Why Do I Need an Estate Planning Attorney?

Pennsylvania News Today’s recent article entitled “Top 7 Reasons You Need An Estate Lawyer says that when you think about hiring a real estate lawyer, it might seem a little unsettling. However, let’s look at these reasons and why you might require them.

Estate Planning. You might want to consider this, but everyone passes away. It’s important that your family is ready for this. An experienced estate planning attorney can help you through this process and make certain everything is prepared. You should have a will. This document says what should happen with your assets when you pass away.

Trusts. A trust helps manage assets before someone dies. If you only have one or two assets you want given to someone, a will is adequate. However, if you own extensive property, ask an experienced estate planning attorney about setting up a trust. This will help your family keep living in your home, even after you’re gone without worrying about it being sold out from under them.

Probate. The probate court oversees the distribution of a person’s estate according to the instructions in their will. Probate can be a lengthy and expensive process, depending on where you live and the complexity of your assets or family situation. An estate planning attorney can help you with strategies to avoid it. A probate attorney can help you, so your family doesn’t have to worry about dealing with that stress or spending a vast amount of money necessary to do this correctly.

Guardianship. Guardianships are used when parents pass away and leave minor children behind. You can designate a guardian for your minor children in your will.

Elder Law Services. Seniors frequently need help managing finances and health care decisions. An experienced estate planning attorney or elder law attorney can help your loved ones through these complicated matters.

Estate Investments. An experienced attorney can also advise you on how to make smart investments for your family and can make certain that the transaction goes smoothly, and that any moves work with your estate planning objectives.

Tax Issues. Taxes may be owed on estates worth more than five million dollars. This can make it hard for heirs who don’t have access to this much money upfront. An estate planning attorney can help you avoid taxes, so your family doesn’t have to deal with this problem.

Estate planning is a process that should be started as soon as possible. You’ll need an estate planning lawyer who is knowledgeable and experienced to help.

Reference: Pennsylvania News Today (Nov. 11, 2021) “Top 7 Reasons You Need An Estate Lawyer”

Why Naming Beneficiaries Is Important to Your Estate Plan

For the loved ones of people who neglect to update the beneficiaries on their estate plan and assets with the option of naming beneficiaries, the cost in time, money and emotional stress is quite high, says the recent article “Five Mistakes To Avoid When Naming Beneficiaries” from The Chattanoogan.

The biggest mistake is failing to name a beneficiary on all of your accounts, including retirement, investment and bank accounts as well as insurance policies. What happens if you fail to name a beneficiary? Assets in the accounts and proceeds from life insurance policies will automatically become part of your estate.

Any planning you’ve done with your estate planning attorney to avoid probate will be undercut by having all of these assets go through probate. Beneficiaries may not see their inheritance for months, versus receiving access to the assets much sooner. It’s even worse for retirement accounts like IRAs. Any ability your heir might have had to withdraw assets over time will be lost.

Next is forgetting to name a contingency beneficiary. Most people name their spouse, an adult child, or a sibling as their primary beneficiary. However, if the primary beneficiary should predecease you and there is no contingency beneficiary, it is as if you didn’t have a beneficiary at all.

Having a contingency beneficiary has another benefit: the primary beneficiary has the option to execute a qualified disclaimer, so some assets may be passed along to the next-in-line heir. Let’s say your spouse doesn’t need the money or doesn’t want to take it because of tax implications. Someone else in the family can more easily receive the assets.

Naming beneficiaries without taking care to use their proper legal name or identify the person with specificity has led to more surprises than you can imagine. If there are three generations of Geoffrey Paddingtons in the family and the only name on the document is Geoffrey Paddington, who will receive the inheritance? Use the person’s full name, their relationship to you (“child,” “cousin,” etc.) and if the document requires a Social Security number for identification, use it.

When was the last time you reviewed beneficiary documents? The only time many people look at these documents is when they open the account, start a new job, or buy an insurance policy. Every few years, around the same time you review your estate plan, you should gather all of your financial and insurance documents and make sure the same people named two decades ago are still the ones you want to receive your assets on death.

