Most people when doing estate planning think about the distribution of their assets: money, home, personal property. In this modern, technological age, there are new issues to consider.
Your agents under your Power of Attorney, your Trustee under your Revocable Trust and your Personal Representative under your Last Will and Testament will have their hands tied if they cannot access your assets because they do not have your passwords.
There are user name, passwords, questions for each account. There may be a password to open your computer programs. Without this information, your information is locked up.
Take the time to list every on-line account: bank accounts, credit card accounts, utility accounts. List the user name and password for each one.
Also take the time to note whether payments to each credit card, mortgage and utility account are automatic to your checking account, automatic to a credit card or whether it must be accessed and paid. This is very important information because many do not send out paper invoices for the monthly charges.
Your agent under your Power of Attorney could miss important payments, or fail to deposit funds into appropriate accounts to cover the automatic payments.
This information should, of course, be kept in a secure location. Your agents, successor trustees and personal representative should know where his information is located.
This will assure a seamless transition by your agent if you are incapacitated or your heirs if you pass away.
I often hear children with aging parents refer to their parents’ assets as their inheritance.
We now are living in an age where people are living much longer. It is highly likely that parents will outlive their assets rather than pass them on.
Good financial and estate planning needs to take this longevity into account. As we have more golden years, it will cost more money. As we age, we will encounter more illness and disability. How do we plan for these outcomes?
Family discussions are important as we confront these questions. What are parents’ expectations concerning their incapacity? Do they believe that they will be cared for by one of their children? Do the children have the same expectation?
How will a parent be cared for if they are simply unable to live independently in the family home? Will it be by moving in with one of the children? Will it be moving to an assisted living home? How do the children feel about their parents’ wishes?
Financial considerations are important as well. Will parents have sufficient assets and income to afford assisted care?
How will a parent be cared for if they are medically incapacitated by severe illness, dementia, or stroke? Are the parents opposed to nursing home care? Are the children prepared to take their parents into their homes and give them skilled nursing care?
How would the financial aspects of this care be addressed? Do parents have long term care insurance? Is it available and affordable? If no, what is the plan?
If the plan involves living with a child, would there be a financial consideration for that child? It is best to discuss this with all family members present.
These are very difficult questions but they should be addressed prior to an illness or accident. A plan should be developed by the whole family. Planning is key.
You planned your dream wedding – the food, the flowers, the music, the honeymoon.
Now you are married. What planning do you need to do now?
It is important to put together a plan to care for yourself and each other in the event of a tragedy. All married couples, newlyweds, new parents and couples in the autumn of their lives need to have estate plans – to care for one another – in sickness and in health.
A disability due to an illness or injury could cause major legal and financial challenges in a marriage. A little planning now could prevent a disaster later.
We are each legally responsible for our own health care, and financial decisions. No one else has the ability to do this for us, even if married. A spouse is not automatically able to make all medical decisions. He or she does not have access to assets that are in the name of the disabled spouse. This includes bank accounts (savings and checking), retirement assets, and investment accounts. In fact, the healthy spouse will not even be able to file a joint income tax return for the couple.
Therefore, it is important to have in place those legal documents which appoint each other to be the patient advocate in the event of medical disability and agent for financial and legal affairs.
If these documents are not in place, the healthy spouse could be forced to file an action in Probate Court for a Guardianship and/or Conservatorship. This takes time and wastes valuable resources. It is public.
Take the steps now to avoid this costly disaster in the future. Execute a Durable Power of Attorney for legal and financial affairs. Also appoint your spouse as your Patient Advocate through a Patient Advocate Designation (Durable Power of Attorney for Health Care).
These documents should be part of your estate plan. While you may not have accumulated significant assets together yet as you are just starting your lives together, it is not too early to plan your estate. Make sure that you and your spouse can care for each other.
Many individuals do not prepare an estate plan because they think the cost is too high. But is it?
We buy health insurance and yet some of us seldom get sick and never use the benefits.
We buy homeowners insurance and never have a claim – we never have a fire, flood or accident.
We buy automobile insurance and we are never in an accident.
