Estate Planning

Assisting clients prepare and execute wills, trusts, powers of attorney, and health care proxies.  Getting your affairs in order will help protect your loved ones in the future.

 

While nobody wants to think about death or disability, establishing an estate plan is one of the most important steps you can take to protect yourself and your loved ones. Proper estate planning not only puts you in charge of your finances, it can also spare your loved ones of the expense, delay and frustration associated with managing your affairs when you pass away or become disabled.
A comprehensive estate plan should include several documents, prepared by an attorney based on in-depth counseling which takes into account your particular family and financial situation:

A Living Trust can be used to hold legal title to and provide a mechanism to manage your property. You (and your spouse) are the Trustee(s) and beneficiaries of your trust during your lifetime. You also designate successor Trustees to carry out your instructions in case of death or incapacity. Unlike a will, a trust usually becomes effective immediately after incapacity or death. Your Living Trust is “revocable” which allows you to make changes and even to terminate it. One of the great benefits of a properly funded Living Trust is the fact that it will avoid or minimize the expense, delays and publicity associated with probate.

If you have a Living Trust-based estate plan, you also need a pour-over will. For those with minor children, the nomination of a guardian must be set forth in a will. The other major function of a pour-over will is that it allows the executor to transfer any assets owned by the decedent into the decedent’s trust so that they are distributed according to its terms.

A Will, also referred to as a Last Will and Testament, is primarily designed to transfer your assets according to your wishes. A Will also typically names someone to be your Executor, who is the person you designate to carry out your instructions. If you have minor children, you should also name a Guardian as well as alternate Guardians in case your first choice is unable or unwilling to serve. A Will only becomes effective upon your death, and after it is admitted by a probate court.

A Durable Power of Attorney for Property allows you to carry on your financial affairs in the event that you become disabled. Unless you have a properly drafted power of attorney, it may be necessary to apply to a court to have a guardian or conservator appointed to make decisions for you during a period of incapacitation. This guardianship process is time-consuming, expensive, emotionally draining and often costs thousands of dollars.
The law allows you to appoint someone you trust to decide about medical treatment options if you lose the ability to decide for yourself. You can do this by using a Durable Power of Attorney for Health Care or Health Care Proxy where you designate the person or persons to make such decisions on your behalf. You can allow your health care agent to decide about all health care or only about certain treatments. You may also give your agent instructions that he or she has to follow. Your agent can then ensure that health care professionals follow your wishes. Hospitals, doctors and other health care providers must follow your agent’s decisions as if they were your own.

A Living Will informs others of your preferred medical treatment should you become permanently unconscious, terminally ill, or otherwise unable to make or communicate decisions regarding treatment. In conjunction with other estate planning tools, it can bring peace of mind and security while avoiding unnecessary expense and delay in the event of future incapacity.

Some medical providers have refused to release information, even to spouses and adult children authorized by durable medical powers of attorney, on the grounds that the 1996 Health Insurance Portability and Accountability Act, or HIPAA, prohibits such releases. In addition to the above documents, you should also sign a HIPAA authorization form that allows the release of medical information to your agents, your successor trustees, your family and other people whom you designate.

 

Estate Planning with Wills

Most people know about wills and their basic purpose – to ensure that one’s hard earned assets go to the right beneficiaries when an individual passes away. However, wills can be used for a lot more than simply dictating who gets a person’s antique lamp collection. Here’s a list of some of the very valuable things a will can do:
• List who gets what. The most common purpose for a will is to name which individual, or group of individuals, will receive particular property belonging to a person when he or she passes away.
• Name guardians for children. Typically, a will is the document that states who should raise a person’s children if something happens to the parent. The will also usually contains at least one alternate in the event the first choice cannot serve.
• Establish trusts. In many cases, a person may not want a child or loved one to receive all of the property that they are inheriting at once. Or a person may want the beneficiary to be able to use the property for a while, and then for it to pass on to someone else. In that situation, an individual may choose to use a trust. A trust holds property on someone else’s behalf. In wills, trusts are commonly established for minor children, so that someone else can manage the children’s money until they reach a certain age when their parents believe they will be able to manage it. Trusts are also commonly used in second marriage situations – a person may want to allow a spouse to have access to certain property while the spouse is living, but for that property to ultimately pass to the decedent’s children. Trusts can help accomplish that goal.
• List funeral wishes. Although this is also done in other documents too, a will commonly states whether an individual wants to be buried or cremated, and where the body should be buried or the ashes should be spread. Sometimes, wills contain other information about funeral wishes too like where it should take place and even what readings might be recited.
• Tax planning. Wills can be great tools for tax planning in order to avoid federal or state estate or inheritance taxes. This can sometimes be accomplished by setting up various trusts.
• Naming executors and trustees. A will usually states who will be the executor of an estate, which is the person who will carry out a deceased individual’s wishes listed in the will. Wills can also name the trustee of any trusts established in a will, which is the person who will be in charge of carrying out the instructions of the trusts.
While wills can serve as powerful estate planning tools, they are only effective if they are properly drafted to suit the needs of each individual. An estate planning attorney can review all your options with you and establish a will in a manner that ensures your wishes will be honored.

