Should You have a Pet Trust Created?

The infamous Leona Helmsley was the subject of as many headlines after her death as when she was alive, mainly because she left millions in trust for her dog, “Trouble.” However, you don’t have to have millions to want to protect your faithful pet’s future in the event of your passing, according to a recent article, “Pet Trusts Are Worth the ‘Trouble’” from Wealth Management.

Pets are legally considered the personal property of their owner, in the same way, one owns a house or a car. If no planning has been done, your heirs can inherit the ownership of your pet. However, they won’t be required to care for your pet. Instead, they can take the pet to a local shelter or, as often happens, abandon it. However, there are steps you can take to protect your animal companion.

Ask two friends or relatives if they would be willing to serve as emergency and/or long-term caretakers. Provide them with contact information for your veterinarian, discuss your wishes about what should happen to your pet and make sure they have each other’s contact information. Have a frank discussion of how expenses will be covered and stay in touch with them. Circumstances can change over time; if they move, have a health issue, or can’t manage the care of your pet, you’ll want to know about it.

Planning for pets has both legal and financial considerations. A pet trust may be created as part of a living trust or as a stand-alone trust. The named trustee has access to funds, and the language of the trust includes directions as to how funds should be used for your pet and how to distribute any remaining funds upon the death of your pet. Pet trusts are now valid in all states.

Note that a verbal agreement to care for your pet may not be legally enforceable. Therefore, you may prefer to use a pet trust. While you can put a provision in your will for the care of your pet, unlike a trust arrangement, there is no continuing obligation for the executor under a will to ensure the pet’s well-being once the estate administration is completed. Instead, you’ll have to count on the moral commitment of the caregiver to take care of your pet.

Planning for your protection shows why a pet trust is a good idea. For example, your Power of Attorney names an agent to act on your behalf in the event of your own physical or mental incapacity. It is possible to include specific funds in a Power of Attorney to maintain and support companion animals. However, this terminates on your death. A trust remains in effect for as long as the terms dictate, whether you are incapacitated or deceased.

Another option is to make arrangements with a humane society or animal rescue group to take possession and care of your pet. This may require making a specific donation to the group and having confidence that the organization will be operational as long as your pet lives.

Speak with your estate planning attorney about your state’s rules on pet trusts and plan for yourself and your beloved animal companion. You’ll then rest easy knowing you are both protected.

Reference: Wealth Management (April 14, 2023) “Pet Trusts Are Worth the ‘Trouble’”

Protecting Assets with a Trust vs. Limited Liability Company

While trusts and Limited Liability Companies (LLCs) are very different legal vehicles, they are both used by business owners to protect assets. Understanding their differences, strengths and weaknesses will help determine which is best for your situation, as explained by the article “Trust Vs. LLC 2023: What Is The Difference?” from Business Report.

A trust is a fiduciary agreement placing assets under the control of a third-party trustee to manage assets, so they may be managed and passed to beneficiaries. Trusts are commonly used when transferring family assets to avoid probate.

A family home could be placed in a trust to avoid estate taxes on the owner’s death, if the goal is to pass the home on to the children. The trustee manages the home as an asset until the transfer takes place.

There are several different types of trusts:

A revocable trust is controlled by the grantor, the person setting up the trust, as long as they are mentally competent. This flexibility allows the grantor to hold ownership interest, including real estate, in a separate vehicle without committing to the trust permanently.

The grantor cannot change an irrevocable trust, nor can the grantor be a trustee. Once the assets are placed in the irrevocable trust, the terms of the trust may not be changed, with extremely limited exceptions.

A testamentary trust is created after probate under the provisions of a last will and testament to protect business assets, rental property and other personal and business assets. Nevertheless, it only becomes active when the trust’s creator dies.

There are several roles in trusts. The grantor or settlor is the person who creates the trust. The trustee is the person who manages the assets in the trust and is in charge of any distribution. A successor trustee is a backup to the original trustee who manages assets, if the original trustee dies or becomes incapacitated. Finally, the beneficiaries are the people who receive assets when the terms of the trust are satisfied.

An LLC is a business entity commonly used for personal asset protection and business purposes. A multi-or single-member LLC could be created to own your home or business, to separate your personal property and business property, reduce potential legal liability and achieve a simplified management structure with liability protection.

The most significant advantage of a trust is avoiding the time-consuming process of probate, so beneficiaries may receive their inheritance faster. Assets in a trust may also prevent or reduce estate taxes. Trusts also keep your assets and filing documents private. Unlike a will, which becomes part of the public record and is available for anyone who asks, trust documents remain private.