So why do we spend this money? To cover ourselves and our families for the “what ifs” in life.
What if we got very ill and couldn’t afford the surgery and hospitalization? What if our home burned in a fire and we couldn’t replace it? What if we were in an automobile accident and the car was severely damaged? The insurance that we purchase is to protect us financially against the catastrophe.
And so it is with estate planning as well. If you draft a Will or a Trust, it is not a matter of whether you will pass away, but a question of when. It could be tomorrow or fifty years from now. This will be a time of anxiety, sadness and confusion for your family. Will you have taken the steps to make the legal and financial issues more or less difficult? Will your family find your affairs in order? Or will they find confusion and ambiguity? Will they have the clear direction that they need to carry out your wishes? Or will they be left wondering, or perhaps arguing over the distribution of your estate?
If you execute a Durable Power of Attorney, it protects you in the event that you are seriously disabled and unable to attend to your business, financial and legal matters. Will you have taken the steps to provide for another to step in and handle these matters on your behalf at a time of stress to your family? Or will your family be confronted with an unnecessary, costly and time consuming legal proceeding?
If you execute a Patient Advocate Designation, it protects you in the event of a catastrophic illness so that you have individuals in place to direct your care. Will you have taken the right steps to provide for an advocate who knows your wishes and can step in and guide your medical care in accordance with your wishes? Or will your loved ones need to file legal proceedings to be allowed to assist you – left wondering what you really wanted?
Estate Planning is no different than insurance. You are protecting yourself and your family from the “what ifs” in life. Don’t leave your family wondering; don’t your affairs disorganized. Get your affairs in order – estate plan. It’s a bargain.
Commonly, parents leave their estates equally to their children. However, there are instances where parents intentionally choose to leave a child out. There may be good reason for doing so. One of the children is very successful and appears not to need any additional assets. Another child is special needs and it is important to make certain they do not lose their government benefits. There is the child who is financially irresponsible or may be drug-dependent. Finally, there is the child who is estranged from the family.
Should these children be disinherited? There are certainly arguments on both sides of this question. It should be remembered that totally disinheriting a child will be permanent and can affect his or her relationship with siblings and other family members for a lifetime. There is something symbolic about receiving something from a parent or grandparent’s estate that has nothing to do with the actual value of the asset.
Hurt feelings and slights are the real reason behind many painful and expensive court battles over inheritances. Even if a lawsuit is not filed, siblings may be forever estranged. While in the end, after careful analysis, it may be decided that disinheriting is the appropriate option, it should be noted that there are other solutions.
The child who is financially successful today may have trouble in the future. He or she could face financial ruin, or divorce. Illness can financially wipe out a successful family.
If a child is disinherited, so will his or her children. If you are disinheriting a child, consideration should be made concerning the grandchildren.
Children who are physically, mentally or developmentally disabled may well be entitled to government benefits that would be at risk if they received an inheritance. The alternative is to provide for this loved one with a special needs trust that will supplement but not interfere with government benefits, in much the same way as you would if you were alive.
The child who is irresponsible with money or is under the influence of drugs or alcohol may not be the ideal candidate to receive an inheritance of any size. Keep in mind that this child may need financial help now or in the future. He or she may even become a responsible adult. Instead of disinheriting the child, you may want to establish a trust. The trustee can be given discretion in providing or withholding financial assistance. It is possible to stipulate conditions and requirements for the child to meet in order to receive distributions.
Choosing to disinherit a child – even if he or she has caused grief and heartache can send a message of no love, anger and resentment. If you have previously disinherited a child and you have since reconciled, update your plan immediately.
If you have made the decision to disinherit a child, consider telling him or her of your decision and why. In this way, it will not come as a complete surprise. Hopefully, by having this very difficult conversation, the child will not blame siblings later and it may eliminate an expensive court battle.
The subject of personal property is an interesting one. While it seems that large financial accounts would create more discord among siblings; it is the distribution of personal property that creates the long lasting rifts.
It is easy to divide money equally among a number of individuals – it’s a matter of simple math. It is far more difficult to equitably divide personal property. There is one set of grandma’s china, one antique leather chair from grandfather, several hunting rifles. How can this be divided equally among two or three children? Should it be done by fair market value? Should appraisals be obtained? What if all children want the chair and none want the china?
