How to Plan Ahead in Case a Loved One Has Dementia

Have the conversation about dementia, says The Tribune-Democrat’s recent article entitled, “Dealing with dementia | Planning ahead: ‘Have the conversation.’” Next, get the legal documents and define the future care. Note that the documents’ provisions are ineffective, until the person cannot make their own decisions.

Having the documents in place can help prevent the person from being placed in guardianship by the court. If they have no advance healthcare directives, the family or caregivers must apply to the court for guardianship if incapacity can be proven. When granted, the court appoints a decision-maker, taking away the individual’s ability to make decisions – either in whole or in part. This court oversight continues throughout the individual’s life.

Advanced directives, like a living will, health care power of attorney and financial power of attorney, allow those facing dementia to make their own decisions while they still have the capacity. Family members and potential caregivers should encourage their loved ones to act and get these important documents in place.

An advanced health care directive can include both a living will, which makes known what end-of-life care the individual wants, and a health care power of attorney, which assigns an agent to carry out the individual’s wishes when making health care decisions. The document states goals and values on which to base the decisions. It doesn’t take away the individual’s rights to make those decisions and can cover a broad range of medical decisions, or it can be narrow and limit the types of decisions.

The documents can be revoked anytime but don’t expire until the individual dies. The agents also don’t become personally responsible for the individuals’ debts. Careful consideration should be used in choosing the agent, which can be a family member or other trusted person. The agent should be capable and have a good relationship with the person.

A financial power of attorney is similar. It names an agent and doesn’t take away the individual’s decision-making ability. It ends with death and can be revised anytime. It can include handling money, checks, deposits, property sales and pursuing legal action. However, changing beneficiaries of insurance or making gifts requires specific instructions.

The agent selected should be a person who understands the individual’s feelings and point-of-view and is trusted to respect the individual’s wishes. They should be adept at handling their finances, as financial management becomes very important regarding where you will stay.

Reference: The Tribune-Democrat (July 29, 2023) “Dealing with dementia | Planning ahead: ‘Have the conversation’”

How to Pass on Family Heirlooms with Fewer Estate Battles

Family feuds are more likely over Aunt Josephine’s jewelry than the family home. Putting sticky notes on personal items before you die or expecting heirs to figure things out after you’ve passed often leads to ugly and expensive disputes, says a recent article from The Wall Street Journal, “Pass On Your Heirlooms, Not Family Drama.”

Boomers handling parents’ estates and assessing their personal property are having more conversations around inheritance and heirlooms. However, there are better ways to plan and distribute property to avoid family fights over cars, jewelry, furniture and household items.

The person you name to handle your estate, the executor, typically distributes personal property. Therefore, pick that person with care and clarify how much power they will have. An example of this comes from a police officer in Illinois who has been settling his father’s estate for nearly two years. His father owned more than twelve vehicles, a water-well drill rig and two semitrailers of car parts and guns dating back to the Civil War. He also listed 19 heirs, including stepchildren and friends. He told his son he knew he could handle everyone and the stress of people who “aren’t going to be happy.”

If you want a particular item to go to a specific person, make it clear in your will or trust. Describe the item in great detail and include the name of the person who should get it. A sticky note is easily removed, and just telling someone verbally that you want them to have something isn’t legally binding.

Without clear directions, one family with five siblings used a deck of cards and played high card wins for items more than one sibling wanted. Only some families have the temperament for this method.

In one estate, two sisters wanted the same ring. However, there were no directions from their late parents. An estate settlement officer at their bank had a creative solution: a duplicate ring was made, mixed up with materials from the original ring, and each daughter got one ring.

Ask your estate planning attorney how to address personal heirlooms best. In some states, you can draft a memo listing what you want to give and to whom. It is legally binding, if the memo is incorporated into a will or trust. If not, the personal representative can consider your wishes. Make sure to sign and date any documents you create.

Get heirlooms appraised to decide how to divide items equitably, which to sell and what to donate. If heirs don’t want personal property, they can donate it and use the appraisal to substantiate a tax deduction. Appraisals will also be needed for estate tax and capital gains tax purposes.

Reference: The Wall Street Journal (July 30, 2023) “Pass On Your Heirlooms, Not Family Drama”

When Is a Child Not A Descendant?