LLCs and trusts are created on the state level. While LLCs are business entities designed for actively run businesses, trusts are essentially pass-through entities for inheritances and to pass dividends directly to beneficiaries while retaining control.

Your estate planning attorney will be able to judge whether you need a trust or an LLC. If you own a small business, it may already be an LLC. However, there are likely other asset protection vehicles your estate planning attorney can discuss with you.

Reference: Business Report (April 14, 2023) “Trust Vs. LLC 2023: What Is The Difference?”

More Heirs Found for Pope Benedict XVI’s Estate

The archbishop who assisted Pope Benedict XVI has been trying to handle the late pontiff’s estate, but has found more heirs than he was expecting, reports Fox News’ recent article entitled, “Vatican searching for heirs to Pope Benedict XVI’s estate.”

Born in Marktl, Bavaria, Pope Benedict XVI, passed away last year at the age of 95.

Some estimates show Pope Benedict’s net worth was approximately $2.5 million. After he stepped down as the head of the Catholic Church, he continued to receive a monthly pension of about $3,300, CNBC reported in 2013.

He was buried on January 5, 2023, in St. Peter’s Basilica, Vatican City. There are 90 other popes buried under the church.

Archbishop Georg Gänswein, Benedict’s personal secretary, told Vatican News that he was surprised to find he had five individuals with claims to Pope Benedict’s estate.

“This has been very interesting for me. I thought he had two relatives, two cousins, but there are five cousins in total,” the archbishop said, according to translations from Catholic News Agency.

He continued, “By law I have to write to the cousins who are the closest relatives, and also by law I have to ask them, ‘Do you accept the inheritance, or do you not accept it?’”

What money or assets are to be inherited from the late pontiff is not publicly known.

Pope Benedict XVI spent his last few years living simply in a Vatican apartment.

Gänswein told the newspaper Il Messaggero that “other personal items, from watches to pens, from paintings to liturgical items, were included in a list meticulously drawn up by Benedict XVI before he died.”

The late pope’s vast library was willed to the Vatican and the Joseph Ratzinger Vatican Foundation.

Reference: Fox News (March 22, 2023) “Vatican searching for heirs to Pope Benedict XVI’s estate”

What are Biggest Blunders with Health Care Proxies?

A health care proxy, also called a medical power of attorney, is a legal document in which you name a person to make medical decisions, in the event that you are unable to do so for yourself.

Forbes’ recent article entitled, “Health Care Proxies – 5 Biggest Mistakes,” lists the five biggest mistakes people make on this vital document.

No 1: Failing to have one. A study found that two-thirds of us don’t have a health care proxy. If you don’t have one, your doctor may be forced to make decisions in a vacuum. As a result, your wishes may not be respected. Even worse, a court might have to step in to make decisions requiring a guardian’s appointment.

No. 2: Not speaking to those you appoint as your health care agent. This conversation doesn’t have to be complicated or lengthy. However, it’s essential to give your agent some understanding of your feelings and wishes.

No. 3: Not addressing religion If you’ve changed faith , married someone of a different faith, or have children with differing religious views, addressing this in your health care documents and your discussions with your agent is critical. Don’t skip religious considerations because you aren’t religious—that’s also an essential part of this.

No. 4: Not having copies of the health care proxy available. You can put together an envelope and write your name, address, phone number and those of your agents on it. Place a copy of your health insurance info, drug cards and health care proxy in the envelope. If you created and signed a living will and/or a POLST (Physical Order for Life-Sustaining Treatment) that you signed with your doctor, add copies of those to the envelope and a HIPAA release.

No. 5: Failing to address financial matters. Your health care agent most likely won’t have legal rights to pay medical bills, caregiver costs, or other outstanding bills. You should sign a durable power of attorney, a financial document designating a person (called an agent) to handle financial matters for you. Provide your agent with the necessary information, like bank account information.

Reference: Forbes (March 21, 2023) “Health Care Proxies – 5 Biggest Mistakes”

Older Singles Can Plan to Protect Themselves

The U.S. Census Bureau reports nearly a third of all seniors live alone—about 14 million—some of whom don’t have children or anyone to care for them if they need help. However, according to a recent article from Forbes, “Essentials for the Solo Ager,” everything is fine until there’s a problem. This is especially true when the solo ager’s friends are all about the same age and in the same situation.

One financial adviser asked an estate planning attorney to contact a client who was 88, living alone, still driving and maintaining her own home. She had an inadequate estate plan done for free by a volunteer at her senior center and needed a Power of Attorney and Health Care Power of Attorney. In addition, her only living relative lived outside of the United States, and the person she relied upon was a 90-year-old, legally blind neighbor. All of this had worked fine for years, but at 88, she was highly vulnerable.