For this reason, it is best to address the issue of personal property directly and in advance.
First, ask your loved ones what it is they desire. You may find that there are no disputes – they may all have their eyes on different items. Get ready though – the things you think are so valuable may not be wanted by anyone.
Sentimental value is in the eye of the beholder. Your emotional attachment to items of personal property in all likelihood are linked to your memories of the individual that owed the item – grandma’s china brings back images of Thanksgiving dinner around her table. Your children may not have those same memories. While they certainly respect their ancestors, they may only know them through photographs and stories. They may not see grandmother’s sewing table as a treasured heirloom – but instead an item of old furniture that doesn’t fit with their lifestyle.
If there are disputes among children concerning the distribution of personal property – they all want the same items – then devise a plan for distribution. Either decide ahead of time who gets which items and write it down, or come up with a method of having them select at the time of your death.
Clients of mine have come up with several that I will share.
- By birth order, or by drawing straws, have individuals select items in a round-robin method. This places the burden on the child to decide whether they select the item with the most sentimental value to them, or of the greatest fair market value.
- Auction among the family is another popular method. Each item is bid on by the family members. The individual who bids the most, gets the item. All the bid money goes into a pot and is then equally divided among the group at the end. Those that want more personal property may actually have to pay and those that do not may actually receive money in the end.
- Yard sale or auction to the public is another way of having the property distributed. Each child has the same opportunity as the third parties present to purchase the items at fair market value.
Whatever method you decide upon, come up with a method for personal property distribution. While you won’t be there to see the disagreements, you want to assure that the distribution of your treasures does not result in life-long disagreements among your children.
I am often surprised to find experienced, successful medical professionals who have no estate plan in place, or if they have one it is outdated. Clearly, the stress and strain of their every day professional practices leave little time for this “back-burner” issue. It is highly important – and it is time to move it to the front burner.
Medical Professionals (doctors, dentists, veterinarians, therapists) especially those with a private practice have unique issues that require an highly individualized approach.
One very important component is a comprehensive asset protection plan. It is critical to evaluate the nature of the practice and its organization. Additionally, special attention to ownership issues should be addressed. It may be prudent to own the real estate in an L.L.C. which leases the property to the practice. The equipment may also be broken out into a separate company. In this manner, the assets of the professional practice can be protected from liability.
A thorough evaluation should be made of the medical professional’s retirement assets. Also, the personal and/or marital assets should be structured for the maximum asset protection today and the appropriate transition in the future.
High asset individuals such as doctors, dentists and veterinarians must determine how these assets would be managed and administered for their family in the event of their disability or death. Trusts may be critical if there are children who are minors or young adults in order to provide for the appropriate distribution of assets for and to these children.
Since this planning requires a comprehensive approach, a team approach should be used including legal, accounting and financial professionals.
The important key is that this cannot stay a “back-burner” issue indefinitely. It needs to be addressed and resolved. Place these issues at the forefront and resolve to address these issues in the near future.
Thanksgiving is a special holiday in my heart – no lights, no costumes, no firecrackers, no gifts. It is simply a day that we pause to be with family and friends to share their company and to give thanks for all we have.
While we each face our share of sorrows and distress as we travel through life – we each have blessings as well. It is important to be grateful for what we have today – not what we wish for tomorrow. We must take the time to treasure our friends, cherish our family, and to express gratitude for our lives.
Those of us who live in Northern Michigan are so very fortunate to live in one of the most beautiful places in this country. I have lived here now for sixteen years. I am thankful every day for the gift of this wonderful town on the bay and the friends that I have made who make my life richer.
Today, take the time to stop for a moment – consider your blessings and give thanks.
Some clients prefer not to put a revocable trust in place – they may have minimal assets, they find it too complex, they might find it too costly. But, if the primary estate planning document is a Will – the estate will go through probate court.
Is there a way to minimize this issue? Yes, although there are some limitations.