Finally, talk with loved ones about your legacy and your wishes. Let them know that an estate plan exists and you’ve given time and thought to what you want to happen when you die. There’s no need to give exact amounts. However, a bird’s eye view of your plan will help establish expectations.

If naming beneficiaries is challenging because of a complex situation, your estate planning attorney will be able to help as a sounding board or with estate planning strategies to accomplish your goals.

Reference: The Chattanoogan (Dec. 6, 2021) “Five Mistakes To Avoid When Naming Beneficiaries”

What Taxes Have to Be Paid When Someone Dies?

The last thing families want to think about after a loved one has passed are taxes, but they must be dealt with, deadlines must be met and challenges along the way need to be addressed. The article “Elder Care: Death and taxes, Part 1: Tax guidance for administering a loved one’s estate” from The Sentinel offers a useful overview, and recommends speaking with an estate planning attorney to be sure all tasks are completed in a timely manner.

Final income tax returns must be filed after a person passes. This is the tax return on income received during their last year of life, up to the date of death. When a final return is filed, this alerts federal and state taxing authorities to close out the decedent’s tax accounts. If a final return is not filed, these agencies will expect to receive annual tax payments and may audit the deceased. Even if the person didn’t have enough income to need to pay taxes, a final return still needs to be filed so tax accounts are closed out. The surviving spouse or executor typically files the final tax return. If there is a surviving spouse, the final income tax return is the last joint return.

Any tax liabilities should be paid by the estate, not by the executor. If a refund is due, the IRS will only release it to the personal representative of the estate. An estate planning attorney will know the required IRS form, which is to be sent with an original of the order appointing the person to represent the estate.

Depending on the decedent’s state of residence, heirs may have to pay an Inheritance Tax Return. This is usually based on the relationship of the heirs. The estate planning attorney will know who needs to pay this tax, how much needs to be paid and how it is done.

Income received by the estate after the decedent’s death may be taxable. This may be minimal, depending upon how much income the estate has earned after the date of death. In complex cases, there may be significant income and complex tax filings may be required.

If a Fiduciary Return needs to be filed, there will be strict filing deadline, often based on the date when the executor applied for the EIN, or the tax identification number for the estate.

The estate’s executor needs to know of any trusts that exist, even though they pass outside of probate. Currently existing trusts need to be administered. If there is a trust provision in the will, a new trust may need to be started after the date of death. Depending on how they are structured, trust income and distributions need to be reported to the IRS. The estate planning attorney will be able to help with making sure this is managed correctly, as long as they have access to the information.

The decedent’s tax returns may have a lot of information, but probably don’t include trust information. If the person had a Grantor Trust, you’ll need an experienced estate planning attorney to help. During the Grantor’s lifetime, the trust income is reported on the Grantor’s 1040 personal income tax return, as if there was no trust. However, when the Grantor dies, the tax treatment of the trust changes. The Trustee is now required to file Fiduciary Returns for the trust each year it exists and generates income.

An experienced estate planning attorney can analyze the trust and understand reporting and taxes that need to be paid, avoiding any unnecessary additional stress on the family.

Reference: The Sentinel (Dec. 3, 2021) “Elder Care: Death and taxes, Part 1: Tax guidance for administering a loved one’s estate”

How Can I Clean Up My Estate Plan?

Chicago Business Journal’s recent article entitled “8 steps to tidy up your estate plan now” gives you some items to think about when working through your affairs.

Make certain that your plan is accurate and up to date. Your basic documents, which include your will, health care directive and power of attorney, should be in place and up-to-date. Review them to confirm that they’re consistent with your wishes and the current laws.

Review your named beneficiaries and fiduciaries. Confirm that the names of designated beneficiaries and fiduciaries are accurate. Most assets will pass under your will or through trusts, other accounts such as retirement, or life insurance may pass directly to a named (or contingent) beneficiary. If your planning circumstances have changed since creating these designations, update them.

