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”

 

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”

 

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”