A recent study found that many Americans forget to update their will after they have signed it. As circumstances and tax situations change, the need to keep those documents current should be a top priority. There are four documents that require attention: a will, trust, health care directive, and a financial power of attorney.
]]> Life-changing events such as a divorce or new purchased assets and properties should be reflected in the will. As heirs change, a will should reflect the changes. A good strategy for major purchases is the use of a separate personal list of all tangible properties. Listing, dating and initialing each new entry on a property list is a cost-effective means of updating properties in a will.Trusts are another good reason to revisit a will. Experts agree that acquiring new assets and new family members are better addressed in a trust, which is more flexible in dealing with estate complexities. Often, trusts allow testators to define and specify instructions on how assets are to be distributed to specific beneficiaries. It can also take effect while the testator is still alive. Also, assets held in a trust generally prevent expensive and time-consuming probate and its associated legal issues.
Finally, health care directives and a financial power of attorney are powerful tools that assign specific trusted individuals the power to make important decisions on behalf of a testator in case of incapacitation. As there could be changes in the family dynamics, both documents have to be reviewed and updated when necessary to ensure that health and financial decisions continue to serve the purpose of the testator. One good tip is to also name possible back-up people to act in the testator's best interests.
Estate planning is an important end-of-life strategy and its main purpose is to serve the testator's and his or her beneficiaries' best interests. Having a knowledgeable and trustworthy legal professional as an ally can prove beneficial in creating, modifying and enacting those important estate planning tools.
Source: Market Watch, "Make your heirs happy: Update your will," Elizabeth O'Brien, May 8, 2013
]]>The Supreme Court recently heard oral arguments in one such case. A federal employee named his wife as his beneficiary on his life insurance policy. They got divorced and he remarried two years later but neglected to update his policy. When he died his ex-wife, not his grieving widow, collected the benefits that valued nearly $125,000.
]]> At issue is a discrepancy between state and federal law. In the employee’s state, divorced spouses are automatically revoked as life insurance beneficiaries. However, the man was a federal employee and federal law preempts state law.This case illustrates how issues of family law can affect estate planning and wealth distribution. It also highlights the importance of having a clear, up-to-date estate plan to guide your loved ones and the courts after your death. Being clear about what assets should go where both alleviates the stress put on your loved ones and protects your money from getting tied up in probate or litigation.
If you know where you would like your assets to go after you’re gone, estate planning is essential to help ensure that your wishes are followed. Consider getting in touch with an estate planning attorney. He or she can work with you to understand your financial situation and help make sure your loved ones are taken care of down the road.
Source: The Washington Post, “Will the widow or the ex-wife get the money? Supreme Court to decide,” Diana Reese, April 22, 2013
]]>Although older, wealthy individuals may make sure that they at least create a will to address how they would like their personal property and other assets to be distributed after death, the death of a multi-millionaire in New York left many stunned when they realized the man had died without a will. The 97-year-old man, who was a successful real estate developer and Holocaust survivor, died last year. As of last week, the public administrator who is working on settling the man's estate still has not been able to identify any potential heirs.
]]> The state comptroller's office reported that the man's estate is the largest unclaimed estate in the history of the state. The man's estate has been estimated to be worth about $40 million. Since the man died without a will, an executor was never named by the man to settle his estate after death. A public administrator has since been assigned to settle the estate, but doing so has proven to be a challenge.Although the public administrator has been able to sell the man's home and other property, the administrator has not been able to identify or locate any living relatives to inherit the man's money. In an effort to make sure any living relatives do receive their share of the man's estate, the public administrator has hired a genealogist to help find any of the Holocaust survivor's living relatives. The administrator is also trying to figure out whether the man had created a will at any point in his life. For now, the man's millions remain unclaimed.
Source: The New York Times, "Holocaust survivor left $40 million, but no heirs," Julie Satow, April 27, 2013
]]>We talked about trusts as a tool that can help you keep your assets out of probate. Setting up a living trust can help you determine where those assets go, setting up successor trustees and instructions for what to do with them. But that isn't your only option if you wish to avoid probate.
]]> Another method for avoiding probate of your property is joint tenancy. Joint tenancy means more than one person owns the property. For example, many spouses have joint tenancy over things like marital assets and their home. The benefit to joint tenancy is that once one owner of the property dies, his or her share of the property is automatically transferred to the other joint tenant without going through probate.Another option would be to establish a life insurance policy and name beneficiaries that way. Upon death, that property will pass to the named beneficiary without probate.