Review your life and property insurance coverage. Be sure that these policies offer adequate coverage and meet their intended purpose. As your wealth increases, the planning purposes behind a term policy for risk mitigation purposes or a whole life policy to ensure ample liquidity upon death may become unnecessary. However, if your assets’ value has grown, you may need to re-examine if the current property coverage is sufficient to minimize your increased potential liability.

Ensure that your beneficiaries have enough liquidity. The estate administration process can be slow and tiresome. It’s possible that a person may not have immediate access to liquidity after a spouse’s death, depending on how assets are titled. A temporary (but major) burden can be avoided, by confirming at least some liquidity will be titled in or directly available to your spouse after you have passed.

Locate and compile important information and account identification. A difficult step in estate administration is locating a decedent’s assets. Make this process easier for loved ones, by creating a list of your accounts, property of significant value, liabilities and contacts at each financial institution. Make the list easily accessible to your family or executor, and update it whenever opening or closing an account.

Review digital assets and online accounts. These assets are frequently overlooked as to access and ownership after death. Instead of divulging passwords or allowing account access, you can add a “digital assets clause” to your planning documents. This lets named parties access specific items within the bounds of accepted legal standards.

Draft a letter of wishes. This document allows you to fully express your intentions and hopes, as well as any explanations or instructions you want to impart to your loved ones.

Plan to review. Repeat the review process regularly and calendar a reminder to give yourself an annual financial and planning checkup.

Reference: Chicago Business Journal (Dec. 2, 2021) “8 steps to tidy up your estate plan now”

How Do I Give My Children the Summer Home?

There are many ways to pass property on to children, such as gifting a home to them while you are still alive, bequeathing it to the children at your death, or selling the home to your heirs. Each has legal and tax implications, so consider the possibilities and consult with an experienced estate planning attorney.

According to USA Today’s recent article entitled “How estate planning can help you pass down a house to your kids and give them a financial leg up,” as you put a plan in place, here are three options to review.

Gifting the property to children. One idea for a landlord with rental properties is to set up a revocable trust, where a trustee is responsible for liquidating houses as they became vacant, as long as the tenants were in good standing. This type of plan is built around the idea of maximizing the value to our children as beneficiaries and minimizing the impact on the trustee, while compensating them for their troubles. In addition, there may be tax implications. When you give a house or any other capital asset to your children while you’re alive, there’s significant capital gains tax issues because of the carryover cost basis. The use of a revocable trust avoids probate. It gives the children a step-up in basis and allows them to avoid capital gains tax.

Bequeathing a house to heirs. You can gift the family home to the children while you’re still alive, bequeath it to them at your death, or sell the residence to your heirs. A will is the standard way to bequeath property to children. Parents have the ownership and benefit of the property during their lifetime and when the last parent dies, the children get the home with the stepped-up basis (the increased value of the property when it passes to the inheritors). A revocable trust is another option to bequeath property. Placing a house into a trust avoids probate court and saves on estate taxes. You can say who gets the property and set guidelines on how they get the property. If one child wants the property, for example, you can state they have to buy out the other siblings. Note that adding the children to the deed of the house means they will each own the house. Therefore, if one child wants to live in the home, the others won’t be able to sell because that child won’t be in agreement. A revocable trust can prevent this from happening.

Selling the home to the children. Selling a home to an adult child may be wise, if the parents can no longer afford to maintain the property. However, there can also be pitfalls if the agreement isn’t well thought out. Parents should think about ways to save money when selling to their children, such as deeding the property to the kids and having them refinance the property and cash the parents out. If parents sell the home below fair market value to their children, they’re restricting their ability to have a retirement. This leaves little to help with retirement, since many people don’t have pensions and are only living on Social Security. There are also taxable gains consequences, if parents sell the home for more than they paid. The sale may result in higher property taxes to the purchaser in some situations.

Reference: USA Today (Dec. 7, 2021) “How estate planning can help you pass down a house to your kids and give them a financial leg up”

Why Should I Update My Estate Plan?

The majority of Americans don’t have an updated estate plan in place. This can create a major headache for their families, in the event that anything happens to them.

