that neither party is being taken advantage of, each party should have their own independent attorney review the document before it is signed.
Details regarding children or child support in a prenuptial agreement may not be enforced by most courts. Partners my want to include details about possible custody or child support arrangements in a prenuptial agreement, but keep in mind that any court will always give the best interests of a child the highest priority, even if it means disregarding those sections of the agreement between spouses.
Waivers of Spousal Support (alimony) Will Be Carefully Construed by California Courts. Any attempt to waive spousal support in the pre-nup will be carefully construed in the event of divorce, and may or may not later hold up, so just beware.
Seniors with children from prior relationshps, who remarry later in life, often consider pre-nups as a way to ensure the inheritance of their own children. So, its not just above divorce. Hopefully, these tips can help ensure that your agreement will be considered valid by a court should the need for enforcement arise down the road.
The Tax-Lady Cometh
February 24, 2011
It’s that time of year again; the time of year when everyone starts gathering receipts, assessing income and expenses, and making appointments with tax advisors. Tax time can be a very stressful time for many families, but—with the help of this article from MSN Money—perhaps tax season can be made a little bit easier. The article lists 13 tax breaks from 2010 that can help save you money, including:
- The tax credit for first time homebuyers (if you’re not a first time homebuyer don’t give up, there’s a credit for existing homeowners too.)
- The parking and transit credit
- The college tuition tax credit
- The credit for energy-saving home improvements
And then of course there are the two we’ve been mentioning here on our blog for the past few months:
- The estate tax exemption, and
- The annual gift tax exemption
Of course, not every item on the list is going to apply to every reader, but if even one or two credits apply to you or your family it can be a huge help.
Don’t rely only on this article to ease your 2010 tax burden, your own advisors and tax planners—who know more about your family’s personal and business finances—will be able to give you much more in-depth advice on how best to address your own tax situation. In addition, talking to a professional advisor right now provides the perfect opportunity to tackle any issues in 2011, hopefully making this time next year a much happier and less stressful time for everybody.
Estate Tax Laws Aren’t the Only Things That Change: A 7 Point Checklist
February 19, 2011
We’ve written before about the importance of reviewing and updating your estate plan, but it’s a topic worth mentioning again—especially in light of the many recent changes to estate tax law. The plain truth is that no matter how perfect your estate plan is when you create it, change is inevitable, and when your life (or the tax law) changes, it’s important that your estate plan change with it.
Reviewing your estate plan every 2-5 years is essential to keeping it up to date and working the way you intended it to work. Luckily, reviewing your estate plan can be quick and easy if you know what you’re looking for. Here are 7 key components you’ll want to review:
- Fiduciaries-How have the people in your life moved or changed?
- Assets-Are your finances different than they were a few years ago?
- Distribution and Beneficiaries-Are there any new members of your family?
- Health Care-What changes have you experienced in your health recently?
- Long Term Care: Are long term care issues on the horizon?
- Capacity: Do you see needing assistance to manage finances in the near future?
- Legal Updates-Have the laws changed?
If we’re lucky, our lives are constantly changing—our families evolve, our finances improve or decline, we meet and form strong relationships with knowledgeable friends and professionals. It only makes sense that your estate plan should change too. What seemed best for your family 4 years ago might not be the ideal situation now. By reviewing and updating these 7 components on a regular basis, and touching base with your attorney for guidance, you will insure that your estate plan will continue to protect yourself and your family the way you intended it to when you first created it.
Planning to Make Your Life Extraordinary
February 4, 2011
One of the best parts about doing the work that our firm does is that we get to help people evaluate their priorities and define for themselves what is truly important. Sometimes it’s too easy to get caught up in the day-to-day stresses and activities and to lose sight of what your true focus is. In the concerns of the ordinary it’s easy to forget to pay attention to the extraordinary.
It may not sound appealing, but planning for your death makes you take a look at life from a very different point of view. Take the typical To-Do list, for example. Most people have a To-Do list filled with tasks such as “pay the bills” or “wash the car”, but don’t these lists evoke a feeling of heavy obligation rather than pleasant anticipation? If you were to take your list of Things to Do and add onto the end of it “Before I Die”, how would that change your list? Recall the recent movie, “The Bucket List” and the fun that Jack Nicholson and Morgan Freeman had together in what each thought was the last weeks of their lives.
This is a large part of what estate planning is all about. It’s about separating the wheat from the chaff, about evaluating your life, realizing what is truly important, and planning to accomplish and protect those things of value.
Of course, nobody can live every minute in this state of heightened awareness. The bills do need to be paid and the car does need to be washed. But as you make that list of ordinary To-Do’s each morning try to include one thing that brings you closer to your extraordinary goal. Keeping the big picture in mind can give you perspective, and keep you focused on what’s really important. Make your own “To Do” list one that will bring you a sense of pleasant anticipation at the dawn of each day, and of peace and contentment when you turn the final page.
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