When to update your will?

Here are some thoughts from St. Jude’s Children’s Hospital:

Does your will need updating?

Creating a will and estate plan is a good first step in protecting the people closest to you and the assets you’ve worked so hard to accumulate. But even the best will can become obsolete over time.
Consider the many life events that can impact a will and other arrangements:

  • moving to another state
  • changes in the value of your assets
  • a change in marital status
  • birth of a grandchild
  • a change in the real estate you own
  • new tax laws
  • changes in your charitable goals

If you need to update your will, there is no substitute for using a qualified attorney with estate planning experience in your state. A knowledgeable attorney can make sure that your revisions are properly recorded, which can reduce expenses and help heirs receive their inheritances sooner.

Asset Protection Trusts

An article recently published by WealthCounsel addresses the use of Asset Protection Trusts.  Technically, they discuss self-settled trusts, in which your assets are used to fund the trust and you retain a beneficial interest.  We can’t do that in North Carolina exactly that way, so we use a version that irrevocably transfers those assets out of your name and interest and the trust makes your family and children the beneficiaries.

Both strategies are important estate planning tools.  In our experience, the irrevocable asset protection trust​ is an essential part of estate planning even if you are not worried about VA benefits or Medicaid… there is still a place for planning wealth transfer to your heirs in a controlled, predictable, and protected manner.

If you’d like more information, check out this article.  And, give us a call to discuss your estate planning needs.  You will find us to be caring compassionate attorneys, passionate about Estate Planning and Elder Law, and focused​ on VA benefits and Special Needs Trusts.

Why do we ask so many hard questions?

Preparing a will or a trust is central to an overall estate plan.  Of course, there are lots of other documents too, but for the moment, what goes into the Will and Trust?  Answers to our questions … based on planning​ and thinking about the future; planning for both while you  are alive and after you die.

We ask a lot of questions.  Some are about you, and others are about your family.  How do you want to be treated?  How do you want to have your family protected?  What would you like to leave them?  Do you have people​ in your life who need special gifts?  O​r, special provisions?

These are hard questions … some have no immediate or easy answer.  We are patient!  It might take a revision or two to get it all the way you want it.  Don’t worry about all the details we ask about and subsequently put into the wills … everything is important.  If you don’t define it now … someone will argue about it later!

A recent example of this is the Robin Williams estate.  You can find a write up about it here and there on the Internet.  The second article is a great argument for the use of trusts in estate planning.  One question that is asked is if a renovation is considered upkeep on the house.  The question is, what doyou want it to mean?  We help define everything so that your family doesn’t have to argue about it after you are not there to help answer the questions.

Whomever you work with should be as detailed as possible.  So, we have to ask a lot of hard questions!​​  You won’t find our questions in an on-line will package.  And, if trusts are right for you even if you do not have an estate like Robin Williams, we are sure to include that planning in your overall estate plan.

Come see us!  Call us today!

