Prevent Problems Before They Happen
Proper estate planning prevents problems before they happen

Prevent Problems Before They Happen

Creating an estate plan, with the help of an experienced estate planning attorney, can help prevent problems before they happen.  People gain clarity on larger issues, like who should inherit the family home, and small details, like what to do with the personal items that none of the children want. Until you go through the process of mapping out a plan, these questions can remain unanswered. However, according the East Idaho Business Journal, “Estate plans can help you answer questions about the future.”

Let’s look at some of these questions:

What will happen to my children when I die? You hope that you’ll live a long and happy life, and that you’ll get to see your children grow up and have families of their own. However, what if you don’t? A will is used to name a guardian to take care of your children, if their parents are not alive. Some people also use their wills to name a “conservator.” That’s the person who is responsible for the assets that any minor children might inherit.

Will my family fight over their inheritance? Without an estate plan, that’s a distinct possibility. Without a will, the entire estate goes through probate, which is a public process. Relatives and creditors can both gain access to your records and could challenge your will. Many people use and “fund” revocable living trusts to place assets outside of the will and to avoid the probate process entirely.

Who will take care of my finances, if I’m too sick? Estate planning includes documents like a durable power of attorney, which allows a person you name (before becoming incapacitated) to take charge of your financial affairs. Speak with your estate planning attorney about also having a medical power of attorney. This lets someone else handle health care decisions on your behalf.

Should I be generous to charities, or leave all my assets to my family? That’s a very personal question. Unless you have significant wealth, chances are you will leave most of your assets to family members. However, giving to charity could be a part of your legacy, whether you are giving a large or small amount. It may give your children a valuable lesson about what should happen to a lifetime of work and saving.

One way of giving, is to establish a charitable lead trust. This provides financial support to a charity (or charities) of choice for a period of time, with the remaining assets eventually going to family members. There is also the charitable remainder trust, which provides a steady stream of income for family members for a certain term of the trust. The remaining assets are then transferred to one or more charitable organizations.

Careful estate planning can help answer many worrisome questions. Just keep in mind that these are complex issues that are best addressed with the help of an experienced estate planning attorney. Read more here.

Reference: East Idaho Business Journal (June 25, 2019) “Estate plans can help you answer questions about the future.”

 

Family Fights over Personal Items or Artwork
How to avoid conflict when leaving personal items

Family Fights over Personal Items or Artwork

A few years after her death in 2014, Joan Rivers’ family put hundreds of her personal items up for auction at Christie’s in New York.

As The Financial Times reported in “Why an art collector’s estate needs tight planning,” a silver Tiffany bowl, engraved with her dog’s name, Spike, made headlines when it sold for thirty times its estimated price.

This shows how an auction house can generate a buzz around the estate of a late collector, creating demand for items that, had they been sold separately, might have failed to attract as much attention.

A problem for some art and collectible owners is that their heirs may feel much less passionately about the works, than the person who collected them.

A collector can either gift, donate or sell in their lifetime. He or she can also wait until they pass away and then gift, donate, or sell posthumously.

The way a collector can make certain his or her wishes are carried out or eliminate family conflicts after their death, is to take the decision out of the hands of the family, by placing an art collection in trust. Read more about trusts here.

The trust will have the collector’s wishes added into the agreement, and the trustees are appointed from the family and from independent advisers with no interest in a transaction taking place.

Many collectors like to seal their legacy, by making a permanent loan or gift of art works to a museum.However, their children can renege on these agreements, if they’re not adequately protected by trusts or other legal safeguards after a collector’s death.

Even with a trust or other legal structure put in place to preserve a legacy, the key to avoiding a fight over personal items after the death of the collector, is to have frank discussions about estate planning with the family well before the reading of the will. This can ensure that their wishes are respected.

Reference: Financial Times (June 20, 2019) “Why an art collector’s estate needs tight planning”

 

Leaving a Legacy Is Not Just about Money
Love locks as symbol for everlasting love

Leaving a Legacy Is Not Just about Money

A legacy is not necessarily about money, says a survey that was conducted by Bank of America/Merrill Lynch Ave Wave. More than 3,000 adults (2,600 of them were 50 and older) were surveyed and focus groups were asked about end-of-life planning and leaving a legacy. The article, “How to leave a legacy no matter how much money you have” from The Voice, shared a number of the participant’s responses.