Here are some options for solo agers to consider while planning constructively for the future:

Consider naming a fiduciary to handle finances in your estate plan, which an experienced estate planning attorney should prepare.

Healthcare decisions are often a minefield for someone who is cognitively or physically impaired and unable to make decisions. Some professionals can be named as your healthcare agent, preferably someone who knows the healthcare system and can advocate for you if you are incapacitated. In addition, a healthcare power of attorney would be needed.

Make your wishes and preferences clear in your estate planning documents, so someone who does not know you well can follow your specific directions and fulfill your wishes.

Give up the idea of being 100% well until you pass. Most seniors unfortunately experience one or more health challenges and need more assistance than they ever imagined. Be realistic and identify younger adults who will be able to help you and give them the legal tools to do so. If they never need to help you, fantastic, but if they do, you’ll be glad to have their help.

Single people are independent and self-reliant and take pride in these characteristics. This is great. However, there comes a time when none of us can be independent. No one likes to think about losing their independence or becoming disabled. However, planning will keep you safer rather than hoping for the best.

Meet with an experienced estate planning attorney who will help you plan for your future and protect you from the unexpected.

Reference: Forbes (March 26, 2023) “Essentials for the Solo Ager”

What You Need to Know About Estate Taxes

Most Americans don’t have to worry about federal estate and gift taxes. However, if you’re even moderately wealthy and want to transfer wealth to your children and grandchildren, you’ll want to know how to protect your ability to pass wealth to the next generation. A recent article from Woman’s World, “If You’re Rich, Read This—Your Estate Taxes Could Be at Stake (And Your Kids at Risk of Losing Their Inheritance” provides a good overview of estate taxes. If any of these issues are relevant to you, meet with an experienced estate planning attorney to learn how your state’s tax laws may impact your children’s inheritance.

A well-created estate plan can help you achieve your goals and minimize tax liability. There are three types of taxes the IRS levies on gifts and inheritances.

Few families worry about federal estate taxes for now. However, this will change in the future, and planning is always wiser. In 2023, the federal estate tax exemption is $12.92 million. Estates valued above this level have a tax rate of 40% on assets. People at this asset level usually have complex estate plans designed to minimize or completely avoid paying these taxes.

An estate not big enough to trigger federal estate taxes may still owe state estate taxes. Twelve states and the District of Columbia impose their own state taxes on residents’ estates, ranging from 0.8 percent to 20 percent, and some have a far lower exemption level than the federal estate tax. Some begin as low as $one million.

Six states impose an inheritance tax ranging between 10 percent and 18 percent. The beneficiary pays the tax, even if you live out of state. Spouses are typically exempt from inheritance taxes, which are often determined by kinship—sons and daughters pay one amount, while grandchildren pay another.

Taxpayers concerned about having estates big enough to trigger estate or inheritance taxes can make gifts during their lifetime to reduce the estate’s tax exposure. In 2023, the federal government allows individuals to make tax-free gifts of up to $17,000 in cash or assets to as many people as they want every year.

A couple with three children could give $17,000 to each of their children, creating a tax-free transfer of $102,000 to the next generation ($17,000 x 3 children x 2 individuals). The couple could repeat these gifts yearly for as long as they wished. Over time, these gifts could substantially reduce the size of their estate before it would be subject to an estate tax. It also gives their heirs a chance to enjoy their inheritance while their parents are living.

It should be noted that gifts over $17,000 in 2023 count against the individual estate tax limit. Therefore, your federal estate tax exemption will decline if you give more than the limit. This is why it’s essential to work with an estate planning attorney who can help you structure these gifts and discuss other estate tax and asset protection strategies.

Reference: Woman’s World (April 5, 2023) “If You’re Rich, Read This—Your Estate Taxes Could Be at Stake (And Your Kids at Risk of Losing Their Inheritance”

What’s Going on with Larry King’s Estate?

Larry King’s widow Shawn has accused the firm Blouin & Company of helping Larry King Jr. as part of the fight over the late broadcaster’s estate.

Radar Online’s recent article entitled, “Larry King’s Widow Shawn SUES HER OWN SISTER Claiming He Spent Millions On Her While They Had Secret Affair,” says that Larry Sr. died in January 2021.

Larry King Jr. asked the court to be named special administrator of his father’s estate. He presented a handwritten will that Larry Sr. had reportedly signed before his death. The amended will left his fortune to his child and not Shawn. Shawn objected to the will claiming Larry Sr. was not in the right mind to sign the amendment to the will. A settlement was eventually reached between the two.

