Total Counsel Law Group

How Do I Write My Will?

“Follow this road map to ensure that your loved ones are taken care of after you're gone.”

A will should be a well-written document that describes how you’d like your property to be distributed after you pass away.

US News & World Report’s article entitled “10 Steps to Writing a Will” says that if you've been procrastinating on completing the task, here's your opportunity to cross it off your list. You can get going with these simple steps.

1. Do-it-yourself? You can use online software to help you write your will. However, there are many horror stories of people who wrote their own wills with financially devastating consequences. Consider the late Supreme Court Justice Warren Burger. Wouldn’t you think he, of all people, could write a will? Nope, His will was just 450 words and had a ton of errors. His family spent a fortune in legal fees and more than $450,000 in taxes to collect their assets. Work with an experienced estate planning attorney. He or she will know how to help you efficiently and effectively.
2. Beneficiaries. When you pass away, your beneficiaries will receive your assets. Be sure that this list is up-to-date.
3. Executor. This individual will make sure the wishes in your will are carried out. Select a person who’s responsible.
4. Guardian. If you have minor children, you need to designate a friend or family member as a guardian.
5. Be specific. Don’t be vague in your will and think everyone will know what you want. If you leave your will open to interpretation, it may end up in court.
6. Be realistic. Even if you want to distribute your assets fairly, it still isn't easy. It’s best to talk to your heirs about your assets. Tell them that if they have their eye on anything other than house and cars, to let you know so you can write that down and make sure they get it when you die. This gives them some input.
7. Attach a letter to the will. It’s okay to attach a personal letter to the will, as a way to say goodbye and make your wishes clear and personal.
8. Witnesses. Be sure you have the witnesses required to sign your will. They can't be people who stand to inherit anything in the will. Witnesses also need to be at least 18 years old, and ideally, they'll be people who are likely to be around after you’re gone. That’s because if something’s amiss, and your will is contested in court, the judge may want to call a witness to testify.
9. Keep your will safe. Be sure that someone you trust knows the location of your will, as well as any other important papers and passwords to financial institutions. Keep the original copy somewhere secure.
10. Review and update your will. After drawing up your will, you'll want to update it, especially after any major life event, like a marriage, divorce or a birth.

Reference: US News & World Report (June 19, 2018) “10 Steps to Writing a Will”

How Will My Retirement Affect My Children?

“Your retirement could have an impact on your children, especially if you plan to move or are helping them financially.”

Baby boomer parents need to add an item to their retirement checklist: having “the talk” with their kids about how their lives will change in retirement.

US News & World Report’s recent article, “The Talk to Have With Your Kids Before You Retire,” acknowledges that this can be uncomfortable for some parents.  However, parents need to prepare adult children for their impending retirement. It’s crucial to begin financial discussions early in retirement. That makes it easier in later years, when cognitive decline can affect decision-making. Talk with your children about these things regarding your retirement:

Notice. Your retirement may affect your children, especially if you plan to move or are assisting them financially. Let them know of your retirement plan five years prior to leaving the workforce, and remind them about it every now and then.

Financial info. Some parents don’t want their kids to know the details of their finances, while others share information and even involve them in the process. If you’re more open and honest with your kids about your financial information, they’ll feel secure that their parents are OK. If you are struggling, you should also let them know that.

Financial support. You may need to stop supporting your kids, so that you can retire. If you have a kid living with you in the house and you’re helping to pay their bills, start working on a strategy to get them off your payroll and out of the house.

Estate plan. Talking to your children about your estate planning to avoid confusion and sibling rivalry during a very stressful time. Talk about which child will be executor, so there are no surprises.

New lifestyle. An important discussion between parents and children is how you want to live. This includes location, which might change with the seasons, deciding if you want to live close to children and grandchildren, or prefer a spot with opportunities to enjoy retirement. You should also let your kids know your preferences for an assisted living facility or a nursing home and discuss paying for long-term care.

Contact info. If a child is named as an executor, successor trustee, or as a beneficiary on retirement accounts and life insurance policies, be sure he knows who to contact, if something happens to you. You may want to give your children a list of the people and institutions involved in your planning, including your estate planning attorney.

Reference: US News & World Report (June 8, 2018) “The Talk to Have With Your Kids Before You Retire”

Asking Mom and Dad What You’ll Inherit, May be the Most Awkward Conversations Ever

“With wealth for millennials set to double in the next 20 years, it’s time to get over the awkwardness and have the conversation now.”

