What Estate Planning Documents Should I Have for My College Student?

Kiplinger’s recent article, “Documents that Parents and College Students Need,” explains that many parental rights are no longer applicable, when a child legally reaches adulthood (age 18 in most states).

However, with a few estate planning documents, you can still be involved in your child’s medical and financial affairs. Many parents don’t know that they need these documents. They think they can access a child’s medical and other information, because their son or daughter is still on the family’s insurance plan and the parents are paying the medical and tuition bills.

Here are four documents you and your son or daughter will need.

HIPAA Authorization Form. This is a federal law that protects the privacy of medical records. You child must sign a HIPPA authorization form to let you to receive information from health care providers, such as the college’s health clinic, about their health and treatment. If your son or daughter doesn’t want to share her entire medical record, he or she can set restrictions on what information you can receive.

Medical Power of Attorney. This lets your son or daughter name a person to make medical decisions, if they are incapacitated and unable to make medical decisions. Your child should select both a primary agent and a secondary agent, in the event the first one is unavailable.

Durable Power of Attorney. This lets your son or daughter authorize a person to handle financial or legal matters on his or her behalf. A durable power of attorney is usually written, so it takes effect when a person becomes incapacitated. However, if your child would like you to manage his or her financial accounts or file tax returns while away at school, they can make the document effective immediately.

Family Education Rights and Privacy Act Waiver. Once your child is an adult, you’re no longer entitled to see their grades without express permission. It seems a bit crazy that you can be paying for tuition, but you don’t have access to their academic records. This waiver signed by your child will allow you permission to receive his or her academic record. Many colleges provide this form, or you can find it online.

Once you get these documents, make sure you have ready access to them, if required.

Reference: Kiplinger (September 24, 2019) “Documents that Parents and College Students Need”

 

Still Waiting to Update Your Estate Plan?
Don't put off updating your estate plan.

Still Waiting to Update Your Estate Plan?

If you are wondering if Franklin’s handwritten wills are valid, join the club. With an estate valued at least $80 million, it’s good news that some kind of will was found to divide up her assets. However, says Daily Reckoning in the article “Urgent: Your Will May Need Updates,” there’s no guarantee that those wills are going to hold up in court.

The problem with Aretha’s family? It proves how important it is to have a properly executed will and one that is also up to date. It’s different for every family and every person, but if you’ve done any of the following, you need to update your estate plan.

Moved to a different state. The laws that govern estate law are set by each state, so if you move to a different state, your entire will or parts of it may not work. If your estate is deemed invalid, then your wishes won’t necessarily be followed. Your family will suffer the consequences. For example, if your old state required only one witness for a will to be valid and you move to a state that requires two witnesses, then your executor is going to have an uphill battle. Some states also allow self-written wills but have very specific rules about what is and is not permitted. Thinking of relocating to Arizona?

Bought new property. People make this mistake all the time. They assume that because their will says they are gifting their home to their children, updating the new address doesn’t matter. However, it does. Your will must specify exactly what home and what address you are gifting. If you have a second property or a new property, update the information in your estate plan.

Downsized your stuff. Sometimes people get excited about getting rid of their possessions and accidentally discard or donate something they had promised to someone in their will. If your will doesn’t reflect your new, more minimal lifestyle, your heirs won’t get what you promised to them. Instead, they may get nothing. Therefore, review your will and distribute the possessions you do have.

Gifting something early and forgetting what was in your will. If your will specifies that your oldest son gets your mother’s mahogany desk, but you gave it to your niece two months ago, you may create some awkward moments for your family. Whenever gifting something with great sentimental or financial value, be sure to review your estate plan.

Having a boom or a bust. If your finances take a dramatic turn, for better or worse, you may create problems for heirs, if your will is not revised to reflect the changes. Let’s say one account has grown with the market, but another has taken a nosedive. Did you give your two children a 50/50 split, or does one child now stand to inherit a jumbo-sized pension, while the other is going to get little or nothing?

Had a change of heart. Has your charity of choice changed? Or did a charity you dedicated years to change its mission or close? Again, review your will.

Had a death in the family. If a spouse dies before you, your will may list alternative recipients. However, you probably want to review your will. You may want to make changes regarding how certain assets are titled. If a family member who was a beneficiary or executor dies, then you’ll need to update your will.