Estate Planning Basics, Part 3 – Coordinating beneficiary considerations

Coordinating Beneficiary Considerations

In our earlier posts, we discussed some issues commonly found with respect to beneficiaries in life insurance​, trusts, and IRAs.  Now, we want to mention why these must be coordinated with your estate plans.  You did get your estate plans set up, right?
A.  Ok, then… why should I Coordinate All Beneficiary Designations with Overall Estate Plan?
This is one of the biggest mistakes that people make when they do their own Will or when they move from one state to another.  People simply forget that the beneficiary designation in the IRA, life insurance, and bank accounts automatically controls who gets the asset.  The Will never comes into play because the assets go to the beneficiary designation.
Suppose you take the time to work with your attorney to lay out (in the Will or Trust) all the ways you want your assets to move to the kids and grandkids, and make arrangements for your church.  That is all great!  But, if your life insurance gives your major asset to your oldest son, and you never changed it when you had the next two kids … do you think your Will will have any effect?  It won’t … in this example your life insurance will pay the oldest, and the others will get nothing.
Suppose you had money in your bank account for grandson Robert, but you neglected to change the beneficiary on the bank account from daughter Susie to grandson Robert.  You’re right … Susie gets what you wanted Robert to have.
Finally, suppose you planned for a Special Needs Trust in your will (see part 2​ of this series).  If you don’t fund it properly with your life insurance policy or other assets, your planning is for naught.
Is that what you wanted?  Improper beneficiary designations may result in unintended consequences, such as adverse tax consequences, failure to distribute the estate as intended, or worse, inadvertently leaving out a family member from an inheritance.
In part 1, we suggested that you set up beneficiaries.  Here, we suggest that you be certain that the beneficiaries you identify match up to the plans you have for your assets.  Don’t leave your wealth differently for different parts of the plan.  Coordinate!
B. Change your plans when you change your life… Remove your Ex-Spouse as Beneficiary!
Often we find former spouses still listed as beneficiaries of life insurance, individual retirement accounts, qualified plans and other financial accounts, even though that clearly wasn’t the intent.  We even find their names on estate plans!  A divorce may not automatically remove your ex-spouse as a beneficiary, depending on the product type (especially qualified retirement plans).  Although ex-spousal claims usually are severed in an estate, a gift in a Will listing your ex-spouse “Joseph” by name might still be presumed to be for that person.
Make sure you follow the guidelines and change beneficiary designations immediately upon a divorce.  You probably should consider that on separating too.  There is a story about Peter Sellers (actor, Pink Panther).  He was in the midst of divorcing a spouse when he died unexpectedly.  The soon-to-be-Ex received the entire estate (millions of dollars) and his children were left with next to nothing.  Don’t let that be you!
Similarly, remove those people who have already predeceased you. This could even apply to family members who are estranged.  As in the other parts we discussed, this situation may result in assets going to unintended beneficiaries, delays in access to funds, and unnecessary legal and administrative expenses.
Bottom line – Review beneficiary designations regularly and certainly after any significant life event.

Summary

Beneficiary designations are an important part of our estate planning practice.  We review these with our annual maintenance clients every year.  If you don’t do it already, you should engage a competent attorney to assist you with your estate plans.

It isn’t just the documents!  Planning, discussions about your family’s needs, and help executing the decisions you make – that is the real value you will receive from your attorney!
Go back to:
   Estate Planning coordination – part 3

 

Estate Planning Basics, Part 2 – Special Needs Trusts and IRAs for heirs

​In part 1, we wrote about life insurance beneficiaries.  In this part, we continue our mini-series about mistakes in planning related to beneficiaries.  This part discusses special needs trusts and a very short summary of IRA issues.

Part 2 – Trusts and IRAs for the children

A. So, how do you protect heirs and children with special needs? Can I just leave them a part of my estate?

Many families have one or more special needs person.  A child with a disabling physical problem is easy to recognize as having special needs, but there are other serious illnesses that are not so obvious, such as substance abuse.  As the person with assets, and decisions to make about life-time care for your loved one, you may wonder what can you do to protect her from the financial effects of her illness?

One way well- intentioned family members approach this is to designate the special needs individual as beneficiary of life insurance or other financial products, or as heirs of an estate plan.  It is what most people would do. But wait!  This might not work out as well as you’d like.  You could create several kinds of problems, including loss of public benefits and loss of the asset through mis-management.

First, your good intentions may disqualify the special needs child or troubled adult from various benefits and governmental assistance.  Many people with serious medical or mental conditions are receiving Supplemental Security Income (SSI) or disability income (SSDI).  Some are on Medicaid or other local benefits.  Your gift would likely put them over the asset limit and cause loss of benefits.  That isn’t what you wanted!

Second, your gift might be simply taken by creditors, or unwisely spent by the recipient.  You probably would like to help with housing or food costs for your troubled child or grandchild, but not to fund continued abuse or to provide a windfall for a creditor!