If you want to control what happens to your estate - including financial assets, real estate property and possessions - after you pass away, the best way is to draft a sound, thorough, enforceable estate plan. Whether you have some documents in place or need to start from scratch, a qualified estate planning attorney can help you get a handle on your situation and craft a plan that meets your needs as well as your family's.
Source: Law and Daily Life, "How to Avoid Probate of Your Estate," Andrew Lu, March 31, 2013
To learn more about the probate process and other estate planning tools, please visit our website.
]]>Probate does offer some benefits if you would like your property transferred in a public forum with court supervision. However, if you want more control over your assets you may wish to avoid probate. The process can be time-consuming, costly and vulnerable to error. In addition the cost of probating your estate may leave less for your heirs.
]]> If you want to avoid probate there are several ways to do it.One way to keep assets out of probate is to put them into a trust. A living trust allows you to transfer assets into the trust and name yourself as the trustee. This means you retain control of your assets and, since those assets will be in the name of your trust they will not go through probate. A living trust also allows you to set up successor trusts and provide instructions for handling those assets.
Trusts are a great option for avoiding probate of your assets but they are by no means the only one. Next week we'll discuss some additional estate planning vehicles that can help you ensure your family's financial future.
Source: Law and Daily Life, "How to Avoid Probate of Your Estate," Andrew Lu, March 31, 2013
To learn more about the probate process and other estate planning tools, please visit our website.
]]>Specifically, we talked about proposed restrictions on grantor retained annuity trusts. As the administration tries to close tax "loopholes" they have proposed a requirement that trusts have certain minimum terms, making it more difficult to save on estate and gift taxes.
]]> The White House proposal could also establish new restrictions on dynasty trusts. Dynasty trusts allow planners in some states to transfer wealth from generation to generation indefinitely without any tax implications like estate, gift or generation-skipping taxes. The federal budget contains a proposal to cut off the the generation-skipping transfer tax after 90 years.In addition, the proposed budget would eliminate one benefit of grantor trusts, which allow grantors to make gifts to beneficiaries that are free of gift tax if they pay the trusts' income tax liability. The proposal would eliminate that benefit of the income tax payment, leaving beneficiaries vulnerable to gift taxes.
If you have questions about your estate plan - whether you have one in place or have been putting off starting one - it may be wise to speak with an experienced estate planning attorney who can help you review your financial situation and your unique needs, working with you to ensure your loved ones are taken care of in the future.
Source: Advisor One, "Obama Budget Endangers Some Estate Planning Techniques," Michael Fischer, March 21, 2013
]]>Part of the White House's strategy to balance the budget and increase revenue involves closing "tax loopholes." This may include restricting certain estate planning practices and techniques that have previously been available to those crafting their estate plans. Some of these restrictions had been part of federal budget talks for months.
]]> For example, the administration's proposed budget imposes serious restrictions on grantor retained annuity trusts. These trusts allow estate planners to transfer wealth and minimize the gift tax cost of transfer. To establish a grantor retained annuity trust, a grantor establishes an irrevocable trust with assets that are likely to increase in value, then retains interest for two or more years.If the grantor is still alive at that time, the assets in the trust are transferred to its beneficiaries. The estate can claim a larger transfer tax benefit the more the assets in the trust appreciate. The White House has proposed a requirement that these trusts have a minimum term of 10 years. This would increase the likelihood that the grantor would die during the term of the trust and make it more difficult to attain those estate and gift tax savings.
Next week we'll talk about some other ways that estate planning vehicles could be affected by the federal budget.
Source: Advisor One, "Obama Budget Endangers Some Estate Planning Techniques," Michael Fischer, March 21, 2013
]]>Typically, your spouse is the major beneficiary in your will or trusts when you die. Unless your divorce was unusually amicable, you probably don't want that to be the case after you split. You may choose instead to leave certain assets to your children, to another relative, a close friend or even a charitable organization that you support. Updating your estate plan is the best way to make sure your wishes are followed.
]]> Your estate plan is also your chance to express your desires about care for your children. This may include setting up a trust for them or, if you are the custodial parent, naming a guardian to take care of them.While many people view estate planning as a chore and breathe a sigh of relief when their documents are safely drafted and signed, it is not wise to lock up your will and trust and never look at them again. Life changes, so how you administer your assets after death may need to change as well.
Divorce is not the only major life event that may justify a revamp of your estate plan. Any event that significantly changes your personal or financial situation - such as a marriage, the death of a relative or beneficiary, the purchase of substantial property like a house, or a change in health may all be good times to take a second look.