Real Estate. Your home if owned in one name alone at the time of death would need to go to Probate Court. The alternative is to transfer ownership of the real property into joint ownership (with the right of survivorship). In this way, upon the death of one co-owner, the property will transfer to the survivors by operation of law.
Is there a downside? If you transfer the property from Mom to Mom and children, joint tenants with the right of survivorship, the children have an ownership interest in the property. This means that their approval and signatures would be needed to sell the property. Additionally, if they have creditors, the property could become subject to their legal obligations.
The alternative? A “Lady Bird Deed”. In this type of deed, the property is transferred from Mom to Mom and children, joint tenants with the right of survivorship, however, Mom retains a life estate with the right to transfer the property and keep the proceeds. The allows for the transfer by operation of law from Mom to her children upon her death without the need for Probate. It also gives Mom the control of her property until she dies.
Financial Assets. Many banks and financial institutions will allow for a Transfer on Death (TOD). This is similar to beneficiary designations. In this way, the assets are transferred upon death to the named beneficiaries without the need for Probate.
Are there drawbacks? This may not present the flexibility that a Will or a Trust can provide for contingencies. In a Will or a Trust, the grantor can provide for distribution to individuals, but also provide for alternative beneficiaries in the event that the primary beneficiary fails to survive the grantor. This may not be possible with Transfer on Death provisions.
Will Still Needed. If an individual executes a Lady Bird Deed and puts Transfer on Death provisions for his or her assets, a Will is still a good idea. There are assets that can be missed, there can be unanticipated income to the individual after his or her death that will be in his or her name alone. Where is that income to go?
The Will becomes a safety net to assure that all of the assets are directed to the correct individuals.
Is a Lady Bird Deed and Transfer on Death provisions on your assets enough for your estate planning needs? It is important to discuss these issues with a professional to evaluate what is best for you and your estate. One size doesn’t fit all.
An often overlooked issue when people engage in estate planning is their pets. While technically they are personal property, most pet owners see their beloved four-legged friends as much more. They are a part of the family.
There are two times that the care of your pets come into play: upon your incapacity and upon your death.
How should you protect your pets upon your death? Unfortunately, a provision in a Will may not provide the correct amount of protection for your pet. You can leave a pet to a person upon your death, and you can provide money for its upkeep and care. There is no mechanism in a Will or in the probate process to assure that the individual(s) who accepts the pet will actually care for and provide for your animal in the manner you anticipated. In other words, you could leave your car to a friend but you cannot require that he or she keep it washed and tuned up.
In the probate process, once the estate is closed, all court supervision is ended. Additionally, Wills are often not probated for weeks or months after an individual has passed away. An animal cannot wait that long for care.
The better legal provision is a pet trust or a pet provision inside your revocable trust. A trust is ongoing and can have care provisions that lay out the manner you want your pet to be cared for. Additionally, a provision can be made for ongoing payments for the care, feeding, maintenance and medical needs of your pet.
Is it necessary to provide financial assistance to the individual who will be caring for your pet? While perhaps not legally required, it is the appropriate way to provide for your pet. The individual you select to care for your beloved pet may not expect to be compensated; however, responsible pet ownership involves the expenditure of money for veterinary bills, vaccinations, high quality food. If a friend or family member is willing to give his or her time and love to care for your pet, he or she should not be financially burdened as well.
How should you protect your pets during a time of incapacity? This is the most overlooked issue. Before an emergency arises, give serious
Once you have identified the individual(s) and have discussed the issue with them, write out your pet’s care plan. When are they fed? What are they fed? When are they exercised? Where do they sleep? Who is the vet that cares for them? What are special medical or behavioral issues? Is there medication to be given? These are essential to a smooth transition in the event of your disability.thought to the most likely individual(s) to care for your four-legged friends. Next, have a conversation with the individual(s). Don’t assume anything. You may believe that your children or neighbors would be happy to take in your pet, however, they may not be in a position to do so. Try to remember that just because you love your cat or dog, doesn’t mean that others feel the same way.
A pet is similar to a small child in that they are totally dependent upon you for their love and care and they cannot express preferences or concerns. Be a loving and responsible owner and be prepared.