Estate Planning Blog

Estate Planning Blog

Elisabeth Pickle Law, P.L.C.

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?”

 

Will a Reverse Mortgage Help Me in Retirement?
Will a reverse mortgage help me in retirement?

Will a Reverse Mortgage Help Me in Retirement?

It’s not uncommon for a homeowner to take out a home equity line of credit or borrow against an existing one. This can provide the funds to pay some bills and stay afloat. Another option if you’re at least 62 with a home that’s not heavily mortgaged, is to take out a reverse mortgage. A reverse mortgage gives you tax-free cash. No repayments are due, until you die or move out of the house.

However, these loans are expensive, and not for those people who want to give their home to heirs, because most or all of the home’s equity may be eaten up by the loan principal and interest.

Fed Week’s recent article entitled “Considerations for Borrowing in Retirement” explains that reverse mortgages work best for seniors who need cash, who want to stay in their homes and who have few other options.

These HECM reverse mortgage loans are insured by the Federal Housing Administration (FHA). They let homeowners convert their home equity into cash with no monthly mortgage payments. Borrowers are still required to continue to pay property taxes and insurance. They also must maintain the home, according to FHA guidelines.

People use reverse mortgage loans to pay for home renovations, as well as medical and daily living expenses. Some homeowners who have an existing mortgage will use their reverse mortgage loan to pay off their existing mortgage and get rid of their monthly mortgage payments.

When the homeowner moves, sells the house, or passes away, the loan becomes due. If the house is held until death, heirs have the option to take out a conventional mortgage, pay off the reverse mortgage and continue to live there.

Other options include loans against your life insurance or your securities portfolio.

It is imperative that you talk with a trusted advisor about how a reverse mortgage might fit into your situation. Book a call and become a client today.

Reference: Fed Week (May 16, 2019) “Considerations for Borrowing in Retirement”

 

Power of Attorney: Which Type Do I Need?
What type of power of attorney do I need?

Power of Attorney: Which Type Do I Need?

A power of attorney is a document that grants a person the legal authority to make decisions about certain aspects of another person’s life. It gives a trusted person of your choosing the right to act as your agent in either highly specific or general decisions, depending on the type of power of attorney. As reported in Wicked Local’s article “Investors, Plans & Money: Power of attorney,” the person you name does not have to be an attorney, nor does it have to be a spouse.

Each type of power of attorney works to achieve a slightly different goal. As you work with your estate planning attorney on developing your overall estate plan, you will want to know which type you need and what your state’s requirements are. You will have to be of sound mind, with awareness of what you are signing, when the documents are prepared and signed.

Here’s a look at the basic powers of attorney:

A General Power of Attorney gives the named agent the broadest scope and authority to act and make decisions for another person. The document ideally lists the actions the person wishes them to take. This requires absolute trust, because it gives the agent complete control.

A Limited, Specific or Special Power of Attorney is a document that gives an agent the authority to act on your behalf in a very specific area of your life, task, or within a specified time frame. An example would be if you wanted someone to sell, maintain, or manage property for you. The State of Arizona requires a separate “Mental Health Power of Attorney” to make mental health care decisions for another person when that person is incapable. This is a serious consideration and should be discussed and drafted by your attorney. Contact Elisabeth Pickle Law for more information.

The Springing Power of Attorney is “triggered” (hence the name) when, and only when, certain conditions are met. That might be a loss of mental capacity, for example. This document also must be very carefully defined, and proof of the condition being met may need to be presented.

A Healthcare Power of Attorney goes by different names depending upon the state. However it is named, this is the legal document that gives the authority to make healthcare decisions, if the person is incapacitated through illness or accident. The person named as your healthcare agent should have a clear understanding of your wishes regarding extreme life-sustaining measures, as well as critical care procedures, like blood transfusions or organ transplants.

There can be problems with powers of attorney. The person named to act as an agent must be entirely trustworthy and reliable. Other issues arise, if the documents are not prepared properly. This is why an experienced estate planning attorney is the best source. Here are some examples of what can go wrong:

  • Details are lacking, so the document is declared invalid;
  • The wrong type of power of attorney is created;
  • The state requirements are not met;
  • An agent is named who the attorney would immediately know is a bad choice; and/or
  • A generic document does not contain the correct language.

Properly prepared, a power of attorney can save a tremendous amount of stress, provide the ability to make time-sensitive decisions and allow your wishes to be followed. Speak with your estate planning attorney to determine the type of power of attorney your estate plan needs.

Reference: Wicked Local (April 24, 2019) “Investors, Plans & Money: Power of attorney”

Guest Blog – Millennial Trend for Retirees: The Side Hustle
Financing retirement

Guest Blog – Millennial Trend for Retirees: The Side Hustle

Today’s blog is a guest blog written by Heidi Cookson, Marketing Director for Vinnie Bonazzoli’s firm, Family Estate Planning Law Group. Vinnie has been practicing law since 1985, and his law firm is changing the way people view estate planning through their relationship-oriented practices and ongoing client care program. Vinnie also runs a law firm consulting business called Client Care Academy that trains firms in how they can successfully implement their own client care program. 

