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Should I Discuss Estate Planning with My Children?

US News & World Report’s recent article entitled “Discuss Your Estate Plan With Your Children” says that staying up-to-date with your estate plan and sharing your plans with your children could make a big impact on your legacy and what you’ll pay in estate taxes. Let’s look at why you should consider talking to your children about estate planning.

People frequently create an estate plan and name their child as the trustee or executor. However, they fail to discuss the role and what’s involved with them. Ask your kids if they’re comfortable acting as the executor, trustee, or power of attorney. Review what each of the roles involves and explain the responsibilities. The estate documents state some critical responsibilities but don’t provide all the details. Having your children involved in the process and getting their buy-in will be a big benefit in the future.

Share information about valuables stored in a fireproof safe or add their name to the safety deposit box. Tell them about your accounts at financial institutions and the titling of the various accounts, so that these accounts aren’t forgotten, and bills get paid when you’re not around.

Parents can get children involved with a meeting with their estate planning attorney to review the estate plan and pertinent duties of each child. If they have questions, an experienced estate planning attorney can answer them in the context of the overall estate plan.

If children are minors, invite the successor trustee to also be part of the meeting.

Explain what you own, what type of accounts you have and how they’re treated from a tax perspective.

Discussing your estate plan with your children provides a valuable opportunity to connect with your loved ones, even after you are gone. An individual’s attitudes about money says much about his or her values.

Sharing with your children what your money means to you, and why you are speaking with them about it, will help guide them in honoring your memory.

There are many personal reasons to discuss your estate plans with your children. While it’s a simple step, it’s not easy to have this conversation. However, the pandemic emphasized the need to not procrastinate when it comes to estate planning. It’s also provided an opportunity to discuss these estate plans with your children.

Reference: US News & World Report (Feb. 17, 2021) “Discuss Your Estate Plan With Your Children”

Remind Me Why I Need a Will

There are a number of reasons to draft a will as soon as possible. If you die without a will (intestate), you leave decisions up to your state of residence according to its probate and intestacy laws. Without a will, you have no say as to who receives your assets or properties. Not having a will could also make it difficult for your family.

Legal Reader’s recent article entitled “Top 7 Reasons to Fill Out a Will” reminds us that, before it is too late, consider these reasons why a will is essential.

Avoid Family Disputes. This process occasionally will lead to disagreements among family members, if there’s no will or your wishes aren’t clear. A contested will can be damaging to relationships within your family and can be costly.

Avoid Costly and Lengthy Probate. A will expedites the probate process and tells the court the way in which you want your estate to be divided. Without a will, the court will decide how your estate will be divided, which can lead to unnecessary delays.

Deciding What Happens to Your Assets. A will is the only way you can state exactly to whom you want your assets to be given. Without a will, the court will decide.

Designating a Guardian for Your Children. Without a will, the court will determine who will take care of your minor children.

Eliminate Stress for Your Family. Most estates must go to probate court to start the process. However, if you have no will, the process can be complicated. The court must name personal representatives to administer your estate.

Protect Your Business. A will allows you to pass your business to your co-owners or heirs.

Provide A Home For Your Pets. If you have a will, you can make certain that someone will care for your pets if you die. The law considers pets as properties, so you are prohibited from leaving assets to your pets in your will. However, you can name beneficiaries for your pets, leaving them to a trusted person, and you can name people to serve as guardians of your pets and leave them funds to meet their needs.

Drafting a will with the help of an experienced estate planning attorney can give you and your family peace of mind and convenience in the future.

Reference: Legal Reader (Jan. 28, 2021) “Top 7 Reasons to Fill Out a Will”

How Do You Handle Probate?

While you are living, you have the right to give anyone any property of your choosing. If you give your power to gift your property to another person, typically through a Power of Attorney, then that person is your agent and may give away your property, according to an article “Explaining the basic aspects probate” from The News-Enterprise. When you die, the Power of Attorney you gave to an agent ends, and they are no longer in control of your estate. Your “estate” is not a big fancy house, but a legal term used to define the total of everything you own.

Property that you owned while living, unless it was owned jointly with another person, or had a beneficiary designation giving the property to another person upon your death, is distributed through a court order. However, the court order requires a series of steps.

First, you need to have had created a will while you were living. Unlike most legal documents (including the Power of Attorney mentioned above), a will is valid when it is properly signed. However, it can’t be used until a probate case is opened at the local District Court. If the Court deems the will to be valid, the probate proceeding is called “testate” and the executor named in the will may go forward with settling the estate (paying legitimate debts, taxes and expenses), before distributing assets upon court permission.