 

Trusts & Estate Planning

Many people have preconceived notions about trusts and believe that they are only for high net worth individuals who wish to leave large trust funds to their children. However, this is far from the truth; trusts can be invaluable tools in the estate plans of millions of individuals.
Trusts are simply an arrangement in which one party holds property on behalf of another party. Trusts are created by the person doing the estate planning (the settlor), who authorizes another person (the trustee) to manage the assets for the benefit of a third party (the beneficiaries). There are many reasons for establishing trusts including tax minimization or providing for the needs of underage beneficiaries.
Some types of trusts that may be useful in estate planning are:
• Trusts for minors. Many people leave money to their children or their grandchildren in a trust as part of a comprehensive estate plan. This is typically done to ensure the money is there for the children’s benefit while they are younger-for support, education, medical expenses, etc. Once the children reach a certain age or achievement level (such as obtaining a bachelor’s degree), they may receive money from the trust to do with as they please.
• Special needs trusts. Special needs trusts are tools that enable a person to leave property to an individual with special needs. Many individuals with special needs receive government benefits. If they were to suddenly inherit money, they would be disqualified in most cases from those benefits until the inheritance was spent. Special needs trusts protect those individuals’ government benefits while allowing them to have money for any extras they may need.
• Marital trusts. Married couples sometimes include trusts in their wills, or separately, for the benefit of their spouse, typically for two reasons: (1) taxes, and (2) property protection. In previous years, marital trusts were needed for some couples to take advantage of estate tax exemptions, and they may be needed in the future as the laws are expected to change. Marital trusts can also protect property from a spouse to ensure that it ultimately goes where it needs to go. For example, a husband with grown children from a previous marriage may decide to let his wife use his property after he passes, but puts it into a trust so that after she passes away it goes to his children.
• Revocable living trusts. Revocable living trusts are documents completely separate from wills although they often work hand in hand with wills to carry out the decedent’s wishes. Revocable living trusts are primarily used to avoid probate in states where probate is particularly cumbersome, or in a few other instances, such as when a person owns real estate in multiple states.
• Irrevocable life insurance trusts. Irrevocable life insurance trusts (or ILIT’s) can be used in order to move a person’s life insurance proceeds outside his or her estate for estate tax purposes.
• Spendthrift trusts. Spendthrift trusts are generally established to protect the beneficiaries’ assets from both themselves and creditors. These trusts usually have an independent trustee which has complete discretion over the distribution of assets of the trust.
In short, there are many different types of trusts, each of which can be customized to serve a valuable purpose in accomplishing the wishes of those making gifts or planning an estate. An experienced estate planning attorney can help you assess your finances and goals to determine the best vehicles to preserve your wealth and your legacy.

 