When is a good time to discuss your inheritance, taxes, and estate planning with your parents? How about never!  However, by the same token, screaming at your sister in a fight over Mom’s Hummel figurines isn’t a pleasant thought either.

No matter how you look at it, this conversation will be uncomfortable. This is because it’s based on one ominous certainty: that the people we love are going to die.

The Guardian’s article, “Discussing inheritance is too important to be left until someone has died”, reports that research from the Resolution Foundation showed that inheritable wealth for those currently aged 20-35 will double in the next 20 years—hitting an all-time peak in 2035.

However, the downside is that the average age at which most people will benefit is 61. The report also mentions that this huge transfer of wealth will further solidify societal inequality in our lifetimes.  People usually marry those of a similar financial background. More than 80% of millennials who already own their home have parents who are homeowners. Compare that to 50% of non-home owning millennials who have parents who don’t own their homes.

For many individuals, this information won’t make much difference. The report stipulated that about 33% will have no property wealth to inherit, and those who do will discover that it arrives much too late to solve life’s biggest financial burdens, like the kids and the home mortgage.

Even so, it’s wise to discuss inheritance with your family, while the older generation is still living. This will decrease the risk of post-funeral family battles and establish definition and clarity regarding the parent’s wishes and plans. Yes, it’s awkward, but it’s the smart move.

Finances are frequently a forbidden subject in families. Approaching the topic of inheritance in the wrong way can be seen as disrespectful and pushy at best. At its worst, it can ruin relationships.

 However, research like that from the Resolution Foundation may help start important discussions about inheritance now, before it’s too late.

Reference: The Guardian (January 13, 2018) “Discussing inheritance is too important to be left until someone has died”

Retirement in Special Needs Families

“The financial planning challenges for parents of special needs children are myriad and complex—and retirement planning presents one of the toughest challenges.”

The big challenge for many Special Needs Families is balancing the financial needs of retirement with the long-term needs of a child with a disability. Those latter needs typically will outlive the parents.

Morningstar’s recent article, “Retirement Planning for Special-Needs Families,” explains that the need is growing. One in every five Americans has a disability, and 20 million families have at least one family member who has a disability, says the National Disability Institute. The costs can be extremely high, with the lifetime cost of caring for a person with autism ranging from $1.4 million to $2.4 million, according to an advocacy and research group. Lifetime costs are similar for people affected by other severe impairments.

While government benefit programs provide some assistance, the eligibility rules vary depending on when a disability is incurred. There’s a set of rules for people disabled as children (prior to age 22) and another for those disabled at older ages. Here some key topics for consideration and action:

• The care plan should include the safety of the child, along with aspects of life fulfillment, including work, learning and play.
• Projected cash flow needs will depend on the type of disability, the capability of the individual needing care and the level of care needed.
• Investment allocations. Families who have a child with special-needs should be more conservative in how they allocate their retirement portfolios, and maintain a higher level of cash.
• Government benefits include Social Security, Medicare and Medicaid.
• Families need to understand all of the government rules on asset and income limits for a person with disabilities.
• A Special Needs Trust is a critical part of a family retirement plan.
• Beneficiary designations must be structured properly, because inheritances can jeopardize government benefits eligibility.

Quality planning is complicated. Families who have children with special-needs should consult with an experienced special needs trust attorney.

Reference: Morningstar (January 17, 2017) “Retirement Planning for Special-Needs Families”

Suggested Key Terms: Asset Protection, Probate Court, Inheritance, Estate Planning Lawyer, Elder Law Attorney, Special Needs Trust, Disability, Medicaid, Social Security, Medicare, Beneficiary Designations

If it is So Important, Why Doesn't Everyone Make a Will?

“Understanding what happens to you when you die may help you understand the intricacies of your estate and make planning both simpler and more effective.”

No one likes to plan for his or her death, but it’ll happen to all of us, says The Reading Eagle Business Weekly in the article “Make a will, plan for distribution of assets.”

You can pass your wealth to anyone you want, but state and/or federal taxes may be due on these transfers. The rules are also complex, and if you die without a will, the state laws of intestacy may say who gets your wealth.

Most folks make the mistake of signing their wills and life insurance policies, then putting them in files and forgetting about them. These documents and your intentions will become out-of-date. It’s not uncommon for a decedent to have been divorced for five years when they die, but the ex-spouse still inherits all of his or her assets. Why? Because the ex’s name is still in the will or is listed as the beneficiary of the life insurance policy. This happens more frequently than you might think.