If you did not have a will, or if the will was not prepared correctly and is deemed invalid by the court, the probate is called “intestate” and the court appoints an administrator to follow the state’s laws concerning how property is to be distributed. You may not agree with how the state law directs property distribution. Your spouse or your family may not like it either, but the law itself decides who gets what.

After opening a probate case, the court will appoint a fiduciary (executor or administrator) and may have a legal notice published in the local newspaper, so any creditors can file a claim against the estate.

The executor or administrator will create a list of all of the property and the claims submitted by any creditors. It is their job to ensure that claims are valid and have been submitted within the correct timeframe. They will also be in charge of cleaning out your home, securing your home and other possessions, then selling the house and distributing your personal furnishings.

Depending on the size of the estate, the executor or administrator’s job may be time consuming and complex. If you left good documentation and lists of assets, a clean file system or, best of all, an estate binder with all your documents and information in one place, it can alleviate a lot of stress for your executor. Estate fiduciaries who are left with little information or a disorganized mess must undertake an expensive and burdensome scavenger hunt.

The executor or administrator is entitled to a fiduciary fee for their work, which is usually a percentage of the estate.

Probate ends when all of the property has been gathered, creditors have been paid and beneficiaries have received their distributions.

With a properly prepared estate plan, your property will be distributed according to your wishes, versus hoping the state’s laws will serve your family. You can also use the estate planning process to create the necessary documents to protect you during life, including a Power of Attorney, Advance Medical Directive and Healthcare proxy.

Reference: The News-Enterprise (Feb. 2, 2021) “Explaining the basic aspects probate”

How Do I Cancel a Loved One’s Credit Cards and Manage Their Points, After They Die?

First, you should get legal advice before you start delving into the deceased person’s estate. Contact an experienced estate planning attorney. Typically, the executor of the deceased’s estate will be in charge of these tasks.

Insider’s recent article entitled “How to cancel a loved one’s credit cards and manage their points after they die” provides some general tips on the steps to take to cancel credit cards and manage loyalty points, after a family member or close friend passes away.

Review the situation and gather documents. After a death, there’s a lot to do. Once you receive a death certificate, the executor must begin managing the deceased’s finances.

First, you want the credit bureaus to note the death in the deceased’s credit report and to get a list of all credit cards they owned. You can contact one of the three nationwide credit bureaus (Equifax, Experian, or TransUnion) to tell them about the death and get a copy of their credit report. The Social Security Administration usually notifies the credit bureaus of the death. However, personally contacting them will make certain that a death notice is entered in their credit report. This will decrease the risk of identity theft. When noted, lenders will see that the individual is dead and won’t issue credit. You only need to contact one bureau because they will automatically notify the others.

How to close the deceased’s credit cards. After you get the credit report, identify all open credit cards and contact each one to notify them of the death. Each issuer will have a different procedure for closing the card, but most will ask you to send a copy of the death certificate. Lenders may also automatically close cards when they see the death notice on the credit bureau report.

Paying off credit card debt after death. The CARD Act of 2009 set the rules for credit card debt after death. Once the lender is notified, it will close the credit card and provide a final bill to the estate within 30 days. While the estate is being settled, they can’t impose additional late fees, annual fees, or over-limit fees. However, the interest on the debt continues to accrue. Note that if the estate pays the debt within 30 days of receiving the final bill, there’s no additional interest charged.

Credit card rewards after death. Every credit card has its own rules for managing points after death. For instance, American Express Membership Rewards has a process to take ownership of an account, and Chase Ultimate Rewards terms state that “If we’re notified of your death, your points will be automatically redeemed for cash in the form of an account statement credit.” The miles and points earned with an airline or hotel are subject to the terms of that program. Review the rules of each credit card, airline and hotel loyalty program to understand how points will be managed.

How to simplify life for your family. You can make things easier for your loved ones, if you make a plan to handle your points, miles and credit card rewards. Similar to other assets, you should explain how you want your points to be used in your will. Ask an experienced estate planning attorney to help you.

Reference: Insider (Feb. 1, 2021) “How to cancel a loved one’s credit cards and manage their points after they die”

Zappos CEO had No Will and That Is a Mistake

Former Zappos CEO Tony Hsieh, who built the giant online retailer Zappos based on “delivering happiness,” died at age 46 from complications of smoke inhalation from a house fire. He left an estate worth an estimated $840 million and no will, according to the article “Former Zappos CEO Tony Hsieh died without a will, reports say. Here’s why you should plan for your own death” from CNBC.