Not using specific names and terms open to definition could significantly impact who might inherit from your estate or trust. There are situations where some people may choose to deliberately restrict or expand the definition of the group, which might be included in these definitions, explains the article “Who Is Your Descendant: Intentional Limitations Or Broadening Of Definitions In Your Will Or Trust” from Forbes. For some people, creating a new role of a special trust protector who holds a limited or special power of appointment to determine who should be included or removed from the definition of “issue” or descendant is worth considering.

What might arise if the wish only considers children descendants if they belong to a particular faith? Is this type of legal restriction permitted? Clauses limiting heirs to members of a particular faith or a sect within the faith may raise questions about the constitutionality of the clause. Potential heirs excluded under such provisions have argued that a religious restriction on marriage violates constitutional safeguards under the Fourteenth Amendment protecting the right to marry.

Courts have held clauses determining if potential beneficiaries qualify for distributions based on religious criteria enforceable, if the potential beneficiaries have no vested interest in the assets. Another court upheld the provisions of a will conditioning bequests to their sons as long as they married women of a particular faith.

These decisions are narrowly tailored to the specific fact patterns of the cases, since individuals are generally allowed to disinherit an heir with the exception of a spousal elective share or a community property interest. The courts have reasoned that the restriction is not on the heir to marry but on the right of the testator to bequeath property as they wish.

An alternative approach is to create a single trust for all heirs mandating the funds in the trust be used for the cost of religious education, attending religious summer camps, taking relevant religious studies, religious institutional membership, etc. The trust could use the assets to encourage religious observance. However, it may only partially address the question. What about the remainder of the assets—should it be used for all heirs regardless of religious affiliations?

An estate plan compliant with Islamic law may involve a different determination of who is a descendant. The Sharia laws of inheritance are similar to the intestacy statute. One-third of the estate may be distributed as the decedent wishes. However, the remainder must be distributed as mandated under Islamic law. The residuary inheritance shares after the first third are restricted to Muslim heirs. Additional laws prescribe specified shares of the estate to be distributed to certain heirs, depending upon which heirs are living at the moment of the decedent’s death.

Suppose you or a family member is lesbian, gay, bisexual, transgender, or queer (LGBTQ). The law may not address the unique considerations regarding who may be considered a descendent. Special steps may be needed to carry out your wishes as to who your descendants are. What if you view a particular child as your own, but share no genetic material with a child? Children may be adopted or born through surrogacy, so neither parent nor only one parent is biologically related to the child. While some states may recognize an equitable parent doctrine, this may be limited and not suffice to protect the testator.

There are many new complexities for determining who is a descendant, and these issues are complicated and evolving. Changing family structures and religious beliefs based on different values all impact estate planning. A special trust protector may make decisions when uncertainty arises from provisions in a will designed to carry out the wishes. This is a relatively new role and not permitted in some states, so speak with your estate planning attorney to protect your wishes and heirs.

Reference: Forbes (Aug. 4, 2023) “Who Is Your Descendant: Intentional Limitations Or Broadening Of Definitions In Your Will Or Trust”

Transferring Property to Heirs? Skip Top Five Mistakes

It is not difficult to ensure the smooth transfer of ownership of your property to a spouse, children, or other heirs, as long as you have an estate plan created by an experienced estate planning attorney and know what pitfalls to avoid. Most importantly, says the article “I’m a Financial Planner: Here Are 5 Mistakes You Must Avoid When Transferring Property to Heirs” from GoBankingRates, if you die without a will, your state’s intestate succession or next-of-kin laws will determine who inherits your house if yours was the only name on the deed.

Next-of-kin succession varies by state, but for the most part, the priority order is first the surviving spouse, biological and adopted children, parents, and siblings, followed by grandparents, aunts, uncles, nieces, nephews, cousins and extended family members.

You’ll want to know how your state treats intestate property to avoid unwanted surprises for your family. For instance, in some states, full siblings are prioritized over half-siblings, while in other states, they are treated equally.

The biggest mistake is dying without a will and an updated deed. In some states, the property will need to go through probate if the surviving heir is not in co-ownership of the house, regardless of what’s stated in the will.

