Estate Planning Blog Articles

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

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”

estate plan

Despite Pandemic, Many Still Don’t Have an Estate Plan

It’s true—many people still believe that they don’t have enough assets so they don’t need a will, or that their money will automatically go to a next of kin. Both of these beliefs are wrong. While the title of this CNBC article is “More people are creating wills amid the pandemic,” the story’s focus is on the fact that most Americans don’t have a will. If you belong to this group, here’s what happens when you die.

The state you live in has laws about who will receive your assets if you die without a will, known as intestacy. Let’s say you live in New York. Your surviving spouse and children will receive your assets. However, in Texas, your assets will be entered into the state’s intestacy probate process, and your relatives will divide up your assets. Want to be in charge of who inherits your property? Have a will created with an experienced estate attorney.

Young adults think they don’t need a will, but Covid-19 has taken the lives of many healthy, young people. Every adult over age 18 needs a will. If you don’t have one, your loved ones—even if it’s your parents—will inherit a legal mess that will take time and money to fix.

If you have children and no will, there’s no way to be sure who will raise your children. The court will decide. Choose your guardians, name them in your will and be sure to name additional choices just in case the first guardian can’t or won’t serve. You should also appoint someone to be in charge of your children’s money.

What if you had a will created 10 or twenty years ago? That’s another big mistake. Your life changes, the law changes, and so do relationships. Life insurance policies, retirement plans, and transfer-on-death instruments are all legally binding contracts. The last will you made will be used, and if you haven’t updated your will or other documents, then the old decisions will stand. Remember that contracts supersede wills, so no matter how much you don’t want your ex to receive your life insurance proceeds, failing to change that designation won’t help your second spouse. You should review and update all documents.

Doing it yourself is risky. You won’t know if your will is valid and enforceable, if you do it from an online template. Your heirs will have to fix things, which can be expensive. The cost of an estate plan depends on the complexity of your situation. You may only need a will, power of attorney and advance directive. You may also need trusts to pass property along with minimal taxes. An estate planning attorney will be able to give you an idea of how much your estate plan will cost.

Talking about death and planning for it is a difficult topic for everyone, but a well-planned estate plan is one of the most thoughtful gifts you can give to your loved ones.

Reference: CNBC (Oct. 5, 2020) “More people are creating wills amid the pandemic”

leave estate to pet

Can I Leave My Pet Some of My Estate?

The Minneapolis Star Tribune’s article entitled “Who will take care of Fido when you’re gone? Minnesotans put trust in trusts reports that Minnesotans are setting up trusts to care for their pets in the event they survive them.

This is a fairly new law in Minnesota. Since it was enacted in 2016, Minnesotans have been setting aside money to guarantee the care of their animals after they die or are incapacitated. With a pet trust, there’s a guarantee that the money earmarked to care for the animal will be there for the animal as intended. A trust can designate a separate caretaker, trustee and a trust enforcer to care for the animal, manage the money. and make certain the care is being provided as instructed in the trust.

A pet trust can contain instructions on the type of food, medical care, exercise and housing the pet will get, as well as the pet’s end of life and burial or cremation directions.

When the pet trust law was being debated in the Minnesota Legislature, there was the idea that pet trusts are frivolous, an option only for wealthy eccentrics like New York real estate and hotel tycoon Leona Helmsley. She died in 2007 leaving $12 million for the care of her dog, Trouble. The courts later reduced that amount to $2 million.

In the North Star State, the amount of money put into a trust to care for a pet can’t be excessive, or a judge might decrease the amount.

A pet trust can be used to care for an animal before the owner dies but is disabled or incapacitated. When the pet dies, depending on how the trust was created, the money left in the trust would be distributed to heirs or could go to another designated person or charity.

In states where pet trusts are not available, a person could write in their will that a relative will inherit a pet, and the pet owner could also leave the person money to pay for the animal’s care. However, because pets are legally considered personal property, they cannot own property or inherit assets themselves. As a result, there’s nothing that would prevent the relative designated to care for the animal to take it to the pound after you die and spend the cash on themselves.

A pet trust can provide a plan for animal lovers who want to own pets late in life but may be concerned the pet might outlive them. Talk to an experienced estate planning attorney about pet trusts in your state.