A total of 94% of those surveyed said that a life well-lived, is about “having friends and family that love me.” 75% said that a life well-lived is about having a positive impact on society. A mere 10% said that a life well-lived is about accumulating a lot of wealth.

People want to be remembered for how they lived, not what they did at work or how much money they saved. Nearly 70% said they most wanted to be remembered for the memories they shared with loved ones. And only nine percent said career success was something they wanted to be remembered for.

While everyone needs to have their affairs in order, especially people over age 55, only 55% of those surveyed reported having a will. Only 18% have what are considered the three key essentials for legacy planning: a will, a health care directive and a durable power of attorney.

The will addresses how property is to be distributed, names an executor of the estate and, if there are minor children, names who should be their guardian. The health care directive gives specific directions as to end-of-life preferences and designates someone to make health care decisions for you, if you can’t. A power of attorney designates someone to make financial decisions on your behalf when you can’t do so, because of illness or incapacity.

An estate plan is often only considered when a trigger event occurs, like a loved one dying without an estate plan. That is a wake-up call for the family, once they see how difficult it is when there is no estate plan. What does an estate plan include? Read more here.

Parents age 55 and older had interesting views on leaving inheritances and who should receive their estate. Only about a third of boomers surveyed and 44% of Gen Xers said that it’s a parent’s duty to leave some kind of inheritance to their children. A higher percentage of millennials surveyed—55%–said that this was a duty of parents to their children.

The biggest surprise of the survey: 65% of people 55 and older reported that they would prefer to give away some of their money, while they are still alive. A mere 8% wanted to give away all their assets, before they died. Only 27% wanted to give away all their money after they died.

Reference: The Voice (June 16, 2019) “How to leave a legacy no matter how much money you have”

 

Arizona Funeral Homes And Potential Financial Abuse
Arizona Funeral Home

Arizona Funeral Homes And Potential Financial Abuse

U.S. Navy veteran Robert Heiskell was a quiet and reclusive man, whose wife had died years before. A concerned neighbor called the police, who on March 22, 2017, discovered the 80-year-old dead in his home.

AZ Central’s recent article, “Phoenix funeral home took control of dead people’s estates, then charged them excessive fees, complaints say,” reports that Heiskell didn’t have will, and no one claimed his body. A Phoenix area funeral home, Abel Funeral Services—under a contract with Maricopa County for indigent burial—retrieved his body and placed it in refrigeration, while they looked for the next of kin. That meant a meter began running on Heiskell’s funeral expenses.

When the county saw that Heiskell had too much money to qualify for indigent burial, funeral home owner Spencer McBride got court approval to become the personal representative of Heiskell’s estate and settle Heiskell’s financial affairs. The funeral home owner had done this many times for other estates.

By the time he was finished, McBride had racked up costs of more than $30,000 from Heiskell’s estate to his funeral home, according to court records. Compare that to the average cost of a funeral and burial of $7,360, according to the National Funeral Directors Association.

While state law permits funeral home owners to act as both executors and creditors of an estate, many don’t care for the headaches. Now the Arizona Board of Funeral Directors and Embalmers, which regulates the profession, is looking into several other complaints that McBride assumed control of estates and charged excessive fees for funeral services.

Three complaints in the past year claim that McBride did not exert a sufficient effort in locating the next of kin, while his funeral home charged estates excessive fees for funeral services. Another complaint didn’t dispute fees, but the family of an Air Force veteran was upset over a delay in burial.

Heiskell’s closest living relative, a cousin, questioned the bill and alleged that all but about $8,000 of the charges were “excessive.” This included fees to refrigerate Heiskell’s body for 115 days. The matter was settled out of court for an undisclosed sum. In statements to the funeral board, McBride has denied using his position as personal representative for profit.

Even if you believe you have no heirs, it is important that you speak with a qualified estate planning attorney to create a mindful plan that tells people what you want to happen to your assets and personal belongings. Book a call today. 

Reference: AZ Central (June 21, 2019) “Phoenix funeral home took control of dead people’s estates, then charged them excessive fees, complaints say”

 

What Debts Must Be Paid During Probate?
Which debts do I pay during probate?

What Debts Must Be Paid During Probate?

Everything that must be addressed in settling an estate becomes more complicated, when there is no will and no estate planning has taken place before the person dies. Debts are a particular area of concern for the estate and the executor. What has to be paid, and who gets paid first? These are explained in the article “Dealing with Debts and Mortgages in Probate” from The Balance.