The solution is simple. Add an adult child or the person you intend to be your executor to the property’s deed via a warranty or quit claim deed. This prevents the family home from going through probate and seamlessly transfers to the individual you want to handle your estate after you’ve passed. In particular, this should be done once one spouse in a joint-owning couple dies.

There are four general types of property ownership. The legal system treats them all differently. They are property with the right of survivorship, property held in a trust, property subject to a will and property for which the spouse does not have a will.

If two spouses purchase and jointly own a property, the right of survivorship dictates that the surviving spouse automatically receives the decedent’s half and becomes the sole owner. This is the simplest and easiest outcome, since it avoids probate and the need to alter the deed. However, it’s not always the case.

A surviving spouse might need to change their deed if a partner dies and the deed didn’t automatically transfer property after death. If only one spouse was on the deed, they may have to go through probate (if there was a will) to transfer the home into the surviving spouse’s name. The spouse may need to file a survivorship affidavit and a copy of the death certificate to ensure that the title is properly in their name.

Should you transfer property while you’re still living? It may solve some problems but create others. If a primary residence is transferred to an adult child and they sell it not as their primary residence, it could lead to a large capital gains tax bill. However, if the child inherits the property after your death, the heir will enjoy a stepped-up tax basis and avoids capital gains taxation.

Before taking any steps to arrange for the transfer of the home after passing, talk with the person or people to make sure they want it and the responsibilities associated with owning a home. This is especially true if there’s more than one heir with different opinions.

If children don’t get along or are in different financial positions, leaving one property for all of them to manage together could lead to family fights. Talk with them before putting your wishes into your estate plan to avoid unnecessary resentment and, in the worst case, litigation.

Reference: GoBankingRates (July 26, 2023) “I’m a Financial Planner: Here Are 5 Mistakes You Must Avoid When Transferring Property to Heirs”

How to Speak With Mom and Dad About Estate Planning

The estate planning process typically includes making a list of your assets and debts, determining the beneficiaries of your property, and establishing a power of attorney (a person who can act on your behalf to handle your finances, healthcare, or other needs, if you become incapacitated).

The Milwaukee Journal-Sentinel’s recent article, “Five tips for having a conversation with your loved one about estate planning,” gives us some ideas to make the conversation easier.

Learn the laws. Know your state’s probate laws when you talk to family members about estate planning. Some states’ laws say that if a family member dies intestate (without a will), their assets — if they have any — go directly to their children. However, this can present issues if there are no children or multiple children and no one, such as a trustee or executor, to carry out the dead loved one’s wishes.
Start early. The earlier these discussions happen, the better. In many cases, people wait until they’re already sick and having problems before they even begin to think about estate planning. Involve loved ones early, so they feel invested in seeing it through and that planning will help ensure that their death does not burden the ones they love.
Keep discussions empathetic and brief. Family visits or holiday gatherings are good times to discuss estate planning. It’s important to remind relatives that planning protects their wishes. Ask open-ended questions, such as, “Let’s talk about your legacy or how you would like to give back to your family or your community.”
Remind your loved one they’re in control — and estate planning helps them stay that way. Leaving your loved one out of the planning process can result in their wishes being misinterpreted or not represented.

Note that the person creating the will should consult an experienced estate planning attorney.

Reference: Milwaukee Journal-Sentinel (April 25, 2023) “Five tips for having a conversation with your loved one about estate planning”

Make Power of Attorney Part of Your Estate Plan

At some point, it becomes necessary for aging people to hand over control of their finances. One aspect of estate planning is naming an agent or fiduciary who can take control of finances if you become incapacitated or experience significant cognitive decline, explains the article “Don’t Forget to Build This Into Your Retirement and Estate Plans” from yahoo! finance.

A financial agent makes financial decisions with you or on your behalf. The exact nature depends upon your preference. However, most agents act as co-signatories or solely control your financial accounts. A co-signatory means you and the agent must jointly authorize a financial transaction. In contrast, a sole controller means only the agent can authorize financial transactions to and from your accounts.

This is a type of Power of Attorney in which you authorize another person to act on your behalf in a legal capacity. The purpose is to protect your finances against cognitive decline often accompanying aging. When it’s unnoticed, the individual can continue making financial decisions, and they may not always be correct. Cognitive decline is why seniors are so vulnerable to financial exploitation and fraud.