Instead of droning on about how the majority of retirees don’t have enough savings and telling you the numbers, let’s talk about how you can supplement your income like a millennial! Millennials, you love them, you hate them, you have one or many in your life, and interestingly enough, they have actually paved the way for retirees to make extra money without having to pick up a traditional part-time job.

According to Experian, over 50% of millennials have a side gig. If you read our last blog, The $1,000,000,000,000 Generation, you’ll recall that millennials are actually a fairly conservative group in that they like to save money, and we have also talked about how many of them want to retire early in a previous blog, New Millennial Retirement Method. It is no surprise that, since this age group is strapped with debt while wanting to save and retire early, they came up with a method to get extra cash: side hustles, aka, side gigs.

The gig economy is growing and by 2021, it is expected to comprise of 9.2 million Americans according to Entrepreneur. What is so appealing about the gig economy is the flexibility, it plays to your talents and knowledge base, and your home base is, well, your home! Retirees should seriously consider tapping into the gig economy because, as you know, most retirees do not have the funds to comfortably cover the entire span of their retirement. Another benefit, money aside, is that having a side hustle allows you to keep structure in your life or continue doing work you love and sharing your talents.

A few entertaining side hustle options you can look into are:

  • Sweatcoin: go for a walk and get paid to exercise
  • TaskRabbit: run errands for people
  • Thumbtack: offer your expertise, clean houses, teach, etc.
  • Swagbucks: be paid for taking polls and surveys and watching videos
  • Vayable: be a tour guide and share all those random facts you’ve collected about your area
  • Air BnB: rent out your house while you visit family, or continually rent your guest bedroom

For retirees who love dogs, check out Wag, you can be paid to walk people’s dogs! You may not want a dog at this stage in life for practical reasons, but it doesn’t mean you can’t have dogs in your daily life, and you’ll be getting some low impact exercise in as well (combine these walks with Sweatcoin to really maximize your earnings).

Check out this article from The Balance that goes into more detail about other side hustle options you might want to consider!

If you are taking social security, note there are certain limitations to income you can receive, but the extra money is a great way to put money in investments, travel, make contributions to a grandchild’s 529, or supplement your current income.

To learn more about Vinnie and his team, visit his website and check out their Twitter, Facebook, and Instagram.

Reference: MarketWatch, December 1, 2018, Retirees Can Earn Money with These Easy Side Jobs

 

Is An Online Will A Good Idea?

Sure, many of us would prefer to fill in the blanks in private, than have to talk to anyone about our questions. However, it’s better to get professional advice.

MarketWatch’s recent article, “Online wills may save you money, but they can lay these estate-planning traps,” says that if you prepare your taxes yourself and you make a mistake, you may need to meet with the IRS. However, you may never know the results of your work when it comes to an online will. Who will be the ones to find out if you made any mistakes, and need to pay the price? Your family.

You can find many DIY options for completing your own estate plan. With the ease and availability of these programs, along with lower prices, one would think more of us would have an up-to-date estate plan. According to the AARP article, Haven’t Done a Will Yet?, only 4 in 10 American adults have a will or living trust.

The four basic estate planning documents are a will, a trust, power of attorney for financial matters and an advance health care directive. If you try to produce any or all of them through a DIY site, expect to be offered a fill-in-the-blank approach. However, each state has its own probate code and the program you use may have different names for the documents. They also may not address state-specific questions.

Some DIY sites have all these documents, but you must buy their higher-end packages to access them. Others offer what they call a “limited attorney consultation” in the form of a drop-down menu of questions with pre-written responses, not an actual conversation with an attorney.

The range of DIY services also has a range of prices. Some claim it’s $69 for just an online will, and others charge hundreds of dollars for what may be described as a “complete plan.” Some sites have more information than others about their options, so you must dig through the website to be certain you’re getting a legally binding will or other estate planning document. It is important to read the fine print with care.

Most of these websites presume you already know what you want, but most people have no idea what they want or need. When you get into the complexities of family dynamics and trust language specific to your state and situation, these DIY estate planning packages can cause more challenges than working with a qualified estate planning attorney.

Remember: you don’t know what you don’t know. You may not know the case law and legislation that have evolved into your state’s probate code.

Play it safe and schedule a call with us today. Your family will be grateful that you did.

Reference: MarketWatch (May 3, 2019) “Online wills may save you money, but they can lay these estate-planning traps”

 

Estate Planning For Singles

 

A woman is shopping, when suddenly she is struck by abdominal pains that are so severe she passes out in the store. When she comes to, an EMT is asking her questions. One of those questions is “Do you have a living will or a medical power of attorney?” That was a wake-up call for her and should be for other singles also, says Morningstar in the article “2 Estate-Planning Tools That Singles Should Consider.”

People who don’t have children or a married spouse, often think they don’t need any kind of estate plan. However, the truth is, they do. Estate planning when you are single, or have no beneficiaries, can be more important than estate planning as a married individual with children. For singles, power of attorney, medical power of attorney and a living will are especially important.