Source: Law & Daily Life, "Changing Your Will After a Divorce," Deanne Katz, March 1, 2013
]]>Knowing he would be unable to take care of his finances during his 10-month prison sentence, this man granted his fiancée power of attorney over his finances. His fiancée did some of the financial tasks he expected she would perform, like paying his bills. However, she did much more with his finances than he anticipated.
]]> She also used his money to pay her bills and make many unnecessary personal purchases. For instance, she spent over $200,000 on vacations, plastic surgery, and home repairs, among other items. In addition, she took money out of his IRA and cashed in bonds and CDs early, incurring penalties. She also opened credit cards in his name and even tried to get a loan for his home.When the man learned what his fiancée had been doing when he was in prison, he filed "theft, forgery and related criminal charges against her." However, likely to his surprise, the charges were dismissed. A report states that since she had power of attorney, she was able to do all of these things legally.
As this man's case shows, the person authorized by power of attorney to handle one's finances can significantly impact one's financial life. In certain circumstances, naming a power of attorney is a smart decision and may be necessary. However, thinking carefully before designating power of attorney is important and could save time, money, and headaches later on.
Source: PhillyBurbs.com, "Power of Attorney: 'People don't realize the extent of the power they're giving'," Jo Ciavaglia, March 11, 2013
]]>For many people, their pets are a very important part of the family. However, if pet owners do not clarify what should happen to their pets when they are no longer around, their beloved pets could end up in a shelter or on the street. Taking the time to ensure one's pets will be provided for is important.
]]> One Florida couple that does not have any children explains that with their two dogs, they make up a family of four. They explain that they decided a few years ago that it was necessary for them to ensure their dogs would be provided for should they both die.To ensure the safety and security of their dogs, the couple set up a trust that clearly explains that all of the couple's assets, including their home, will go to their dogs when they die. However, even though the dogs will receive all of the couple's assets, the dogs will not be running around unattended in their owners' home. A friend of the couple has agreed to take care of the dogs if both spouses die. This friend would be able to do what he or she pleased with the assets entrusted to the dogs. If the dogs die, the friend gets to keep the assets.
This type of plan may surprise some people, but it is smart to consider what one wants to happen to one's pets before this type of situation arises.
Source: MyFox Tampa Bay, "How to provide for pets in your will," Cynthia Smoot, Feb. 26, 2013
]]>Making information about how to access one's accounts, attorneys, and estate planning papers accessible is critical. One expert suggests compiling copies of important documents in one place so it is easy for family members to find this information after one's death.
]]> Some may wonder what types of information should be handed on to family members after creating an estate plan. Contact information for one's attorney, accountant, stockbroker, or doctors could be very helpful when managing one's estate.Information regarding how to access one's will and trusts could also be very valuable for one's family members. One may prefer to direct family members to one's attorney to access detailed information regarding these topics.
Even though this type of information may not be included in one's formal estate plan, making sure one's family members can access one's bank accounts, bills, computer passwords, account passwords, and other records may be very important. If a family member knows all of the information about one's bank account, but is missing a key password or PIN code, he or she may have difficulty closing accounts and managing other financial matters.
Compiling this information may take a while and may be stressful, but after taking the time to establish a clear estate plan, it would be terrible for one's family members to not know how to access the estate plan.
Source: Market Watch, "To help your heirs, write a 'Death Book'," Henry Hebeler, Feb. 26, 2013
]]>This man selected two actors as the beneficiaries of his estate. Though the man never met the actors, he reportedly told his attorney that the men were his "friends." According to a news report, this man liked the actors' television shows, which primarily aired in the 1970s and 1980s.
]]> After the man's death last summer, each actor received a letter informing him that he would receive half of the man's estate. The man owned 160 acres of land in Illinois worth approximately $1 million. In addition, he also had several hundred thousand dollars in cash and CDs. The man only made one other request in his will; he donated $5,000 to a humane society.While this man's choice to give his estate to two people he had never met may be unusual, it demonstrates a person's ability to create a unique estate plan. When drafting a will, a person might feel pressured to create a fairly standard will.
However, each person can create as unique of a will and estate plan as he or she wants. For some, this may mean giving one's estate to actors one has never met. For others, this might mean donating one's entire estate to a charity or dividing one's assets among family members. An estate planning attorney can help a person create a fitting estate plan.
Source: Yahoo News, "Man's estate left to actors he never met," Susanna Kim, Feb. 8, 2013
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