But a few months later, Shawn sued Blouin & Company, claiming it had led a “fraudulent and malicious conspiracy to steal money from their client, Mrs. King, and deprive Mrs. King of her rights and interests in the estate of her late husband.”

Shawn brought claims against Blouin & Company and her sister Shannon Engemann Grossman, a named defendant. She claims that Shannon “received a substantial number of improper and unauthorized transfers of” her community assets. Moreover, she alleges that her sister received “unauthorized goods and services worth millions of dollars (or more subject to further investigation), including airfare, clothing and accessories, furniture, limousine services, healthcare services, dental implants, luxury automobiles, luxury hotel accommodations and numerous other goods and services.”

During their marriage, Shawn and Larry were close to divorce multiple times after marrying in 1997. In 2010, they both filed their petitions in Los Angeles Superior Court. Shawn believed Larry and her sister were having an affair.

At the time, Shannon denied having an affair with Larry. She admitted Larry was generous with gifts but said he was like that with everyone. Shannon said, “I’m tired of taking the rap for things. I did not have an affair with Larry. He’s been like a father to me.”

Blouin & Company denied all allegations of wrongdoing in their response and noted that Larry had a secret bank account that they were unaware of that he used to fund his lavish lifestyle. The firm filed a countersuit against Shawn for unpaid invoices.

Reference: Radar Online (Jan. 9, 2023) “Larry King’s Widow Shawn SUES HER OWN SISTER Claiming He Spent Millions On Her While They Had Secret Affair”

What Legal Documents are Needed in an Estate Plan?

If you plan to give away property or assets, you’ll need to create a will, trust document, or other estate planning document, advises KHTS’s recent article entitled “Common Documents An Estate Planning Attorney Can Draft.” Let’s take a look at these:

Trusts and Wills. An experienced estate planning attorney can draft documents, such as a will or trust, to ensure that your property is distributed the way you’d want it in the event of your death. A will can do this. An estate planning attorney can also assist you in keeping assets out of probate court. A trust is crucial if you have to keep the money you give away out of your estate. A trust also protects assets from possible creditors.

Living Trust. A living trust is set up while you’re alive rather than waiting until your death, so that you can change it at any time without court administration. A living trust also doesn’t require probate or court approval. The way money passes through a trust is instead determined by the terms and the state in which you live.

Medical Powers of Attorney. This legal document lets a person delegate specific healthcare decisions, if incapacitated. This document doesn’t supersede a living will or any other advance directive but allows an individual to enjoy more flexibility. A medical power of attorney also allows the individual to appoint a healthcare proxy and someone to the power of attorney who can make medical decisions in their name while they are still capable.

Durable Power of Attorney. This legal document allows individuals to delegate specific authority over their financial and legal affairs. A durable power of attorney also permits the individual to appoint someone as guardian, who can make financial decisions for the individual when they cannot do so. Of course, a guardian can’t make decisions for the incapacitated person in all situations. For example, they may be unable to protect the individual’s assets from creditors. However, a guardian can make financial decisions and has the power to access your bank account, even if you’re incapacitated.

It’s never too early to start planning for your future and estate. However, without the proper legal documents, your property may not be distributed as you would like, or other necessary steps may not be taken. An experienced estate planning attorney will give you options that aren’t available to those who try to do it themselves.

Reference: KHTS (Dec. 15, 2022) “Common Documents An Estate Planning Attorney Can Draft”

Can I Motivate My Heirs After I’m Gone?

When providing what should happen to your property upon your death, language in an estate plan should be clear, direct and unambiguous. Using unclear language can lead to confusion and disagreements between beneficiaries and a longer and more expensive probate process.

Kiplinger’s recent article entitled “I Wish I May, I Wish I Might: Estate Planning’s Gentle Nudge” says it would seem that using phrases such as “I wish,” “I hope” or “I desire” — known as precatory language — would never belong in a will or trust. However, there are three important cases where it can be helpful to include non-binding guidance for your loved ones and estate representatives.

You want to encourage your beneficiaries to work with a professional. Baby Boomers will pass on more than $70 trillion in wealth to younger generations. Working with an adviser can help preserve and protect assets and set beneficiaries up for a positive working relationship with a trusted professional. If you have a great relationship with your financial adviser and estate planning attorney and want to encourage your beneficiaries to consider working with them, your will could be a great way to communicate this message. Consider the following wording:

“I desire that my children consult with our family adviser, Sally Brown, or another competent professional adviser of their choosing to manage their inheritance.”