Your estate planning attorney will review your estate plan and talk about the various changes in your life. Life changes over the course of time, and your will needs to reflect those changes.

Reference: Daily Reckoning (Sep. 12, 2019) “Urgent: Your Will May Need Updates”

 

Do It Yourself Estate Planning Leads to Bad Outcomes
Do It Yourself Estate Planning Leads to Bad Outcomes

Do It Yourself Estate Planning Leads to Bad Outcomes

While the attraction of simplicity and low cost is appealing, the results are all too often disastrous, affirms Insurance News in the article “Mind Your Mouse Clicks: DIY Estate Planning War Stories.” The increasing number of glitches that estate planning attorneys are seeing after the fact has increased, as much as the number of people using online estate planning forms. For estate planning attorneys who are concerned about their clients and their families, the disasters are troubling.

A few clumsy mouse clicks can derail an estate plan and adversely affect the family. Here are five real life examples.

Details matter. One of the biggest and most routinely made mistakes in DIY estate planning goes hand-in-hand with simple wills, where both spouses want to leave everything to each other. Except this typical couple neglected something. See if you can figure out what they did wrong:

John’s will: I leave everything to my wife Phyllis.

Phyllis’ will: I leave everything to my wife Phyllis.

Unless John dies and Phyllis marries someone named Phyllis, this will is not going to work. It seems like a simple enough error, but the courts are not forgiving of errors.

Life insurance mistakes. Jeff owns a life insurance policy and has been using its cash value as a “rainy day” fund. He had intended to swap the life insurance into his irrevocable grantor trust in exchange for low-basis stock held in the trust. The swap would remove the life insurance from Jeff’s estate without exposure to the estate tax three-year rule, and the stock would receive a stepped-up basis at death, leading to tax savings on both sides of the swap.

However, Jeff had a stroke recently, and he’s incapacitated. He planned ahead though, or so he thought. He downloaded a free durable power of attorney form from a nonprofit that helps the elderly. The POA specifically included the power to change ownership of his life insurance.

Jeff put his name in the space designated for the POA. As a result, the insurance company won’t accept the form, and the swap isn’t going to happen. Read more about using life insurance in your estate plan here.

Incomplete documents. Ellen created an online will leaving her entire probate estate to her husband. It was fast, cheap and she was delighted. However, she forgot to click on the space where the executor is named. The website address for the website company is the default information in the form, which is what was created when she completed the will. The court is not likely to appoint the website as her executor. Her heirs are stuck, unless she corrects this, hoping the court will understand. Hope is a terrible estate plan.

Letting the form define the estate plan. Single parent Joan has a 6-year-old son. Her will includes a standard trust for minors, providing income and principal for her son until he turns 21, at which point he inherits everything. Joan met with a life insurance advisor and applied for a $1 million convertible 20–year term life insurance policy. It will be payable to the trust. However, her son has autism, and receives government benefits. There are no special needs provisions in her will, so her son is at risk of losing any benefits, if and when he inherits the policy proceeds.

Don’t set it and forget it. One couple created online wills, when the estate tax exclusion was $2 million. They created a credit shelter, or bypass, trust to reduce their estate taxes, by allowing each of them to use their estate tax exclusion amount. However, the federal estate tax exclusion today is $11.4 million per person. With $4 million in separate assets and a $2 million life insurance policy payable to children from a previous marriage, the husband’s separate assets will go into the bypass trust. None of it will go to his wife.

An experienced estate planning attorney who is licensed to practice in your state is the best source for creating and updating estate plans, preparing for incapacity and ensuring that tax planning is done efficiently.

Reference: Insurance News Net (Sep. 9, 2019) “Mind Your Mouse Clicks: DIY Estate Planning War Stories”

 

Estate Planning for Physicians
Estate Planning for Physicians

Estate Planning for Physicians

Three Liability Planning Tips for Physicians Anyone Can Use

Whether you are a physician or not, you probably know that the practice of medicine is a profession fraught with liability.  It’s not just medical malpractice claims either – employment related issues, careless business partners and employees, contractual obligations, and personal liabilities add to the risk assumed by a physician in private practice.  Unfortunately, in our litigious society, these liability risks are not unique to physicians.  Business owners, board members, real estate investors, and retirees need to protect themselves from a variety of liabilities too.

Below are three liability planning tips anyone – physicians and non-physicians alike – can use to protect their hard earned money.