Probate?

Probate versus non-probate assets is one of the most misunderstood concepts in estate planning. Probate is the process that deals with proving a will's validity by filing it in court. The will names an executor who is responsible for fulfilling its terms. The estate assets are identified and valued, then given to the individuals named in the will.

There are also non-probate assets that are transferred by operation of law. They specifically include accounts with beneficiary designations like IRAs, 401(k)s, pensions, retirement accounts, life insurance, annuities and transfer-on-death accounts. These non-probate assets supersede what’s written in the will. The beneficiary designations control them.

Do you have a will? When was the last time you reviewed it?

You should hire an experienced estate planning attorney to help structure an estate plan for both your will and beneficiary designations to allow for the efficient transfer of your assets.

For more information on estate planning, please visit our website here

Reference: Reading (PA) Eagle Business Weekly (January 17, 2017) “Make a will, plan for distribution of assets.”

Blended Family Estate Planning

“We all need to do some type of estate planning, but it’s especially important if you are part of a blended family.”

The best time to start estate planning is now—before the plan needs to be implemented, says The Fairfield Bay News in “Estate Planning Tips for Blended Families.” Estate planning can be very complex with a blended family, so ask for help from a qualified estate planning lawyer.

Here are a few general ideas to help you think about your blended family:

Update Beneficiary Designations. Get all of your beneficiaries set and updated, like those on your retirement accounts and insurance policies. This will ensure that they reflect your blended family. It is important to remember that these designations take priority over the instructions in your will—it’s a totally separate deal.

Living Trust. While you’re at it, consider a professional trustee for a living trust. Trusts can help you to avoid probate and allow you the freedom to decide how and when you want your assets distributed. After you pass away, a properly created trust can provide a surviving spouse with income for life.  After he or she dies, it will then give the children from an earlier marriage the remainder of the trust assets. To be fair to all, you may want to hire a professional third-party trustee who isn’t a beneficiary of the trust and isn’t entitled any of the trust assets. This person or company wouldn’t have a vested interest in how proceeds of the trust are distributed.

Prenuptial Agreement. When settling an estate, a prenuptial agreement can help eliminate disputes among members in a blended family. With a pre-nup, you can detail a separation of property for your will, your living trust, and any other relevant estate-planning arrangements in the event that you and your new spouse agree to keep your assets separate so you can each pass an inheritance to your own children.

Finally, be sure to share your estate-planning intentions with the members of your blended family. This can help prevent bad feelings and unpleasant surprises.

For more information on estate planning, please visit our website here

Reference: Fairfield Bay (AR) News (November 9, 2016) “Estate Planning Tips for Blended Families”

Hybrid Life Insurance as an Estate Planning Tool

“There is a new type of life insurance policy gaining popularity in recent years that provides 'living benefits' or 'accelerated benefits'.”

The concept of leveraging your assets and maximizing your estate with life insurance is a common strategy that has been used by many retirees for decades. If you do this the right way, this can be a great estate planning tool to own within a portfolio of investments, says The Digital Journal’s article “New Hybrid Wealth Transfer Concept Gaining Consumer Acceptance.”

This strategy is called “hybrid life insurance” because the insured doesn’t have to die to use the policy’s death benefit. The insured’s death benefit is calculated by the amount of the one-time deposit, age, gender, and health. In some instances, the single deposit can be multiplied by two or more when determining the policy’s guaranteed death benefit. Therefore, a non-smoking female in average health who contributes $100,000, could see an immediate $200,000 tax-free death benefit. That death benefit can be given to the heirs of her estate without going through probate, as the assigned beneficiaries to the policy. That lets the insured transfer her wealth tax-free and up the amount her beneficiaries will inherit. Insurance companies that write this type of policy may give you an option to accelerate the policy’s death benefit to use for chronic illness and long-term care expenses.

If an individual has bank savings accounts, CDs, money market accounts, brokerage accounts, and even annuities and is keen on the idea of being able to always have access to their money, they should know that some hybrid policies guarantee a 100% return of premium. Other policies allow withdrawals of the policy’s cash value.

Many hybrid policies have growth based on either fixed rates of interest or an indexed rate of interest. This can be much better than a savings account, CD, or an annuity. These added benefits make hybrid life insurance an ideal alternative to depositing cash in the bank.