Fox 43’s recent article entitled “Majority of Americans have outdated estate plans” explains that estate planning is making some decisions now for what you want to happen in the future, if you’re unable to make decisions then.

It’s important that every adult has an estate plan in place. Moreover, as you get older and you have a family, an estate plan becomes even more important.

These decisions can impact your family. It involves deciding who will care for your children. If you’re a parent with children under the age of 18, your estate plan can name the guardians of those children.

This is accomplished by having a clause in your will that states which person(s) will have the responsibility of caring for your minor children, in the event that you and your spouse pass away unexpectantly.

In your will, you’ll also name an executor who will carry out your wishes after your death.

You may ask an experienced estate planning attorney about whether you should have a trust to protect some of your assets.

You also should have your attorney draft a power of attorney, healthcare directive, living will and HIPAA waiver.

Many people don’t know where to get started. However, the good thing is ultimately it’s your decisions about what you want to happen, if you are unable to care for your loved ones.

Talk to an experienced estate planning attorney and do this sooner rather than later.

Reference: Fox 43 (Oct. 27, 2021) “Majority of Americans have outdated estate plans”

Is There More to Estate Planning Than Writing My Will?

Having a will is especially important if you have minor children. That’s because you can nominate guardians for your minor children in your will. Guardians are the people you want to raise your children, in the event that neither you or your spouse can do so.

Fed Week’s article entitled “Estate Planning: It’s Not Just about Making a Will” explains that when designating guardians, a person should be practical.

Closet relatives—such as a brother and his wife—may not necessarily be the best choice. They may be busy raising their own family and have plenty to look after, without adding your children to the equation.

You’re acting in the interests of your children, so be certain that you obtain the consent of your chosen guardians before nominating them in your will.

In addition, make sure you have sufficient life insurance in place, so the guardians can comfortably afford to raise your children.

However, your estate planning shouldn’t stop with a will and guardians. There are a number of other components to include:

Powers of attorney. A power of attorney allows a person you name to act on your behalf regarding financial matters.
Health care proxy. This authorizes another person to make medical decisions for you, if you are unable to do so yourself.
Living will. This document states your wishes on life-sustaining efforts.
HIPAA Waiver. This document allows healthcare professionals to provide information on a patient’s health to third parties, such as family members.
Letter of Last Instruction. This personal document is an organized way for you to give your family important information about your finances and perhaps your reasons for your choices in your will or trust. This letter isn’t a will or a substitute for one.
This is a way to avoid assets going through probate. The assets in trust can provide funds for your heirs under the rules you set up.

Ask an experienced estate planning attorney about developing a comprehensive estate plan.

Reference: Fed Week (September 28, 2021) “Estate Planning: It’s Not Just About Making a Will”

Do College Kids Need Estate Planning?

The topic of estate planning is frequently overlooked in the craze to get kids to college.

When your child leaves home, it’s important to understand that legally you may not hold the same rights in your relationship that you did for the first 18 years of your child’s life.

Wealth Advisor’s article entitled “Estate Planning Documents Every College Student Should Have in Place” says that it’s crucial to have these discussions as soon as possible with your college student about the plans they should put into place before going out on their own or heading to college. An experienced estate planning attorney can give counsel on the issues concerning your child’s physical health and financial well-being.

When your child turns 18, you’re no longer your child’s legal guardian. Therefore, issues pertaining to his or her health can’t be disclosed to you without your child’s consent. For instance, if your child is in an accident and becomes temporarily incapacitated, you couldn’t make any medical decisions or even give consent. As a result, you’d likely be denied access to his or her medical information. Ask your child to complete a HIPAA release. This is a medical form that names the people allowed to get information about an individual’s medical status, when care is needed. If you’re not named on their HIPAA release, it’s a major challenge to obtain any medical updates about your adult child, including information like whether they have been admitted to a hospital.

In addition, your child also needs to determine the individual who will manage their healthcare decisions, if they’re unable to do so on their own. This is done by designating a healthcare proxy or agent. Without this document, the decision about who makes choices regarding your child’s medical matters may be uncertain.