Tip #1 – Insurance is the First Line of Defense Against Liability

Liability insurance is the first line of defense against a claim.  Liability insurance provides a source of funds to pay legal fees as well as settlements or judgments. Types of insurance you should have in place include (as applicable):

  • Homeowner’s insurance
  • Property and casualty insurance
  • Excess liability insurance (also known as “umbrella” insurance)
  • Automobile and other vehicle (motorcycle, boat, airplane) insurance
  • General business insurance
  • Professional liability insurance
  • Directors and officers insurance

Tip #2 – State Exemptions Protect a Variety of Personal Assets From Lawsuits 

Each state has a set of laws and/or constitutional provisions that partially or completely exempt certain types of assets owned by residents from the claims of creditors.  While these laws vary widely from state to state, in general you may be able to protect the following types of assets from a judgment entered against you under applicable state law:

  • Primary residence (referred to as “homestead” protection in some states)
  • Qualified retirement plans (401Ks, profit sharing plans, money purchase plans, IRAs)
  • Life insurance (cash value)
  • Annuities
  • Property co-owned with a spouse as “tenants by the entirety” (only available to married couples; and may only apply to real estate, not personal property, in some states)
  • Wages
  • Prepaid college plans
  • Section 529 plans
  • Disability insurance payments
  • Social Security benefits

Tip #3 – Business Entities Protect Business and Personal Assets From Lawsuits

Business entities include partnerships, limited liability companies, and corporations.  Business owners need to mitigate the risks and liabilities associated with owning a business, and real estate investors need to mitigate the risks and liabilities associated with owning real estate, through the use of one or more entities.  The right structure for your enterprise should take into consideration asset protection, income taxes, estate planning, retirement funding, and business succession goals.

Business entities can also be an effective tool for protecting your personal assets from lawsuits.  In many states, assets held within a limited partnership or a limited liability company are protected from the personal creditors of an owner.  In many cases, the personal creditors of an owner cannot step into the owner’s shoes and take over the business.  Instead, the creditor is limited to a “charging order” which only gives the creditor the rights of an assignee.  In general this limits the creditor to receiving distributions from the entity if and when they are made.

Final Advice for Protecting Your Assets

Liability insurance, exemption planning, and business entities should be used together to create a multi-layered liability protection plan.  Our firm is experienced with helping physicians, business owners, board members, real estate investors, and retirees create and—just as important—maintain a comprehensive liability protection plan.  Please contact Elisabeth if you have any questions about this type of planning.

Estate Planning: Funding A Special Needs Trust For Your Child
How to fund a special needs trust for your child.

Estate Planning: Funding A Special Needs Trust For Your Child

One of the toughest things about planning for a child with special needs is trying to calculate the amount of money it’s going to take to provide both while the parents are alive and after the parents pass away.

Kiplinger’s recent article asks “How Much Should Go into Your Special Needs Trust?” The article explains that it’s not uncommon for folks to have done some estate planning but not necessarily special needs estate planning. And they haven’t thought about how much money they should earmark to fund that trust someday and which assets would be the best to use.

Special needs estate planning involves creating a special needs trust that allows a person with a disability continue to receive certain public benefits. Typically, ownership of assets more than $2,000 would make the individual ineligible for certain public benefits. Assets held in a special needs trust don’t count toward this amount.

A child with special needs can generate multiple expenses. The precise amount will be based on the needs and lifestyle of the family and the child’s capabilities.

When the parents die, this budget must be increased because the things the parents did must be monetized.

A special needs trust usually isn’t funded until the parents’ death. Then, the trust would need to file a tax return each year and pay taxes.

There are also legal and trust administration expenses to think about. Public program benefits can in many cases offset many of the above-mentioned costs.

It’s vital to conduct a complete analysis of the future costs to provide for a child with special needs so that parents can start saving and making adjustments in their planning.

Speak with an elder law or estate planning attorney about special needs trusts.

Reference: Kiplinger (June 10, 2019) “How Much Should Go into Your Special Needs Trust?”

 

Don’t Have A Will? Arizona Has One For You
Don't have a will? Arizona has one for you.

Don’t Have A Will? Arizona Has One For You

Drafting a will is an essential part of estate planning. Even though it’s vitally important, a recent survey from AARP revealed that two out of five Americans over the age of 45 don’t have one.