A study from the University of Southern California found that cognitive decline significantly reduces wealth among households whose financial decision-makers experience these declines.

Putting a Power of Attorney in place before it is needed can prevent many issues. Children or another trusted family member are usually selected to serve as agents. The issue of timing is another concern—the agent should be appointed before irreversible mistakes are made. If control of finances is handed over too early, the elderly parent can be forced to live as a competent adult who needs permission to make routine decisions. However, waiting too long exposes them to financial mistakes.

How should you manage the timing? First, have regular medical checkups with a doctor who can track your mental status over time. Select your agent before issues begin as part of your estate planning. Consider a Springing Power of Attorney, allowing your agent to take charge if a doctor or court declares you unfit. Medical incompetence is a high bar, and financial mistakes can be made long before you meet a doctor’s standard for incapacity.

Another option is speaking with your agent regularly. Ask for their advice and follow it. If you trust them, you can have your estate planning attorney prepare a Power of Attorney form to suit your individual needs. Do you want your agent to manage every aspect of your financial life or focus on day-to-day bill paying? Does your situation require one person to pay bills and another to manage investments?

Cognitive decline impacts many older adults and can expose them to serious financial risk. You can protect yourself from this risk by appointing a trusted agent in a timely manner to manage your legal and financial lives.

Reference: yahoo! finance (July 28, 2023) “Don’t Forget to Build This Into Your Retirement and Estate Plans”

What’s the Latest on Multiple Wills of Queen of Soul?

A Michigan jury recently determined that a handwritten document by Soul Superstar Aretha Franklin found on her couch after her 2018 death was a valid will. It was a critical turn in a dispute that had turned her sons against each other.

CBS News’ recent article, “Expensive court fight over Aretha Franklin’s will provides cautionary tale,” warns that the fight could have been avoided if Franklin had had a formal will drafted by an experienced attorney.

An experienced estate planning attorney could have made certain that it specified what should become of her money, property and other possessions — and that it would hold up in court.

This lesson also applies to other families. You should prepare your estate plan, so the children won’t fight after you die. Estate attorneys may recommend that you establish a revocable trust. This can keep the estate out of probate court.

After the singer died, her family thought she had no will. Under Michigan law, her assets would have been divided equally among her four sons. The sons unanimously selected a cousin as the estate’s personal representative, a position similar to that of an executor. However, months later, in May 2019, two handwritten documents were found at Franklin’s home in suburban Detroit — one in a locked cabinet, the other in a spiral notebook in the couch — which immediately divided the singer’s children. Neither document was prepared by a lawyer, and neither lists witnesses, though the first one was notarized. Both had detailed lists of assets.

Aretha put her family through five years of expensive litigation that could have been avoided.

She was working with an attorney about a formal will from 2016-18, but nothing was finalized at her death.

“There were a lot of open questions and we never resolved those open questions,” lawyer Henry Grix testified during the long-running litigation. “She was quite ill and perhaps unable, really, to reach final intentions.”

Do-it-yourself software is inexpensive. However, these programs can’t customize a will to a family’s unique circumstances and foresee all the potential pitfalls like a good attorney could. Don’t be pennywise and pound foolish. Work with an experienced estate planning attorney.

Reference: CBS News (July 12, 2023) “Expensive court fight over Aretha Franklin’s will provides cautionary tale”

Which Is the Best to Way to Transfer Wealth, Trusts or Wills?

Even when everyone in the family grows up and gets along, settling an estate can bring back old sibling battles. It is even more likely if there are large sums of money or valuable property at stake. This makes having a well-prepared estate plan necessary and making those plans clear to family members long before they are needed.

A recent article from The Motley Fool, “Living Trust vs. Will: Which Is The Best Way to Pass Inheritance to Your Family?” explores how best to prepare for the future.

A will, also known as a last will and testament, instructs the executor of your estate how to distribute assets to heirs after your death.

A trust allows you to transfer assets at any time—including while you are still living—however you want, whenever you want. A trustee is the person named in the trust who is responsible for administering the trust. You can protect your children from mismanaging their inheritance with a good trustee and a properly prepared trust.

One of the biggest differences between a will and a trust is that the will takes effect only after you die.It also usually requires review and approval by a probate court. A trust is funded while you are living and does not go through the probate process.