Reference: StarTribune (Sep. 23, 2020) “Who will take care of Fido when you’re gone? Minnesotans put trust in trusts”

letter of instruction

Should You Include a Letter of Instruction with Your Estate Plan?

A letter of instruction, or LOI, is a good addition to the documents included in your estate plan. It’s commonly used to express advice, wishes and practical information to help the people who will be taking care of your affairs, if you become incapacitated or die. According to this recent article “Letter of instruction in elder law estate plan can help with managing important information” from the Times Herald-Record, there are many different ways an LOI can help.

In our digital world, you might want to use your LOI to record website names, usernames and passwords for social media accounts, online accounts and other digital assets. This helps loved ones who you want to have access to your online life.

If you have minor children who are beneficiaries, the LOI is a good way to share your priorities to the trustee on your wishes for the funds left for their care. It is common to leave money in trust for HEMS—for “Health, Education, Maintenance and Support.” However, you may want to be more specific, both about how money is to be spent and to share your thoughts about the path you’d like their lives to take in your absence.

Art collectors or anyone who owns valuable items, like musical instruments, antiques or collectibles may use the LOI as an inventory that will be greatly appreciated by your executor. By providing a carefully created list of the items and any details, you’ll increase the likelihood that the collections will be considered by a potential purchaser. This would also be a good place to include any resources about the collections that you know of, but your heirs may not, like appraisers.

Animal lovers can use an LOI to share personalities, likes, dislikes and behavioral quirks of beloved pets, so their new caregivers will be better prepared. In most states, a pet trust can be created to name a caregiver and a trustee for funds that are designated for the pet’s care. The caregiver and the trustee may be the same person, or they may be two different individuals.

For families who have a special needs member, an LOI is a useful means of sharing important information about the person and is often referred to as a “Letter of Intent.” It works in tandem with a Special Needs Trust, which is created to leave assets to a person who receives government benefits without putting means-tested benefits in jeopardy. If there is no Special Needs Trust and the person receives an inheritance, they could lose access to their benefits.

Some of the information in a Letter of Intent includes information on the nature of the disability, daily routines, medications, fears, preferred activities and anything that would help a caregiver provide better care, if the primary caregiver dies.

The LOI can also be used to provide basic information, like where important documents are kept, who should be notified in case of death or incapacity, which bills should be paid, what home maintenance tasks need to be taken care of and who provides the services, etc. It is a useful document to help those you leave behind to adjust to their new responsibilities and care for loved ones.

Reference: Times Herald-Record (Sep. 8, 2020) “Letter of instruction in elder law estate plan can help with managing important information”

estate planning

Trusts: The Swiss Army Knife of Estate Planning

Trusts serve many different purposes in estate planning. They all have the intent to protect the assets placed within the trust. The type of trust determines what the protection is, and from whom it is protected, says the article “Trusts are powerful tools which can come in many forms,” from The News Enterprise. To understand how trusts protect, start with the roles involved in a trust.

The person who creates the trust is called a “grantor” or “settlor.” The individuals or organizations receiving the benefit of the property or assets in the trust are the “beneficiaries.” There are two basic types of beneficiaries: present interest beneficiaries and “future interest” beneficiaries. The beneficiary, by the way, can be the same person as the grantor, for their lifetime, or it can be other people or entities.

The person who is responsible for the property within the trust is the “trustee.” This person is responsible for caring for the assets in the trust and following the instructions of the trust. The trustee can be the same person as the grantor, as long as a successor is in place when the grantor/initial trustee dies or becomes incapacitated. However, a grantor cannot gain asset protection through a trust, where the grantor controls the trust and is the principal recipient of the trust.

One way to establish asset protection during the lifetime of the grantor is with an irrevocable trust. Someone other than the grantor must be the trustee, and the grantor should not have any control over the trust. The less power a grantor retains, the greater the asset protection.

One additional example is if a grantor seeks lifetime asset protection but also wishes to retain the right to income from the trust property and provide a protected home for an adult child upon the grantor’s death. Very specific provisions within the trust document can be drafted to accomplish this particular task.

There are many other options that can be created to accomplish the specific goals of the grantor.

Some trusts are used to protect assets from taxes, while others ensure that an individual with special needs will be able to continue to receive needs-tested government benefits and still have access to funds for costs not covered by government benefits.