The Reflector’s recent article, “Things people should know about creating wills,” says that writing your wishes down on paper helps avoid unnecessary work and stress when you die. Signing a will allows heirs to act with the decedent’s wishes in mind and also will make certain that assets and possessions go to the right people. What might you need in addition to a will? Read more here.

Estate planning can be complicated, and that’s the reason why many folks turn to estate planning attorneys to make sure this important task is done correctly and legally. Here are some of the estate planning topics to discuss with your lawyer:

List of Your Assets. Create a list of your assets and determine the ones covered by the will and those that will have to be passed through joint tenancy on a deed or a living trust. For instance, life insurance policies or retirement plan proceeds will be distributed by the beneficiaries you named in each account. Remember that your will can list other assets, like memorabilia, antiques, cars, and jewelry.

Naming a Guardian. Parents with minor children should definitely designate the person or persons whom they want to become guardians if they were to die unexpectedly. They can also use their will to name a person who will be in charge of the finances for the children.

Remembering Your Pets. It’s common for pet owners to use their will to detail guardianship for their pets and to leave money or property to defray the cost of their care. But remember that pets don’t have the legal capacity to own property, so don’t leave money directly to pets in a will. A pet trust is legal in most states and is the best way to leave money and name a caretaker for your pets.

Stating Your Funeral Instructions. Settling probate won’t occur until after the funeral. As a result, any funeral wishes in a will frequently aren’t read until after the fact.

Designate an Executor. This is a trusted individual who will execute the terms of the will. He or she should be willing to serve and be capable of executing the will.

Those who die without a valid will become intestate. This will result in their estate being settled based on the laws of where that person lived. A court-appointed administrator will have the authority to transfer the assets and property. This administrator is bound by the state’s intestacy laws and may make decisions that go against the decedent’s wishes.  This is incredibly difficult for the heirs and causes families to be torn apart. To avoid this, work with an experienced estate planning attorney to draft a will and other estate planning documents.  Elisabeth can help! Book a call today.

Reference: The Reflector (July 15, 2019) “Things people should know about creating wills”

 

How Transfer on Death Accounts Work
How transfer on death accounts work

How Transfer on Death Accounts Work

Even estates with wills usually do go to probate court. This is not a major issue in some states and an expensive headache in others. Learn more about probate here. By changing some accounts to transfer on death (TOD), you can avoid some assets going through probate, says Yahoo! Finance in the article “Transfer on Death (TOD) Accounts for Estate Planning.”

Here’s how it works:

A TOD account automatically transfers the assets to a named beneficiary, when the account holder dies. Let’s say you have a savings account with $100,000 in it. Your son is the beneficiary for the TOD account. When you die, the account’s assets transfer to him.

A more formal definition: a TOD is a provision of an account that allows the assets to pass directly to an intended beneficiary, the equivalent of a beneficiary designation. Note that the laws that govern estate planning vary from state to state, but most banks, investment accounts and even real estate deeds can become TOD accounts. If you own part of a TOD property, only your ownership share transfers.

TOD account holders can name multiple beneficiaries and split up assets any way they wish. You can open a TOD account to be split between two children, for instance, and they’ll each receive 50% of the holdings, when you pass.

One thing to bear in mind: the beneficiaries have no right or access to the TOD account, while the owner is living. The beneficiaries can change at any time, as long as the TOD account owner is mentally competent. Just as assets in a will can’t be accessed by heirs until you die, beneficiaries on a TOD account have no rights or access to a TOD account, until the original owner dies.

Simplicity is one reason why people like to use the TOD account. When you have a properly prepared will and estate plan, the process is far easier for your family members and beneficiaries. The will includes an executor, who is the person who takes care of distributing your assets and a guardian to take care of any minor children. Absent a will, the probate court will determine who the next of kin is and distribute your property, according to the laws of your state.

A TOD account usually requires only that a death certificate be sent to an agent at the account’s bank or brokerage house. The account is then re-registered in the beneficiary’s name.

Whatever is in your will does not impact the TOD account. If your will instructs your executor to give all of your money to your sister, but the TOD account names your brother as a beneficiary, any money in the account is going to your brother. Your sister will get any other assets.

Speak with an estate planning attorney about how a TOD account might be useful for your purposes.