You can work this out by seeking the help of a qualified attorney who understands the needs of the families with loved ones with disabilities.  Careful attention to the details in your specific case will make the best outcome.  You can use a “supplemental needs trust” (“SNT”) or special accounts that support the child if you cannot.  The best approach is to integrate your desires with the child’s parents’ planning and possibly use the assets to fund a special (or supplemental) needs trust.

A SNT is like other trusts, but with unique provisions.  Like other trusts, a trustee is named to manage funds on behalf of the beneficiary.  But, in a SNT the trustee is required to consider the effect any distribution would have on the individual’s entire need.  If giving the child money for rent would affect eligibility for Medicaid or SSI, the trustee has to consider that and protect the beneficiary.

A SNT is a great way to protect a child with disabilities, or a troubled adult heir who can’t manage finances on his own.  But, this approach requires careful planning.  See a qualified attorney for help! We regularly help our clients protect heirs, spouse, and others during their lifetimes and as part of a comprehensive distribution of wealth through their estate plans.

B. IRA designations should be easy…  I just list beneficiaries for the IRA, right?

Well, not really!  IRAs require an entire course to understand their unique issues.  But, here are a couple of important points… IRAs are often qualified investments, meaning that taxes are not yet paid (they are “tax deferred”).  Taxes are due when the assets are taken out of the IRA.  The goal in a gift of the IRA should be to provide the eventual recipient the maximum flexibility in handling the divesting of assets and in paying the taxes.  Here are some key points:

  • IRAs should never be owned by a Trust.  Death of the IRA owner will probably cause a complete divesting of the holdings, along with loss of the tax benefits (meaning, you have to pay them right then).
  • You can make the trust a beneficiary if your servicer allows it and if you set up the Trust correctly.  But, great care is required, and the trust must have actual people as its beneficiaries. If you have more than one beneficiary, then consider separate trusts for each.
  • Don’t leave an IRA to a trust for a charity… there are other better ways to manage charitable giving.
  • Beneficiaries with special needs or troubled adult children or relatives should be protected by designating a special needs trust as a beneficiary.  And, of course, with a trustee who will act responsibly.
  • Minor children should be the primary beneficiaries, with a trust as secondary.  Look back at the information about minors if necessary.
  • Pass along IRAs to your spouse as a “spousal rollover.”

Failure to handle IRAs correctly will cause problems and could result in loss of all those tax benefits!​  Seek a qualified financial planner (you can look for certifications, such as CFP) or tax attorney for this complicated area.

Review Part 1 of this series – Beneficiary Designations

Look ahead to the next part, Part 3 – Estate planning coordination​.

ABLE Act and other IRA and tax extensions passed by Senate

​On December 16, the US Senate passed important new legislation which included a variety of important tax provisions.  Included is the “ABLE Act” which creates tax-favored accounts for children and adults whose disability occurred before age 26.  Some additional web sites to review this are NDSS and the ARC​ and ​​Autism Speaks.

The ABLE Act allows these tax-favored accounts to receive up to the annual gift tax exemption (currently $14,000 per year). Beneficiaries are restricted to one account, but anyone could contribute to their account. Modeled after 529 college savings accounts, ABLE account programs will need to be implemented by the states.

According to the Congressional Budget Office, “assets in an ABLE account and distributions from the account for qualified disability expenses would be disregarded when determining the qualified beneficiary’s eligibility for most federal means-tested benefits. For SSI [Supplemental Security Income], only the first $100,000 in each ABLE account would be disregarded.”

This provides important new options for parents with children with disabilities.  We will provide updates as needed for our clients.

The Senate passed the ABLE Act as part of the Tax Increase Prevention Act of 2014​, also known as “tax-extenders,” a bill that includes a variety of extensions for temporary tax provisions.