Many people use both a will and a trust for their estate plans.

The will is best created by an experienced estate planning attorney who knows the estate and tax laws of your state. Wills are also used to name your executor and appoint a guardian for minor children. If your children are young, you want this in your will. Remember that when wills go through probate, they become part of the public record. As a result, anyone who wants to can read your will.

Trusts fall into two main categories—revocable and irrevocable. The difference is as it sounds; the grantor can change the revocable trust after it’s created. Irrevocable trusts can’t be changed once established, although some states permit what is known as “decanting”—pouring the contents from one trust into another. Your estate planning attorney will know if your state permits this.

One benefit of a trust is privacy. The trust doesn’t go through probate, so no one but the trustee and, depending on the trust, the beneficiaries, know what is in it. Assets in the trust are also distributed as directed in the trust, so they go directly to beneficiaries. There is no court involvement.

In addition, when assets are placed in the trust, they are owned by the trust and not the person who created the trust (the grantor).

Whether you are beginning to plan your estate or updating an existing plan, your estate planning attorney will help you understand your options, so you can create a plan best suited for you and your family.

Reference: The Motley Fool (July 7, 2023) “Living Trust vs. Will: Which Is The Best Way to Pass Inheritance to Your Family?”

Special Needs Planning for Beneficiaries with Disabilities

Families who aren’t knowledgeable about special needs planning often disinherit a disabled child because they don’t know the other options for protecting their offspring, reports a recent article, “Beneficiaries with disabilities require special planning” from The News-Enterprise. With proper planning, disabled beneficiaries can receive an inheritance and remain eligible for government benefits.

For estate planning, disabled beneficiaries are people who are disabled and receive public benefits, should be receiving public benefits, or are likely to need public benefits in the future. These public benefits are means-tested and determined by financial eligibility. They typically include Social Security Insurance and Medicaid. However, they may also include Section 8 housing, food stamps and other income or asset-based assistance.

Some people think they can replace public benefits with an inheritance. However, realistically, the disabled person will likely use up their inheritance and then be left only with public benefits and no resources to cover any other needs.

The best practice is to create a third-party supplemental needs trust for the beneficiary to receive an inheritance. This differs from a first-party supplemental needs trust and an ABLE account, since both have requirements based on the beneficiary’s age. The third-party supplemental needs trust can be funded regardless of the beneficiary’s age.

Third-party supplemental needs trusts don’t have a payback provision to the state. This is because a third party has funded the trust and not the beneficiary. Therefore, the assets within the trust aren’t required to be repaid to the state upon the death of the beneficiary. This leads to another benefit—the third-party supplemental needs trust may be left to a contingent beneficiary upon the death of the primary beneficiary.

Some families may leave the bulk of their estate to their disabled child, while the other children will be contingent beneficiaries.

A third-party supplemental needs trust is relatively flexible to set up and administer for future trustees. Your estate planning attorney can create one to include basic protective provisions giving the trustee maximum flexibility or set it up with instructions for an advisory committee, care planning and housing requirements.

Not all disabled individuals receive income or asset-based public benefits. In this case, the inheritance can be managed in one of two ways. First, planning documents could require the beneficiary’s inheritance to be left in a third-party supplemental needs trust, either because the planning anticipates a future need for benefits or because the beneficiary cannot manage their assets.

Another option is to leave the inheritance to the beneficiary outright, with a “trigger trust” provision. This means the third-party supplemental needs trust is set up within the planning document—a will or a trust—and will be “triggered” if the beneficiary is eligible for financial-based public benefits at the time of distribution.

The benefit of a trigger trust is that any beneficiary, including those who are healthy and capable of managing their lives when the documents are executed, can have the protection of a third-party supplemental needs trust, if and when needed.

The downside of a trigger trust is that once assets are distributed to the beneficiary outright, the option for a third-party trust is no longer available.

An experienced estate planning attorney will help the family with a disabled member plan for the future.

Reference: The News-Enterprise (July 8, 2023) “Beneficiaries with disabilities require special planning”

Where Is the Best Place to Keep Your Will?