Probate is the process of gaining court approval of the estate and paying off final bills and expenses, before property can be transferred to beneficiaries. Dealing with the debts of a deceased person can be started, before probate officially begins.

Start by making a list of all of the decedent’s liabilities and look for the following bills or statements:

  • Mortgages
  • Reverse mortgages
  • Home equity loans
  • Lines of credit
  • Condo fees
  • Property taxes
  • Federal and state income taxes
  • Car and boat loans
  • Personal loans
  • Loans against life insurance policies
  • Loans against retirement accounts
  • Credit card bills
  • Utility bills
  • Cell phone bills

Next, divide those items into two categories: those that will be ongoing during probate—consider them administrative expenses—and those that can be paid off after the probate estate is opened. These are considered “final bills.” Administrative bills include things like mortgages, condo fees, property taxes and utility bills. They must be kept current. Final bills include income taxes, personal loans, credit card bills, cell phone bills and loans against retirement accounts and/or life insurance policies.

The executors and heirs should not pay any bills out of their own pockets. The executor deals with all of these liabilities in the process of settling the estate.

For some of the liabilities, heirs may have a decision to make about whether to keep the assets with loans. If the beneficiary wants to keep the house or a car, they may, but they have to keep paying down the debt. Otherwise, these payments should be made only by the estate.

The executor decides what bills to pay and which assets should be liquidated to pay final bills.

A far better plan for your beneficiaries, is to create a comprehensive estate plan that includes a will that details how you want your assets distributed and addresses what your wishes are. If you want to leave a house to a loved one, your estate planning attorney will be able to explain how to make that happen, while minimizing taxes on your estate.

Reference: The Balance (March 21, 2019) “Dealing with Debts and Mortgages in Probate”

 

Choosing a Trustee: Family or Professional?

Selecting a trustee to manage your estate after you pass away is an important decision. Depending on the type of trust you’re creating, the trustee will be in charge of overseeing your assets and the assets of your family. It’s common for people to choose either a friend or family member, a professional trustee or a trust company or corporate trustee for this critical role.

Forbes’s recent article, “How To Choose A Trustee,” helps you identify what you should look for in a trustee.

If you go with a family member or friend, she should be financially savvy and good with money. You want someone who is knows something about investing, and preferably someone who has assets of their own that they are investing with an investment advisor.

A good thing about selecting a friend or family member as trustee, is that they’re going to be most familiar with you and your family. They will also understand your family’s dynamics.  Family members also usually don’t charge a trustee fee (although they are entitled to do so).

However, your family may be better off with a professional trustee or trust company that has expertise with trust administration. This may eliminate some potentially hard feelings in the family. Another negative is that your family member may be too close to the family and may get caught up in the drama.They may also have a power trip and like having total control of your beneficiary’s finances.

The advantage of an attorney serving as a trustee, is that they have familiarity with your family, if you’ve worked together for some time. There will, however, be a charge for their time spent serving as trustee.

Trust companies will have more structure and oversight to the trust administration, including a trust department that oversees the administration. This will be more expensive, but it may be money well spent. A trust company can make the tough decisions and tell beneficiaries “no” when needed. It’s common to use a trust company, when the beneficiaries don’t get along, when there is a problem beneficiary or when it’s a large sum of money. A drawback is that a trust company may be difficult to remove or become inflexible. They also may be stingy about distributions, if it will reduce the assets under management that they’re investing. You can solve this by giving a neutral third party, like a trusted family member, the ability to remove and replace the trustee.

Talk to your estate planning attorney and go through your concerns to find a solution that works for you and your family.

Reference: Forbes (May 31, 2019) “How To Choose A Trustee”

 

Legal Documents For Graduates

It is wonderful to bring up the children, make sure they are educated and see that 18th birthday come along. However, it is important to recognize that many things change from a legal standpoint, according to grbj.com in “Give your graduate the gift of legal documents.”

Here are recommended steps to take so parents can still be involved in their children’s lives when they are needed:

Health care proxy/medical power of attorney. Even if you are the person paying for health insurance, you are not legally permitted to make decisions on their behalf. Have your child sign a proxy/POA form designating who has the primary authority to make health decisions, if he or she is unable to do so. This is especially important when parents are divorced: both parents need to have the proper forms. Your estate planning attorney will be able to prepare these for you.

Durable power of attorney. If your child has signed a durable POA, you will be able to handle their financial matters, especially if your child becomes incapacitated.