An estate planning attorney will have a thorough understanding of the many different types of trusts and which one would best suit each individual situation and goal.

Reference: The News Enterprise (July 25, 2020) “Trusts are powerful tools which can come in many forms”

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”

estate planning mistakes

Which Stars Made the Biggest Estate Planning Blunders?

Mistakes in the estate planning of high-profile celebrities are one very good way to learn the lessons of what not to do.

Forbes’ recent article entitled “Eight Lessons From Celebrity Estates” discussed some late celebrities who made some serious experienced estate planning blunders. Hopefully, we can learn from their errors.

James Gandolfini. The “Sopranos” actor left just 20% of his estate to his wife. If he’d left more of his estate to her, the estate tax on that gift would have been avoided in his estate. But the result of not maximizing the tax savings in his estate was that 55% of his total estate went to pay estate taxes.

James Brown. One of the hardest working men in show business left the copyrights to his music to an educational foundation, his tangible assets to his children and $2 million to educate his grandchildren. Because of ambiguous language in his estate planning documents, his girlfriend and her children sued and, years later and after the payment of millions in estate taxes, his estate was finally settled.

Michael Jackson.  Jackson created a trust but never funded the trust during his lifetime. This has led to a long and costly battle in the California Probate Court over control of his estate.

Howard Hughes. Although he wanted to give his $2.5 billion fortune to medical research, there was no valid written will found at his death. His fortune was instead divided among 22 cousins. The Hughes Aircraft Co. was bequeathed to the Hughes Medical Institute before his death and wasn’t included in his estate.

Michael Crichton. The author was survived by his pregnant second wife, so his son was born after his death. However, because his will and trust didn’t address a child being born after his death, his daughter from a previous marriage tried to cut out the baby boy from his estate.

Doris Duke. The heir to a tobacco fortune left her $1.2 billion fortune to her foundation at her death. Her butler was designated as the one in charge of the foundation. This led to a number of lawsuits claiming mismanagement over the next four years, and millions in legal fees.

Casey Kasem. The famous DJ’s wife and the children of his prior marriage fought over his end-of-life care and even the disposition of his body. It was an embarrassing scene that included the kidnapping and theft of his corpse.

Prince and Aretha Franklin. Both music legends died without a will or intestate. This has led to a very public, and in the case of Prince, a very contentious and protracted settlement of their estates.

So, what did we learn? Even the most famous (and the richest) people fail to carefully plan and draft a complete estate plan. They make mistakes with tax savings (Gandolfini), charities (Brown and Hughes), providing for family (Crichton), whom to name as the manager of the estate (Duke) and failing to prevent family disputes, especially in mixed marriages (Kasem).

If you have an estate plan, be sure to review your existing documents to make certain that they still accomplish your wishes. Get the help of an experienced estate planning attorney.

Reference: Forbes (July 16, 2020) “Eight Lessons From Celebrity Estates”

real estate investments

Can I Add Real Estate Investments in My Will?

Motley Fool’s recent article entitled “How to Include Real Estate Investments in Your Will” details some options that might make sense for you and your intended beneficiaries.

A living trust. A revocable living trust allows you to transfer any deeds into the trust’s name. While you’re still living, you’d be the trustee and be able to change the trust in whatever way you wanted. Trusts are a little more costly and time consuming to set up than wills, so you’ll need to hire an experienced estate planning attorney to help. Once it’s done, the trust will let your trustee transfer any trust assets quickly and easily, while avoiding the probate process.

A beneficiary deed. This is also known as a “transfer-on-death deed.” It’s a process that involves getting a second deed to each property that you own. The beneficiary deed won’t impact your ownership of the property while you’re alive, but it will let you to make a specific beneficiary designation for each property in your portfolio. After your death, the individual executing your estate plan will be able to transfer ownership of each asset to its designated beneficiary. However, not all states allow for this method of transferring ownership. Talk to an experienced estate planning attorney about the laws in your state.

Co-ownership. You can also pass along real estate assets without probate, if you co-own the property with your designated beneficiary. You’d change the title for the property to list your beneficiary as a joint tenant with right of survivorship. The property will then automatically by law pass directly to your beneficiary when you die. Note that any intended beneficiaries will have an ownership interest in the property from the day you put them on the deed. This means that you’ll have to consult with them, if you want to sell the property.