The IRA updates include a one year extension of expired tax provisions retroactive to January 1, 2014. This reauthorizes the IRA charitable rollover through December 31, 2014. Donors age 70 1/2 and older may transfer up to $100,000 from their IRA to a qualified public charity. The transfer will be made free of federal income tax and the gift qualifies for the donor’s 2014 required minimum distribution (RMD).

Because your window of opportunity is short for making IRA rollover gifts, we recommend that you contact your financial planner or tax adviser immediately. Keep in mind that it often takes IRA administrators several weeks to process rollover transactions. In order to complete the gift by year end, you need to act right away.

Getting divorced? Don’t forget to update your estate plans!

No one gets married expecting to get divorced … but it happens  to about half of all first marriages*.​  And, if divorcing, the marriage only lasts an average of about eight years.  ​Then, about 60% of divorced people remarry.  Well … that makes it possible for several people to have some degree of claim over each other’s estates and for a variety of different claims by children of each of these marriages.

What could happen?  Well, according to stories we have heard, just about anything!  Here is one extreme example … in 1980, Peter Sellers (actor, Pink Panther) died of a heart attack.  He was in the middle of divorcing his fourth wife (Lynne Frederick), but he had not quite gotten around to changing his will.  He allegedly wanted to leave his estate to his kids … but, he didn’t actually change the will.  The entire estate went to the almost divorced wife, and a mere token (nothing) to the kids.  The difference was something like $6 million.

Is there anything YOU want to change now?

We suggest that divorcing couples separately change a number of aspects of their estate plans (see below).  Ask your divorce attorney to suggest an estate planning attorney to help you do this.  Don’t leave it to an on-line system that can’t account for your real needs.  If you would prefer, just give us a call, and we will help you get peace of mind with this part of the pain of divorce.

Here is the list we suggest:

  • Change Last Will and Testament – don’t write on it!
  • Change or revoke recorded Financial Powers of Attorney that you might have given to each other
  • Change Health Care documents and HIPAA authorizations
  • Change beneficiary designations for life insurance and bank accounts
  • Change guardians of minor children, if named
  • Change trustees of trusts, including special needs trusts
  • Retitle assets if Trusts have been affected
  • Monitor business income for changes and revise payments or succession plans as necessary
Each situation is different, but we will help you through what you need.
* Information obtained in part from: Cohabitation, Marriage, Divorce, and Remarriage in the United States. Series Report 23, Number 22. 103pp. (PHS) 98-1998​

End of year planning checklist

It is almost the end of the year!  You know what that means … tax time, resolutions, and new starts.  We think it might also be time to think about your estate planning needs too!

Here are some key steps to consider:

1. Have your finances changed significantly?  Work with your financial planner and / or accountant to review your portfolio.

2. Are there new family members, through marriage, birth, or adoption?  Consider whether your estate plans cover them adequately.  Also consider if you need to change any specific gifts, or if your family might have a child with special needs.

3. Do you need an update on your wills?  We suggest an annual review of your situation, and an update every two or three years to be sure that new laws and new legal precedents don’t throw a wrench into your plans.  Our Annual Maintenance clients enjoy a complimentary review every year.

4. Have you thought about your own medical needs recently?  Review and update your health care documents, HIPAA forms, and powers of attorney before it is too late.  Annual Maintenance Program clients of ours receive complimentary  access to  an on-line document repository for all those pesky health care documents you need to keep track of.

5. Are all your assets in your trust?  Most problems with estates utilizing trusts arise because the trust-maker FAILED to put the assets into the trust!  Don’t be that person … review your trust and your assets to be sure it does what you want.

6. Make charitable contributions a priority.  If you have received much this year, it might be time to give some to worthy causes.  You can do this through such mechanisms as direct donations, gifting through organizations that distribute to causes you like, or providing long-term benefits​ through planned endowments, just to name a few.  Let us work with you and your financial planner to set up charitable trusts or endowments that meet your needs.

Taking just a few steps to think about your estate needs prior to the new year can be important to your family and others.  Happy New Year!

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