Reference: Yahoo! Finance (June 26, 2019) “Transfer on Death (TOD) Accounts for Estate Planning”

 

How Dads and Moms Can Make Sure Their Families are Protected
Dads can protect their family with proper estate planning.

How Dads and Moms Can Make Sure Their Families are Protected

Forbes’ recent article, “How Fathers Can Make Sure Their Families Are Financially Protected” suggests that fathers consider taking the following steps to ensure their families are protected. The same advice applies to mothers too.

Do you have enough life insurance? Be sure you’re adequately insured, so your family won’t struggle to pay the bills without your income. Many employees only have enough life insurance from work to cover a year’s worth of salary, which may be enough for some families. However, if your spouse can’t make the mortgage payment on their own, and if they would be unwilling or unable to sell the home, you might want to at least make sure you have enough life insurance to pay off the mortgage. Once you know how much you need, buy a low-cost term policy for the maximum length of time you might need the coverage.

Are your beneficiaries updated on retirement accounts, annuities and life insurance policies? This is an often overlooked issue. An outdated beneficiary designation could result in your ex-spouse inheriting most of your assets, your latest child being disinherited, or your family having to pay higher taxes and probate fees than is necessary. Read more here.

Can you add a “payable on death” or a “transfer on death” form on any accounts? You can generally add beneficiaries to bank and investment accounts, saving your family from the time and cost of probate. In some states, you can add beneficiaries to your home and vehicles. Ask your bank for a “payable on death” form and your investment company for a “transfer on death” form.

Is your will drafted?  You need a will to name a guardian for your minor children in most states. It’s a good idea to have a qualified estate planning attorney help you.

Are you organized? Keep a record of where everything and everyone is. You can draft an “In Case of Emergency” folder that has copies of your will, revocable trust, life insurance policy and a summary of brokerage and bank accounts. Let your family know where to find it. You should also share your passwords to your digital accounts.

As a parent, you have an obligation to care for the financial well-being of your family. Part of this is making sure they’ll be protected, even if you’re not around.

Reference: Forbes (June 16, 2019) “How Fathers Can Make Sure Their Families Are Financially Protected”

 

Can We Talk About Death and Dying Or Nah?
Let's talk about death and dying.

Can We Talk About Death and Dying Or Nah?

Evolutionary psychologists think there’s an innate reason for people not wanting to discuss death and estate planning. They say our brains haven’t evolved much past a Stone Age mentality, where survival was our main concern. As a result, it makes sense that we would avoid any threatening situations and defend our existence.

Insurance News Net’s recent article, “What Human Behavior Tells Us About Estate Planning,” says that when people think of estate planning, they think about death, which is the ultimate threat. Because we’re programmed to secure our survival, thinking about our demise is counterintuitive. With this in mind, you can begin to see why more than half of Americans don’t have essential estate documents in place.

Some say that we have to be able to see and identify it, be motivated to act by pain or some negative stimulus and believe we can do something about it without feeling dumb in the process. However, estate planning hasn’t met any of these criteria. The need for estate planning feels remote, and, therefore, it isn’t visible or painful. Sometimes estate planning can be complicated and overwhelming, which can leave people feeling incapable and inept. The need to create an estate plan also feels chronic—a nagging problem people don’t want to address and want to avoid.

However, in the digital age, estate planning has become about more than just the systematic disposition of assets upon one’s death. With bank and email accounts, social media and other digital assets scattered throughout cyberspace, it has become necessary to find a way to connect our assets to us. There’s an immediate upside to spending time on organizing our financial lives: the peace of mind of knowing everything we have is accounted for. It’s intrinsically satisfying when we can bring our assets together under one virtual roof. Read more about estate planning in the digital world.

With comprehensive planning, we can benefit from being able to monitor every account with ease, giving us a full financial picture at a glance.

In addition, today we can capture stories and memories to create a living, breathing legacy. Remember, your legacy is about more than the money left behind—it’s also about sharing the values and valuables with the right people at the right time.

When we think about legacy planning as part of our lives, we change the narrative and estate planning becomes visible, solvable and non-chronic. It becomes something people embrace rather than avoid. Therefore, think of estate planning that way and speak with an experienced estate planning attorney to be certain your plan is comprehensive and up to date.

Reference: Insurance News Net (May 9, 2019) “What Human Behavior Tells Us About Estate Planning”

 

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.”