Wills and estate plans can feel like a ghoulish topic that requires considerable effort. However, it is worth doing the work now to avoid having your estate go through the probate process once you die. The probate process can be expensive and lengthy. It’s even more so, when real estate is involved.

Reference: Motley Fool (June 22, 2020) “How to Include Real Estate Investments in Your Will”

pets during pandemic

Don’t Neglect a Plan for Your Pet During the Pandemic

If you have a pet, chances are you have worried about what would happen to your furry companion if something were to happen to you. However, worrying and having an actual plan are two very different things, as discussed at a Council of Aging webinar. That’s the subject of the article “COA speakers urge pet owners to plan for their animal’s future” that appeared in The Harvard Press.

It’s stressful to worry about something happening, but it’s not that difficult to put something in place. After you’ve got a plan for yourself, your children and your property, add a plan for your pet.

Start by considering who would really commit to caring for your pet, if you had a long-term illness or in the event of your unexpected passing. Have a discussion with them. Don’t assume that they’ll take care of your pet. A casual agreement isn’t enough. The owner needs to be sure that the potential caretaker understands the degree of commitment and responsibility involved.

If you should need to receive home health care, don’t also assume that your health care provider will be willing to take care of your pet. It’s best to find a pet sitter or friend who can care for the pet before the need arises. Write down the pet’s information: the name and contact info for the vets, the brand of food, medication and any behavioral quirks.

There are legal documents that can be put into place to protect a pet. Your will can contain general directions about how the pet should be cared for, and a certain amount of money can be set aside in a will, although that method may not be legally enforceable. Owners cannot leave money directly to a pet, but a pet trust can be created to hold money to be used for the benefit of the pet, under the management of the trustee. The trust can also be accessed while the owner is still living. Therefore, if the owner becomes incapacitated, the pet’s care will not be interrupted.

An estate planning attorney will know the laws concerning pet trusts in your state. Not all states permit them, although many do.

A pet trust is also preferable to a mention in a will, because the caretaker will have to wait until the will is probated to receive funds to care for your pet. The cost of veterinary services, food, medication, boarding or pet sitters can add up quickly, as pet owners know.

A durable power of attorney can also be used to make provisions for the care of a pet. The person in that role has the authority to access and use the owner’s financial resources to care for the animal.

The legal documents will not contain information about the pet, so it’s a good idea to provide info on the pet’s habits, medications, etc., in a separate document. Choose the caretaker wisely—your pet’s well-being will depend upon it!

Reference: The Harvard Press (May 14, 2020) “COA speakers urge pet owners to plan for their animal’s future”

Here’s Why You Need an Estate Plan

It’s always the right time to do your estate planning, but it’s most critical when you have beneficiaries who are minors or with special needs, says the Capital Press in the recent article, “Ag Finance: Why you need to do estate planning.”

While it’s likely that most adult children can work things out, even if it’s costly and time-consuming in probate, minor young children must have protections in place. Wills are frequently written, so the estate goes to the child when he reaches age 18. However, few teens can manage big property at that age. A trust can help, by directing that the property will be held for him by a trustee or executor until a set age, like 25 or 30.

Probate is the default process to administer an estate after someone’s death, when a will or other documents are presented in court and an executor is appointed to manage it. It also gives creditors a chance to present claims for money owed to them. Distribution of assets will occur only after all proper notices have been issued, and all outstanding bills have been paid.

Probate can be expensive. However, wise estate planning can help most families avoid this and ensure the transition of wealth and property in a smooth manner. Talk to an experienced estate planning attorney about establishing a trust. Farmers can name themselves as the beneficiaries during their lifetime, and instruct to whom it will pass after their death. A living trust can be amended or revoked at any time, if circumstances change.

The title of the farm is transferred to the trust with the farm’s former owner as trustee. With a trust, it makes it easier to avoid probate because nothing’s in his name, and the property can transition to the beneficiaries without having to go to court. Living trusts also help in the event of incapacity or a disease, like Alzheimer’s, to avoid conservatorship (guardianship of an adult who loses capacity). It can also help to decrease capital gains taxes, since the property transfers before their death.

If you have several children, but only two work with you on the farm, an attorney can help you with how to divide an estate that is land rich and cash poor.

Reference: Capital Press (December 20, 2018) “Ag Finance: Why you need to do estate planning”