HIPAA authorization. Medical providers may not disclose a patient’s medical status, unless they have legal permission. Your child should sign a HIPAA authorization with each of their providers, giving the parent access to all their information. This is especially necessary for a child with health or mental issues.

FERPA waivers. This one takes many parents by surprise. Even if you are the one paying for tuition and all college expenses, the college will not provide academic records, including grades and tuition bills, due to the Family Education Rights and Privacy Act. Contact the college and find out exactly what forms they need to be sure you have access to all of your children’s information, including any health and mental health treatment.

Wills and trusts. If a child has assets and no descendants, they need a will or revocable trust to protect the parent’s taxable estate and allow someone to manage these assets, if they die prematurely.

Medical records. Make sure the child has access to their medical records, including medications, allergies, immunizations, etc.

Insurance. See if the family’s medical, homeowner’s and auto insurance coverage extend to a child living away at school and in another state. If the child is renting a house or apartment, make sure they have renter’s insurance.

Proof of identity. Make sure the child has access to their passport, birth certificate or Social Security card so they can get an internship or a job.

Bank accounts and credit cards. If the family’s regular bank does not have a branch where the child is attending school, the parents should consider opening a basic checking account at a local branch. Both parents and child should be on the account.

Registration. It’s time to register to vote and sons will need to register with Selective Service.

An estate planning attorney can advise you on the proper documents needed for your family.

Reference: grb.com (June 7, 2019) “Give your graduate the gift of legal documents.”

Talk To Your Kids About Their Inheritance
Talk to your children about their inheritance.

Talk To Your Kids About Their Inheritance

For some parents, it can be difficult to discuss family wealth with their children. You may worry that when your kid learns they’re going to inherit a chunk of money, they’ll drop out of college and devote all their time to their tan.

Kiplinger’s recent article, “To Prepare Your Heirs for Future Wealth, Don’t Hide the Truth,” says that some parents have lived through many obstacles themselves. Therefore, they may try to find a middle road between keeping their children in the dark and telling them too early and without the proper planning. However, this is missing one critical element, which is the role their children want to play in creating their own futures.

In addition to the finer points of estate planning and tax planning, another crucial part of successfully transferring wealth is honest communication between parents and their children. This can be valuable on many levels, including having heirs see the family vision and bolstering personal relationships between parents and children through trust, honesty and vulnerability.

For example, if the parents had inherited a $25 million estate and their children would be the primary beneficiaries, transparency would be of the utmost importance. That can create some expectations of money to burn for the kids. However, that might not be the case, if the parents worked with an experienced estate planning attorney to lessen estate taxes for a more successful transfer of wealth.

Without having conversations with parents about the family’s wealth and how it will be distributed, the support a child gets now and what she may receive in the future, may be far different than what she originally thought. With this information, the child could make informed decisions about her future education and how she would live. Do you or your spouse have children from a prior marriage or relationship? Read more about planning for blended families.

Heirs can have a wide variety of motivations to understand their family’s wealth and what they stand to inherit. However, most concern planning for their future. As a child matures and begins to assume greater responsibility, parents should identify opportunities to keep them informed and to learn about their children’s aspirations, and what they want to accomplish.

The best way to find out about an heir’s motivation, is simply to talk to them about it. Talk to your kids about their inheritance.

Reference: Kiplinger (May 22, 2019) “To Prepare Your Heirs for Future Wealth, Don’t Hide the Truth”

 

So You Want To Retire In Arizona
Retirement in Arizona.

So You Want To Retire In Arizona

Arizona’s population increases in the winter months, which is just one thing it has in common with Florida, says Kiplinger in the article “9 Things You Must Know About Retiring to Arizona.” Many retirees have settled in Arizona year-round. The nation’s first active adult retirement community was in Youngtown, Arizona in 1954. Now 17% of the state’s 7.2 million residents are 65 and older. Let’s look at the Grand Canyon State as a retirement destination.

You’ll have lots of company. Between 2010 and mid-2018, Arizona’s population grew by 12.2%. By comparison, the population of New York (state, not city) only grew 0.8%. In 2018, Arizona ranked number five (behind Vermont, Oregon, Idaho, and Nevada) among states with the most inbound movers. Retirement was the reason for the relocation cited by 37% of the Arizona newcomers in a United Van Lines survey. Arizona has more than 100 age-restricted retirement communities.

It’s a dry heat. You’ve heard it before, and it’s true. The dry heat is more tolerable for most people than the humidity and heat of Florida. Annual precipitation ranges from 3 inches in the arid southwest to 40 inches in the mountains of east central Arizona, according to the Arizona State University’s climate office.