Without a will or an estate plan, his family will never know exactly how he wanted his estate to be distributed. The family has asked a judge to name Hsieh’s father and brother as special administrators of his estate.

How can someone with so much wealth not have an estate plan? Hsieh probably thought he had plenty of time to “get around to it.” However, we never know when we are going to die, and unexpected accidents and illnesses happen all the time.

Why would someone who is not wealthy need to have an estate plan? It is even more important when there are fewer assets to be distributed. When a person dies with no will, the family may be faced with unexpected and overwhelming expenses.

Putting an estate plan in place, including a will, power of attorney and health care proxy, makes it far easier for a family that might otherwise become ensnared in fights about what their loved one might have wanted.

An estate plan is about making things easier for your loved ones, as much as it is about distributing your assets.

What Does a Will Do? A will is the document that explains who you want to receive your assets when you die. It can be extremely specific, detailing what items you wish to leave to an individual, or more general, saying that your surviving spouse should get everything.

If you have no will, a state court may decide who receives your assets, and if you have minor children, the court will decide who will raise your children.

Some assets pass outside the will, including accounts with beneficiary designations. That can include tax deferred retirement accounts, life insurance policies and property owned jointly. The person named as the beneficiary will receive the assets in the accounts, regardless of what your will says. The law requires your current spouse to receive the assets in your 401(k) account, unless your spouse has signed a document that agrees otherwise.

If there are no beneficiaries listed on these non-will items, or if the beneficiary is deceased and there is no contingent beneficiary, then those assets automatically go into probate. The process can take months or a year or more under state law, depending on how complicated your estate is.

Naming an Executor. Part of making a will includes selecting a person who will carry out your instructions—the executor. This can be a big responsibility, depending upon the size and complexity of the estate. They are in charge of making sure assets go to beneficiaries, paying outstanding debts, paying taxes for you and your estate and even selling your home. Select someone who is trustworthy, reliable and good with finances.

Your estate plan also includes a power of attorney for someone to handle financial and legal affairs, if you become incapacitated. An advance health-care directive, or living will, is used to explain your wishes, if you are being kept alive by life support. Otherwise, your loved ones will not know if you want to be kept alive or if you would prefer to be allowed to die.

Having an estate plan is a kindness to your family. Don’t wait until it’s too late to take care of it.

Reference: CNBC (Dec. 3, 2020) “Former Zappos CEO Tony Hsieh died without a will, reports say. Here’s why you should plan for your own death”

tax planning

Is a Tax Change a Good Time to Check My Will?

A last will and testament can make certain that your goals for legacy and asset disposition are satisfied and carried out. However, what most people fail to grasp is that a will needs regular review—especially if the document was written or involved the creation of a trust prior to passage of tax reform, the Tax Cuts and Jobs Act (TCJA), in 2017, says Financial Advisor’s recent article entitled “Tax Changes Make This A Good Time To Revise A Will.”

Wills can pass on assets, but taxes have come to greatly impact how much money is passed on. People usually understand the primary components, including the tax implications, of their wills.

These include:

  • The unlimited marital deduction
  • Applying current rules to make non-taxable gifts of up to $15,000 per person
  • The current estate tax exemption of $11.58 million
  • Health care directives
  • Naming trustees and executors; and
  • Creating long-term trusts with non-taxable asset transfers.

Wills and trusts were created prior to the passage of the TCJA may not consider that reform changed the amount which can be exempted from estate taxes.

The law more than doubled the amount that can be exempted from estate taxes. The potential tax changes could cause many more Americans to have a taxable estate, and it’s important to have a full understanding of your assets and carefully decide who you want to receive them. You must also decide if you want them passed outright or through a trust.

Privacy is a good reason why some people often prefer trusts. They also like the quick processing and avoiding probate.

Estate plans should be reviewed every few years, and wills should be reviewed more frequently because life changes are the biggest reason for trouble in revising wills.

Divorce, separation or marriage; the birth or adoption of children, as well as a child reaching adulthood; and changes to finances, location and health all can play important roles.

Reference: Financial Advisor (Nov. 9, 2020) “Tax Changes Make This A Good Time To Revise A Will”

executor selection

How Does Court Choose an Executor if a Will Isn’t Available?