Putting language in your will that encourages your loved ones to take action and meet with an adviser to help manage their inheritance could be just the reminder they need to set an appointment after you pass.

You want to encourage your co-trustees to collaboratively make decisions, even if decision-making isn’t unanimous. For example, if you have named three or more co-trustees, you may have said they act by majority consent to streamline the decision-making process. You can express a desire to see your trustees work through decisions constructively and collaboratively — even if their final decisions aren’t made by unanimous agreement.
You want to encourage your trustee to consider certain parameters when making decisions about trust distributions. A typical trust arrangement gives an independent trustee the power to make distribution decisions to beneficiaries at their sole discretion. This gives the trustee the most flexibility to ensure that the beneficiaries’ needs are met to the appropriate extent. You can add factors for the trustee to consider in exercising their discretion, such as if the beneficiary has ample funds apart from the trust funds or if the particular need at stake would likely have been supported were you still alive. Giving your trustee some guidance (“I encourage my trustee in the exercise of their discretion to consider requests related to educational pursuits”) can help them make decisions, while simultaneously not tying their hands if they ultimately decide a different route is in the beneficiaries’ best interest.

Your estate planning documents should be clear about where your property should go on your death and who should manage it. When appropriately used, precatory language can help communicate essential guidance to your family.

Reference: Kiplinger (March 21, 2023) “I Wish I May, I Wish I Might: Estate Planning’s Gentle Nudge”

Why Is ‘When’ the Big Question in Estate Planning?

When do you plan to retire? When will you take Social Security? When must you start withdrawing money from your retirement savings? In retirement, “when” is everything, says Kiplinger’s recent article entitled, “In Retirement, Many Crucial Questions Start With the Word ‘When’.” That’s because so many financial decisions related to retirement are much more dependent on timing than on the long-term performance of an investment.

Too many people approaching retirement — or are already there — don’t adjust how they think about investing to account for timing’s critical role. “When” plays a major role in the new strategy. Let’s look at a few reasons why:

Required Minimum Distributions (RMDs). Many people use traditional IRAs or 401(k) accounts to save for retirement. These are tax-deferred accounts, meaning you don’t pay taxes on the income you put into the accounts each year. However, you’ll pay income tax when you begin withdrawing money in retirement. When you reach age 73, the federal government requires you to withdraw a certain percentage each year, whether you need the money or not. A way to avoid RMDs is to start converting your tax-deferred accounts to a Roth account way before you reach 73. You pay taxes when you make the conversion. However, your money then grows tax-free, and there is no requirement about how much you withdraw or when.

Using Different Types of Assets. In retirement, your focus needs to be on how to best use your assets, not just how they’re invested. For example, one option might be to save the Roth for last, so that it has more time to grow tax-free money for you. However, in determining what order you should tap your retirement funds, much of your decision depends on your situation.

Claiming Social Security. On average, Social Security makes up 30% of a retiree’s income. When you claim your Social Security affects how big those monthly checks are. You can start drawing Social Security as early as age 62. However, your rate is reduced for the rest of your life. If you delay until your full retirement age, there’s no limit to how much you can make. If you wait to claim your benefit past your full retirement age, your benefit will continue to grow until you hit 70.

Wealth Transfer. If you plan to leave something to your heirs and want to limit their taxes on that inheritance as much as possible, then “when” can come into play again. For instance, using the annual gift tax exclusion, you could give your beneficiaries some of their inheritance before you die. In 2023, you can give up to $17,000 to each individual without the gift being taxable. A married couple can give $17,000 each.

Reference: Kiplinger (March 15, 2023) “In Retirement, Many Crucial Questions Start With the Word ‘When’”

Estate Planning Blog Articles

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

Should You have a Pet Trust Created?

Protecting Assets with a Trust vs. Limited Liability Company

More Heirs Found for Pope Benedict XVI’s Estate

What are Biggest Blunders with Health Care Proxies?

Older Singles Can Plan to Protect Themselves

What You Need to Know About Estate Taxes

What’s Going on with Larry King’s Estate?

What Legal Documents are Needed in an Estate Plan?

Can I Motivate My Heirs After I’m Gone?

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Should You have a Pet Trust Created?

Protecting Assets with a Trust vs. Limited Liability Company

More Heirs Found for Pope Benedict XVI’s Estate

What are Biggest Blunders with Health Care Proxies?

Older Singles Can Plan to Protect Themselves

What You Need to Know About Estate Taxes

What’s Going on with Larry King’s Estate?

What Legal Documents are Needed in an Estate Plan?

Can I Motivate My Heirs After I’m Gone?

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