Some folks over age 65 have the common misconception that the required underwriting process is burdensome and requires perfect health in order for them to qualify. That’s not so in this case because simplified underwriting makes getting qualified quite easy. There’s no medical exam or blood test required. Advanced underwriting and technology that’s been adopted by insurance carriers expedites the approval process. It requires just a few medical questions and a short phone interview.

Hybrid life insurance can be a worthwhile estate planning tool with tax benefits and favorable guarantees.  However, it does have its pluses and minuses.  You should, therefore, work with a competent estate planning attorney with the knowledge and experience to help guide you with this estate planning tool.

For more information on estate planning, please visit our website here

Reference: Digital Journal (November 22, 2016) “New Hybrid Wealth Transfer Concept Gaining Consumer Acceptance”

Saying “I Do” Again in Your Golden Years

“Make sure your wedding makes you cry for the right reasons.”

A late-in-life remarriage can get extremely complicated, says New Hampshire Magazine in “Navigating Late-Life Remarriage.” This is especially true if you don’t know your legal rights and responsibilities or fail to address money matters up front.

While death and the likelihood that one spouse will outlive the other is inevitable, another important fact is that the divorce rate among those who remarry later in life years is 60%. This is much higher than the rate of any other segment of the population. Some experts think that number may go even higher.

Important considerations in senior marriages are pre-nuptial and post-nuptial agreements. These agreements stipulate rights and obligations in the event of separation or divorce. Although presumed to be valid, proper drafting is essential. Estate planning is critical for those who remarry and have additional issues of blending families and assets. If one or both partners have children and former spouses, a trip to the offices of a qualified estate planning attorney is paramount before the big day.

As you make the appointment with your attorney, here are some of the basics to digest:

• Estate planning documents should be updated to reflect your new marital status and your current wishes;
• You don’t need your spouse’s consent to name someone other than him or her as the beneficiary of your IRAs;
• Your spouse will have rights and benefits to some of your qualified retirement plans, like 401(k)s and pensions;
• Your spouse may waive any provision made for him or her in the deceased spouse’s will and instead take a fraction of the estate, typically one-third to half, depending the number of people in the family;
• If you’re widowed or divorced but then remarry before age 60, Social Security benefits that you collect from your former spouse will be impacted;
• You are responsible for the costs of medical care and long-term care for your new spouse; and
• If you have children in college receiving financial aid, adding your new spouse’s salary to your family income might decrease the amount of aid that your child receives.

As you can see, this gets complex rather quickly, and you can never be too careful or too well-prepared. It is essential to work with an experienced estate planning attorney.

For more information on estate planning, please visit our website here

Reference: New Hampshire Magazine (December 2016) “Navigating Late-Life Remarriage”

Some Trustworthy Incentive Trust Information

“If you want to influence your family members even after you’re gone, an incentive trust is definitely an option to consider.”

What if you have adult children that are—to put it kindly—financial disasters?

What can a parent put in place so these adult children comply with certain requirements in order to receive their portion of the estate? You don’t want the money to be spent in the first six months!

The Norman (OK) Transcript’s article, “Incentive trusts can motivate your heirs to better themselves,” provides some information on how it works and some tips to help you create such an estate plan.

An incentive trust is an estate-planning tool used to help motivate your heirs in the direction you want after you pass away. Some or all of your assets are passed to your incentive trust when you die instead of directly to your heirs, like your financial disaster kids. The trustee has the power to distribute funds from the trust only if and when the beneficiaries perform (or abstain from) whatever goal or behavior you have specified in the trust. It can be something like encouraging a granddaughter beneficiary to graduate from college, reward beneficiaries who do charitable work, or supplement the incomes of beneficiaries who elect to go into lower-paying but meaningful careers like social work.

On the flip side, an incentive trust can be set up to penalize beneficiaries who don’t work by cutting off or cutting down their trust distributions. Some trusts will put restrictions on heirs with addictions by requiring that the payments go straight to the rehab facility.

You should also be aware that incentive trusts can have drawbacks. Poorly constructed incentive trusts can have a high risk of unintended consequences. For instance, you may want to set up an incentive trust that provides a financial incentive for beneficiaries to be employed full-time—but if one becomes ill or is seriously injured in a car accident and is unable to work, they’d be punished unfairly.