There are plenty of great places to retire. The state isn’t one big arid desert. There are a variety of climates that offer seasonal changes. If health care is important, look at Mesa, one of 10 U.S. cities celebrated by Kiplinger’s Personal Finance in 2018 as great places to retire for your health. Mesa received high scores for its proximity to top-rated hospitals, a cost of living that’s lower than the national average and a variety of activities.

Snowbirds and rental property. Planning to rent before you buy to look at different communities? In most spots, January through March or April is peak snowbird season. Migrators often book the same place for the coming year, before they leave in the spring. Others start booking their rentals as early as August. Early birds get the biggest blocks of time and the most-desirable properties. Expect to pay monthly rent (excluding fees and taxes) of $2,500 to $3,500 for a standard condo (two-bedroom, two-bath) or $3,000 to $9,000 for a single-family home (three-bedroom, two-bath) from January through March.

It’s a seller’s market in late spring. The best time to buy a home in Arizona is usually in the late spring, when the competition from snowbirds ends. In summer and fall, you’ll have fewer options to buy.  However, the remaining sellers may be more motivated and willing to deal. Thinking of buying? Read more about trust planning for your real estate.

Arizona’s income tax for retirees is mixed. Your state tax bill in Arizona will depend a lot on your retirement income sources. Arizona doesn’t tax Social Security benefits, and on most other income that is taxed, rates are low—from 2.59% (for married filers with as much as $20,690 of taxable income) to 4.54% (for married filers with more than $310,317 of taxable income). However, private pensions are fully taxed at ordinary income tax rates. The same is true for government pensions from other states. For those with military, civil service and Arizona state and local government pensions, only the first $2,500 in this income is exempt from Arizona state taxes.

Sales taxes vary. Arizona’s state sales tax is 5.6%. However, localities can add their own sales taxes. As a result, you could pay as much as 5.3% more in sales tax, depending on where you live (and shop).

You don’t need to reset your clocks. Arizona is one of only two states (with Hawaii) that don’t have daylight saving time. Arizona aligns with Pacific Daylight Time in spring, summer, and part of fall. However, they are on Mountain Standard Time during most of the fall and winter.

Reference: Kiplinger (April 19, 2019) “9 Things You Must Know About Retiring to Arizona”

 

Are “Digital Assets” Part Of My Estate?
Don't forget about your digital assets.

Are “Digital Assets” Part Of My Estate?

Most of us have digital assets and online accounts. It’s time to think about what will happen to them when we die.

Estate planning attorneys are now talking with clients about their digital assets and leaving specific instructions about what to do with these online accounts and social media, after they pass.

There’s a trend of creating video messages to loved ones and posting them online for the family to see after they pass. Facebook has a feature that allows the page owner to set a legacy contact to manage the account, after the account owner has died. Other technologies are emerging to allow you to gather your digital assets and assign an individual or individuals to manage them after you die.

It is now just as important to think about what you want to happen to your digital assets, as it is to your tangible, earth-bound assets when you die. What’s also important: considering what you want to happen to your data, how accessible and enduring you want it to be and how it will be protected.

People in their older years have seen amazing leaps and changes in technologies. We’ve moved from transistor radios to VHS to DVD to Blu-Ray. We’ve gone from land line home phones to smart phones that have the same computing power or more than a desktop. The first social media site was launched in 1997, and websites like Myspace have come and gone.

Will the current websites and software still be available and commonly used in five, ten, fifty, or one hundred years? It’s impossible to know what the world will look like then. However, unless a plan is made for digital legacies, it’s unlikely that your digital assets will be accessible to others in the near and far future.

Here’s the problem: even if your executor does succeed in memorializing your Facebook page, will there be things on the page that you don’t want anyone to see after you’ve gone? There’s a wealth of data on social media to sift through, including items you may not want to be part of your digital legacy.

Consider the comparison to people who lived during previous ages. We may not be able to see their lives online, but they have left behind physical artifacts—letters, diaries, photographs—that we can hold in our hands and that tell us their stories. These artifacts will survive through the generations.

A digital estate plan can ensure that your data is managed by someone you trust. Talk with your estate planning attorney to learn how to put such a plan in place, when you are creating your legacy. Your last will and testament is a starting point in today’s digital world.

Reference: The Scotsman (May 16, 2019) The ghost in the machine—what will happen to online you after death?”