What is a Living Will? A living will is sometimes called an advance medical directive. It details your wishes, if you are in a situation where life-sustaining treatment is the only way to keep you alive. Would you want to remain on a respirator, have a feeding tube or have other extreme measures used? It’s not pleasant to think about. However, this is an opportunity for you to make this decision on your own behalf, for a possible future date when you won’t be able to convey your wishes. Some people want to stay alive, no matter what. Others would prefer to turn off any artificial means of life support.

This spares your loved ones from having to guess about what you might like to have happen.

What is a Durable Power of Attorney for Healthcare? This is a legal document that gives a person you name the ability to make decisions about healthcare for you, if you can’t. To some people, this matters more than a living will, because the durable power of attorney for healthcare can convey your wishes in situations, where you are not terminally ill, but incapacitated.

Find someone you trust, whose judgment you respect and have a long, serious talk with them. Talk about your preferences for blood transfusions, organ transplants, disclosure about your medical records and more. Doctors have a hard time when a group of relatives and friends are all trying to help, if there is no one person who has been named as your power of attorney for healthcare.  Read more about Healthcare Power of Attorneys here: https://www.elisabethpicklelaw.com/health-care-decisions-in-2019-require-a-medical-power-of-attorney/

What else does a single person need? The documents listed above are just part of an estate plan, not the whole thing. A single person should have a will or a trust, so that they can determine who they want to receive their assets upon death. They should also check on their beneficiary designations from time to time, so any insurance policies, investment accounts, retirement accounts, and any other assets that allow beneficiary designations are going to the correct person. Some accounts also do not permit non-spouses as beneficiaries. As unfair as this is, it does exist.

The takeaway here is that to protect yourself in a health care emergency situation, you should have these documents in place. Speak with an experienced estate planning attorney. This is not a complicated matter, but it is an important one.

Reference: Morningstar (April 23, 2019) “2 Estate-Planning Tools That Singles Should Consider”

What are the Most Common Beneficiary Designations Mistakes?
Common mistakes on beneficiary designation forms.

What are the Most Common Beneficiary Designations Mistakes?

Many people don’t understand that their will doesn’t control who inherits all of their assets when they pass away. Some of a person’s assets pass by beneficiary designation. That’s accomplished by completing a form with the company that holds the asset and naming who will inherit the asset, upon your death.

Kiplinger’s recent article, “Beneficiary Designations: 5 Critical Mistakes to Avoid,” explains that assets including life insurance, annuities and retirement accounts (think 401(k)s, IRAs, 403bs and similar accounts) all pass by beneficiary designation. Many financial companies also let you name beneficiaries on non-retirement accounts, known as TOD (transfer on death) or POD (pay on death) accounts.

Naming a beneficiary can be a good way to make certain your family will get assets directly. However, these beneficiary designations can also cause a host of problems. Make sure that your beneficiary designations are properly completed and given to the financial company, because mistakes can be costly. The article looks at five critical mistakes to avoid when dealing with your beneficiary designations:

  1. Failing to name a beneficiary. Many people never name a beneficiary for retirement accounts or life insurance. If you don’t name a beneficiary for life insurance or retirement accounts, the financial company has it owns rules about where the assets will go after you die. For life insurance, the proceeds will usually be paid to your estate. For retirement benefits, if you’re married, your spouse will most likely get the assets. If you’re single, the retirement account will likely be paid to your estate, which has negative tax ramifications. When an estate is the beneficiary of a retirement account, the assets must be paid out of the retirement account within five years of death. This means an acceleration of the deferred income tax—which must be paid earlier, than would have otherwise been necessary.
  2. Failing to consider special circumstances. Not every person should receive an asset directly. These are people like minors, those with specials needs, or people who can’t manage assets or who have creditor issues. Minor children aren’t legally competent, so they can’t claim the assets. A court-appointed conservator will claim and manage the money, until the minor turns 18. Those with special needs who get assets directly, will lose government benefits because once they receive the inheritance directly, they’ll own too many assets to qualify. People with financial issues or creditor problems can lose the asset through mismanagement or debts. Ask your attorney about creating a trust to be named as the beneficiary.
  3. Designating the wrong beneficiary. Sometimes a person will complete beneficiary designation forms incorrectly. For example, there can be multiple people in a family with similar names, and the beneficiary designation form may not be specific. People also change their names in marriage or divorce. Assets owners can also assume a person’s legal name that can later be incorrect. These mistakes can result in delays in payouts, and in a worst-case scenario of two people with similar names, can mean litigation.
  4. Failing to update your beneficiaries. Since there are life changes, make sure your beneficiary designations are updated on a regular basis.
  5. Failing to review beneficiary designations with your attorney. Beneficiary designations are part of your overall financial and estate plan. Speak with your estate planning attorney to determine the best approach for your specific situation.

Beneficiary designations are designed to make certain that you have the final say over who will get your assets when you die. Take the time to carefully and correctly choose your beneficiaries and periodically review those choices and make the necessary updates to stay in control of your money.

Reference: Kiplinger (April 5, 2019) “Beneficiary Designations: 5 Critical Mistakes to Avoid”