Aretha Franklin may have done the right thing in writing down her wishes. However, she made a costly mistake resulting in an expensive estate battle over a multimillion-dollar estate, says a recent article from The Washington Post, “Aretha Franklin’s will was in her couch. Here’s where to keep yours.”

Three of her sons battled in court over handwritten wills, one of which was found under her couch cushions. Another was found in a locked cabinet. Her family was put into a pricey, heart-breaking and public battle by failing to be clear about her final wishes and improperly storing the wills. This is not likely the legacy you want to leave.

If you have a will, keep it in a place where it will be secure and easily found. Don’t put it in your bank’s safe deposit box. The bank will seal the box when it learns of your passing, and your executor may need a copy of the will and a court order to open the box. This will add a layer of delay and stress to administering your will. If this is the only option, you may want to add your executor as an owner of the safe deposit box and make sure they have a copy of the key.

What about keeping the will at home? A copy of the will can be kept in a fireproof and waterproof safe.However, be sure that someone else has a duplicate key or combination code. Your executor, personal representative, or another trusted person will need to be able to access the will. The risk here is the possibility of someone intentionally destroying the will, if they are disinherited or think you won’t leave them what they deserve.

Can you leave your will with your estate planning attorney? Creating a duplicate set of original documents, one for you to keep at home and another for your estate planning attorney, is a good option. If you choose this route, make sure the family knows the name of the attorney who has the will. If the practice closes, your heirs may need help tracking down the original will.

In some jurisdictions, you can store your original last will with the court. You give your court a sealed will for a one-time fee. The will can then only be released to you or the person you designate in writing. Remember, the will becomes a public document after you die as part of the probate process.

Wills can also be stored online. However, most states don’t yet recognize electronic wills, so your executor would need to have the originally signed copy, even if you have one stored in the cloud. Remember, no matter how secure a site is, even the Pentagon was hacked. Your will could be compromised in a data breach.

Wherever you store your will, estate planning attorneys often recommend leaving a letter of instruction to serve several purposes, including letting family members know your will exists and where it is stored.

To make things easier for your family during a difficult time, put together a binder and include a letter with a list of important information. The list should include assets, names and contact information for the professionals they’ll need to know, including your estate planning attorney, financial advisor and CPA.

When you update your estate planning documents, which should be done every three to five years, or when there is a trigger event in your life (birth, death, divorce), destroy any old wills. Your estate planning attorney will add a provision saying the new will supersedes any previous versions.

If you don’t have a will, state law will dictate how your property will be distributed, which may not be what you want. Known as dying “intestate,” your assets could go to a relative you haven’t seen in decades or people you don’t know or like. Your children, siblings, or parents may not inherit your property, and fighting will likely occur, especially if significant sums of money are involved.

Having a will and making sure people know where it is doesn’t always ensure that there won’t be a battle over your estate. However, it may prevent a war.

Reference: The Washington Post (July 14, 2023) “Aretha Franklin’s will was in her couch. Here’s where to keep yours.”

Estate Planning Blog Articles

Estate & Business Planning Law Firm Serving the Providence & Cranston, RI Areas

How to Plan Ahead in Case a Loved One Has Dementia

How to Pass on Family Heirlooms with Fewer Estate Battles

When Is a Child Not A Descendant?

Transferring Property to Heirs? Skip Top Five Mistakes

How to Speak With Mom and Dad About Estate Planning

Make Power of Attorney Part of Your Estate Plan

What’s the Latest on Multiple Wills of Queen of Soul?

Which Is the Best to Way to Transfer Wealth, Trusts or Wills?

Special Needs Planning for Beneficiaries with Disabilities

Where Is the Best Place to Keep Your Will?

Join Our eNewsletter

Recent Posts

How to Plan Ahead in Case a Loved One Has Dementia

How to Pass on Family Heirlooms with Fewer Estate Battles

When Is a Child Not A Descendant?

Transferring Property to Heirs? Skip Top Five Mistakes

How to Speak With Mom and Dad About Estate Planning

Make Power of Attorney Part of Your Estate Plan

What’s the Latest on Multiple Wills of Queen of Soul?

Which Is the Best to Way to Transfer Wealth, Trusts or Wills?

Special Needs Planning for Beneficiaries with Disabilities

Where Is the Best Place to Keep Your Will?

Categories

Email/Social Media

Quick Links