An executor is the person who’ll manage your estate by protecting your assets, paying your debts and distributing the remaining property according to the terms in the will. But Programming Insider’s recent article, “Role of the Court When There is No Will For an Estate, asks “what would happen if someone dies without a will and, therefore, without appointing a personal representative?”

This is known as dying “intestate.” When it happens, the probate court must decide who will act as the estate’s administrator or personal representative. The judge’s decision will be based on state law, which will say how to prioritize potential fiduciaries in an administrator’s appointment. Every state has a prioritized list of preferred executors, and some states offer detailed guidance, like Oklahoma, which has a prioritized list. If more than one person is equally entitled to be appointed, a court has the option to appoint one or more executors.

The probate court has the final decision as to who will serve as the estate’s administrator or personal representative, even including a person who is named as executor in a will or is entitled to be chosen as a valid executor. The court will award authority to an administrator and will issue letters of administration or letters of testamentary. This authorizes the person to serve as an estate’s personal representative. Some people who might otherwise be entitled to serve as an executor may be disqualified based on state law. Here are some of the factors that a judge may consider when disqualifying a potential executor:

  • An executor must be an adult, who is at least 18 years old. However, some states require the minimum age of 21.
  • Criminal History. Some states don’t permit someone who’s been convicted of a serious crime to serve as the fiduciary representative of a decedent’s estate. Other states only require a potential executor to notify the court of any felony convictions.
  • Residency. This may be a factor in a person’s ability to serve as a personal representative. Some states let nonresidents serve in some circumstances. Some let nonresidents serve, if it’s a close relative. Finally, some other states require a nonresident executor to post a bond or use an agent within the state to process services and the court’s communication.
  • Business Relationship. There may be state laws as to who may be an executor if the decedent was an active member of a partnership; and
  • It also may be difficult for a noncitizen to serve as an estate’s personal representative.

Generally, probate judges have a lot of latitude and discretion on this selection.

Reference: Programming Insider (Nov. 9, 2020) “Role of the Court When There is No Will For an Estate

estate protection

Act Quickly to Protect an Estate

For most families, the process of estate administration or the probate of a will starts weeks after the death of a loved one.  However, before that time, there are certain steps that need to be taken immediately after death, according to a recent article “Protecting an estate requires swift action” from The Record-Courier. It is not always easy to keep a clear head and stay on top of these tasks but pushing them aside could lead to serious losses and possible liability.

The first step is to secure the deceased’s home, cars and personal property. The residence needs to be locked to prevent unauthorized access. It may be wise to bring in a locksmith, so that anyone who had been given keys in the past will not be able to go into the house. Cars should be parked inside garages and any personal property needs to be securely stored in the home. Nothing should be moved until the trust administration or probate has been completed. Access to the deceased’s digital assets and devices also need to be secured.

Mail needs to be collected and retrieved to prevent the risk of unauthorized removal of mail and identity theft. If there is no easy access to the mailbox, the post office needs to be notified, so mail can be forwarded to an authorized person’s address.

Estate planning documents need to be located and kept in a safe place. The person who has been named as the executor in the will needs to have those documents. If there are no estate planning documents or if they cannot be located, the family will need to work with an estate planning attorney. The estate may be subjected to a probate proceeding.

One of the responsibilities that most executors don’t know about, is that when a person dies, their will needs to be admitted to the court, regardless whether they had trusts. If the deceased left a will, the executor or the person who has possession of the will must deliver it to the court clerk. Failing to do so could result in large civil liability.

At least five and as many as ten original death certificates should be obtained. The executor will need them when closing accounts. As soon as possible, banks, financial institutions, credit card companies, pension plans, insurance companies and others need to be notified of the person’s passing. The Social Security Administration needs to be notified, so direct deposits are not sent to the person’s bank account. Depending on the timing of the death, these deposits may need to be returned. The same is true if the deceased was a veteran—the Veteran’s Affairs (VA) need to be notified. There may be funeral benefits or survivor benefits available.

It is necessary, even in a time of grief, to protect a loved one’s estate in a timely and thorough manner. Your estate planning attorney will be able to help through this process.

Reference: The Record-Courier (Oct. 17, 2020) “Protecting an estate requires swift action”

estate planning documents

What Estate Planning Documents Do I Need for a Happy Retirement?

Estate planning documents are made to help you and your family, in the event of your untimely demise or incapacitation.

These documents will give your family specific instructions on how to proceed.