In addition, there are some legal limitations on what you can do with an incentive trust. Incentive trusts that encourage a beneficiary to join or leave a particular religion or seek a divorce may be challenged in court and possibly revoked.

To create a comprehensive and effective incentive trust that does all that you want, tell your estate planning attorney what you want to accomplish and he or she can draft the right provisions. However, you should also add in language granting your trustee the right to use his or her discretion and that the trustee’s decisions should be final and binding. This allows your trustee to make common sense decisions, reducing or eliminating the chances of unintended and inequitable results. It also makes it harder for beneficiaries to successfully challenge the trust or trustee in court. When a trust gives final decision-making authority to its trustee, it’s just about impossible for beneficiaries to successfully argue that the trustee is failing to implement the trust’s terms.

Reference: Norman Transcript (November 1, 2016) “Incentive trusts can motivate your heirs to better themselves”

For more information on Trust planning, please visit our website here

 

Roll with the Changes After a Divorce…Including Beneficiary Designations

“What happens if you don’t make changes?”

While you don’t plan ahead for a divorce, you should immediately take steps to ensure your interests are protected and your estate plan reflects your new marital status if your marriage ends.

What should you change? Forbes’ article, “The First Thing You Must Do When Your Divorce Is Final,” says, in a word: “Everything.”

Once your divorce is final—that is, the divorce decree has been approved by a judge—and a judgment rendered, you should begin to review and revise, if necessary, the following legal and estate planning documents:

• Trusts
• Powers of Attorney (property, healthcare, HIPAA, etc.)
• Your will
• Life insurance policies
• Retirement accounts

Let’s say your ex-spouse is the beneficiary of your life insurance policy and you die.

Guess what!

The proceeds are going to go straight to your ex-spouse and not your children. It doesn’t matter if your estate planning documents stipulate that the proceeds should go to your children. Still, if the plan all along was to keep the ex as beneficiary, you’re fine. Otherwise, the kids get zero.

What happens if you don’t even have a valid will in place? The divorce cuts the ex-spouse out as a legal heir, and that person won’t be in line to receive anything from your estate—but they still get the insurance proceeds if you don’t make the beneficiary change.

One final thought: when you make changes to estate planning documents, be certain that the changes are in accordance with the terms of your divorce decree. The divorce judgment is legally binding, and if you agreed that your ex-spouse would remain the beneficiary of a life insurance policy as a part of your divorce, you can’t change the beneficiary designation on the policy.

If you do, you’ll create a significant headache for your heirs if you pass away while the policy is in force.

For more information on Estate Planning please visit our website here

Reference: Forbes (August 14, 2016) “The First Thing You Must Do When Your Divorce Is Final”

The Tax Consequences of Life Insurance Death Benefits

“When you purchase life insurance, the money your beneficiary receives when you pass away are referred to as death benefits.”

Forbes’ recent article, “Are Life Insurance Proceeds Subject to Taxes?” says that your beneficiary typically won’t be required to pay income tax on death benefits. Those funds typically are tax-free.

But this doesn’t mean you get to ignore how that money will be distributed—there are options available. The insurance company can cut a check, but you can have the insurer hold on to all or some of the funds and distribute them at a later date or in periodic distributions. If the money is held by the insurer, it will continue to earn interest—and that interest is taxable.

Another option is to transfer those funds to a trust that could control the proceeds of the policy based on the stipulations you set when creating it. However, remember that trust planning can get complicated if you establish “incidents of ownership” in the policy, in other words, if you are controlling the policy in some way. For example, such “incidents” include borrowing against it, using it as collateral or assigning it in a contract. If that happens, the proceeds of the policy might be considered a part of your estate and be subject to estate taxes when you die. Those estate taxes may be delayed if your spouse is the beneficiary, but taxes may be due when he or she passes away.

Also, remember that while you can state in your will that the proceeds of a life insurance policy should go to one of your beneficiaries, only the named beneficiary of the policy gets the funds. When your intentions change, you must contact the life insurance company to update your beneficiary designation. You should also update any 401(k)s or IRAs.

Talk with your estate planning lawyer to be certain that your life insurance policies work in concert with the rest of your estate plan to give your family protection and to help avoid unintended and potentially unpleasant financial consequences.

For more information on Beneficiaries and Life Insurance please visit our website here

Reference: Forbes (August 30, 2016) “Are Life Insurance Proceeds Subject to Taxes?”