Your child should ensure his or her financial matters are addressed if he or she can’t see to them, either due to mental incapacity or physical limitations, such as studying abroad. Ask that you or another trusted relative or friend be named agent under your child’s financial power of attorney, so that you can help with managing things like financial aid, banking and tax matters.

Reference: Wealth Advisor (Sep. 24, 2021) “Estate Planning Documents Every College Student Should Have in Place”

Should I Write My Own Will?

Only a third of Americans have estate planning documents, according to a 2021 study. However, the pandemic has caused many to start taking estate planning more seriously. The research saw a 63% increase from last year in adults between the ages of 18 and 34 who have a will or another estate planning document. A total of 24% of all adults surveyed also said that COVID made them see a greater need for estate planning and take action.

Yahoo Life’s recent article entitled “Planning to Write Your Own Will? Here’s What You Need to Know” explains that an online form may be cheaper. However, hiring a lawyer could save you money in the future. If you don’t understand or review the probate laws in your state, when you try to write your will on your own, it can cost you and your loved ones more in the long run. It can mean added court fees, legal fees and stress. If there are any mistakes in your will, it can take a long time for it to clear probate court.

Drafting a will through an attorney is a way to make certain that your assets will be transferred the way you want them to, giving you and your loved ones more peace of mind.

You should hire an experienced estate planning attorney because the state’s probate code and tax laws are constantly changing.

If you write your own will, it is possible that a minor mistake can cause the will to be invalid or contested.

Once you create your will, it is vital that you execute or sign it correctly according to state law. That means having the correct number of witnesses, the right formal language above the will-maker’s signature and the legal requirements of your state.

Even if you decide to write your own will, you should ask an attorney to review it for you.

When you use an experienced estate planning attorney, you can fix any mistakes and know that your will is legally sound.

Many attorneys offer estate plan audits for those who have documents and want to make sure they work the way they think they do.

Reference: Yahoo Life (Sep. 17, 2021) “Planning to Write Your Own Will? Here’s What You Need to Know”

Don’t Follow Queen of Soul: Think about Estate Planning

The Albuquerque Journal’s recent article entitled “Learn from Aretha’s estate mess and ‘Think’” talks about the new bio pic called “Respect” that traces 20 years of the life of Aretha Franklin, the Queen of Soul and the number one singer of all time in a Rolling Stone ranking from 2010.

Aretha died in 2018. She had four sons from either three or four fathers. Their ages spanned 15 years. The oldest, born when Aretha was 12, has special needs and lives in a group home. When she passed, all evidence pointed to the fact that she had no will. The sons – in birth order, Clarence, Edward, Ted, and Kecalf – agreed to a friendly and equal split of the estate. Michigan law supported this. They designated a cousin, Sabrina, as the executor.

This was good, until Sabrina started finding wills. There were two from 2010 and one from 2014. They were all in Aretha’s handwriting, the last one in a spiral notebook found under cushions of a sofa.

Michigan law permits an entirely handwritten will and even allows a will to be unsigned, if it clearly shows the decedent’s wishes. Her 2014 will first named the three younger sons as co-executors. Aretha then crossed out all names but Kecalf. Ted and an attorney appointed to represent Clarence challenged Kecalf’s competence to serve as Aretha’s executor.

But wait! A fourth will was found. That one was actually typed and established a trust for Clarence. Aretha initialed some pages, but she didn’t sign it.

At that point, Sabrina gave up and resigned as Aretha’s executor.

The probating of Aretha’s estate went from a friendly division of assets to a hot mess.

The sons were now “playing games that they can score,” and wondering if Aretha stopped to think what she was trying to do to them.

The Probate Court judge appointed Aretha’s friend Reginald Turner, who recently was named President of the American Bar Association, as temporary estate representative.

The sons’ fighting is ongoing.

Aretha’s estate has a lot of issues. Don’t be like the Queen. Get your estate plan set and revise it, as needed, with the help of an experienced estate planning attorney.

Reference: Albuquerque Journal (Sep. 12, 2021) “Learn from Aretha’s estate mess and ‘Think’“

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