The Winston-Salem Journal’s recent article entitled “4 Must-Have Documents for a Peaceful Retirement” looks at these critical documents in constructing an effective estate plan.

  1. Power of Attorney (POA). If you become incapacitated or become unable to make your own financial decisions, a POA will permit a trusted agent to manage your affairs. Have an estate planning attorney review your POA before it’s executed. You can give someone a limited POA that restricts their authority to specific transactions. You can also create a springing POA, which takes effect only at the time of your incapacitation.
  2. Will. About 40% of Americans actually have a will. Creating a valid will prevents you from leaving a mess for your heirs to address after you die. A will appoints an executor who will manage your affairs in a fiduciary manner. The will also details your plan for the distribution of your property. Make certain that your will is also in agreement with other documents you’ve set up, so it doesn’t create any questions.
  3. TOD/POD Designation Forms. A Transfer-on-Death (TOD) or Payable-on-Death (POD) designation lets you to assign your investment accounts to a named beneficiary. The big benefit here is that accounts with a named TOD/POD beneficiary pass directly to that person when you die. Any accounts without a TOD/POD beneficiary will be subject to the terms of your will and will be required to go through the probate process.
  4. Healthcare POA/Advance Directives. These are significant health-related documents. A healthcare POA allows your named agent to communicate your wishes to medical professionals, if you are unable. They also include instructions as to whether you want to have life-saving measures performed, if you have a cardiac or respiratory arrest. These healthcare documents also remove the need for your family to make difficult decisions for you.

Reference: Winston-Salem Journal (Sep. 20, 2020) “4 Must-Have Documents for a Peaceful Retirement”

update a will

When Exactly Do I Need to Update My Will?

Many people say that they’ve been meaning to update their last will and testament for years but never got around to doing it.

Kiplinger’s article entitled “12 Different Times When You Should Update Your Will” gives us a dozen times you should think about changing your last will:

  1. You’re expecting your first child. The birth or adoption of a first child is typically when many people draft their first last will. Designate a guardian for your child and who will be the trustee for any trust created for that child by the last will.
  2. You may divorce. Update your last will before you file for divorce, because once you file for divorce, you may not be permitted to modify your last will until the divorce is finalized. Doing this before you file for divorce ensures that your spouse won’t get all of your money, if you die before the divorce is final.
  3. You just divorced. After your divorce, your ex no longer has any rights to your estate (unless it’s part of the terms of the divorce). However, even if you don’t change your last will, most states have laws that invalidate any distributive provisions to your ex-spouse in that old last will. Nonetheless, update your last will as soon as you can, so your new beneficiaries are clearly identified.
  4. Your child gets married. Your current last will may speak to issues that applied when your child was a minor, so it may not address your child’s possible divorce. You may be able to ease the lack of a prenuptial agreement, by creating a trust in your last will and including post-nuptial requirements before you child can receive any estate assets.
  5. A beneficiary has issues. Last wills frequently leave money directly to a beneficiary. However, if that person has an addiction or credit issues, update your last will to include a trust that allows a trustee to only distribute funds under specific circumstances.
  6. Your executor or a beneficiary die. If your estate plan named individuals to manage your estate or receive any remaining funds, but they’re no longer alive, you should update your last will.
  7. Your child turns 18. Your current last will may designate your spouse or a parent as your executor, but years later, these people may be gone. Consider naming a younger family member to handle your estate affairs.
  8. A new tax or probate law is enacted. Congress may pass a bill that wrecks your estate plan. Review your plan with an experienced estate planning attorney every few years to see if there have been any new laws relevant to your estate planning.
  9. You come into a chunk of change. If you finally get a big lottery win or inherit money from a distant relative, update your last will so you can address the right tax planning. You also may want to change when and the amount of money you leave to certain individuals or charities.
  10. You can’t find your original last will. If you can’t locate your last will, be sure that you replace the last will with a new, original one that explicitly states it invalidated all prior last wills.
  11. You purchase property in another country or move overseas. Many countries have treaties with the U.S. that permit reciprocity of last wills. However, transferring property in one country may be delayed, if the last will must be probated in the other country first. Ask your estate planning attorney about having a different last will for each country in which you own property.
  12. Your feelings change for a family member. If there’s animosity between people named in your last will, you may want to disinherit someone. You might ask your estate planning attorney about a No Contest Clause that will disinherit the aggressive family member, if he or she attempts to question your intentions in the last will.

Reference: Kiplinger (May 26, 2020) “12 Different Times When You Should Update Your Will”

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