Providing for Incapacity

If you become incapacitated, you will not be able to manage your own financial affairs. Many are under the mistaken impression that one’s spouse or adult children can automatically take over for them if they become incapacitated. The truth is that in order for others to be able to manage your finances, they must petition a court to seek guardianship and/or conservatorship and declare you legally incompetent. This process can be lengthy, costly and stressful. Even if the court appoints the person you would have chosen, the individual may have to come back to the court every year and show how he or she is spending and investing each and every penny.
If you want your family to be able to immediately take over for you, it’s essential that you work with an attorney to create the proper legal documents to designate a person, or persons, that you trust so they will have the authority to withdraw money from your accounts, pay bills, take distributions from your IRAs, sell stocks, and refinance your home. Many people mistakenly think that a simple will can effectively protect you in the event that you become incapacitated, but the truth is that a will does not take effect or have any power until you die.
In addition to planning for the financial aspect of your affairs during incapacity, it’s critical that you establish a plan for your medical care. The law allows you to appoint someone you trust, such as a family member or close friend, to make decisions on your behalf about medical treatment options if you lose the ability to decide for yourself. You can do this by creating a Health Care Proxy or durable power of attorney for health care where you designate the person to make such decisions on your behalf. In addition to a power of attorney for health care, you can also have a living will which informs others of your preferred medical treatments such as the use of extraordinary measures should you become permanently unconscious or terminally ill.
Avoiding Probate
If you leave your estate to your loved ones using a will, everything you own will pass through probate. The process can be expensive, time-consuming, and is open to the public. The probate court is in control of the process until the estate has been settled and distributed. During this process, the probate courts can freeze assets for weeks or even months while trying to determine the proper disposition of the estate, making it difficult for your family to pay for living expenses. If you are married and have children, you want to make certain that your surviving family has immediate access to cash to pay for living expenses while your estate is being settled. With proper planning, your assets can pass on to your loved ones without undergoing probate, in a manner that is quick, inexpensive, and private.
Providing for Minor Children
It is important that your estate plan address issues regarding the upbringing of your children. If your children are young, you may want to consider implementing a plan that will allow your surviving spouse to devote more attention to your children, without the burden of work obligations. You may also want to provide for special counseling and resources for your spouse, if you believe he or she lacks the experience or ability to handle financial and legal matters. You should also discuss with your attorney the possibility of both you and your spouse dying simultaneously, or within a short duration of time. A contingency plan should include a list of persons you’d like to manage your assets and name a guardian you’d like to raise your children in your absence. The person, or trustee, in charge of the finances need not be the same person as the guardian. In fact, in many situations, you may want to purposely designate different persons to maintain a system of checks and balances.
You should give careful thought to your choice of guardian, ensuring that he or she shares the values you want instilled in your children. You will also want to give consideration to the age and financial condition of a potential guardian. Some guardians may lack child-rearing skills you feel are necessary. If you fail to plan, the decision as to who will manage your finances and raise your children will be left to a court of law.
Another issue to consider during the planning process is whether you’d like your beneficiaries to receive your assets directly, or to have the assets placed in trust and distributed subject to conditions and circumstances such as age, need and even incentives based on behavior and education. All too often, children receive substantial assets before they are mature enough to handle them in a prudent manner.
Planning for Death Taxes
The IRS will want to review your estate at death to ensure you don’t owe them that one final tax: the federal estate tax. Whether there will be any tax owed depends on the size of your estate and how your estate plan is structured. Many states have their own separate estate and inheritance taxes that you need to be aware of. There are many effective strategies that can be implemented to reduce or eliminate death taxes, but you must start the planning process early in order to properly implement many of these strategies.
Charitable Bequests – Planned Giving
Do you want to benefit a charitable organization or cause? Your estate plan can provide support for such organizations in a variety of ways, either during your lifetime or at your death. Depending on how your planned giving is set up, it may also allow you to receive a stream of income for life, earn higher investment yield, or reduce your capital gains or estate taxes.
Ultimately, a well thought out estate plan should provide for your loved ones in an effective and efficient manner by avoiding guardianship during your lifetime, probate at death, estate taxes and unnecessary delays. You should consult a qualified estate planning attorney to review your family and financial situation, your goals and explain the various options available to you. Once your estate plan is in place, you will have peace of mind knowing that you have provided for yourself and your family.

 

Estate Planning/Non-Traditional Families

Nontraditional families take many forms – a grandmother raising a grandchild via an informal custodial arrangement, an unmarried couple with children and perhaps stepchildren, a couple in a same-sex marriage. In June 2015, the U.S. Supreme Court ruled that the Constitution guarantees the right to same-sex marriage which affords them most of federal privileges available to traditional couples. Other nontraditional families, however, are not recognized as families by the state or federal government. Accordingly, they are not granted the same benefits with respect to estate planning, guardianship of minor children, and health care proxy designations.
Estate Taxes: An Example of the Difference between a Married Couple and a Nontraditional Family
A U.S. citizen does not have to pay any estate taxes on any real estate or assets received from his or her spouse, either as a gift during life or as a bequest after death. Because of the Court’s ruling, same-sex married couples are now on even ground with other married couples as it concerns federal taxes and most federal benefits.
Use Estate Planning to Protect Your Nontraditional Family
Our firm helps nontraditional families to assert their rights in a wide range of circumstances, including:
• Protecting ownership of the family home
• Protecting custody of the family’s minor children
• Protecting the survivor’s right to manage the finances of the family’s minor children
• Protecting family members’ rights to make medical decisions for minor children
• Protecting family members’ rights to make financial decisions
• Ensuring that state probate laws do not override the family’s wishes regarding inheritance
• Correctly designating beneficiaries on life insurance and other policies
• Minimizing the impact of estate taxes and income taxes on the surviving partner
• Minimizing will contests by family members over bequests and other estate documents
• Granting the right to make burial decisions to the surviving partner over other blood relatives
Just because you don’t fit the traditional family mold doesn’t mean that you should be denied the rights and privileges that are critical to your livelihood. Contact our firm for a consultation.
Pet Trusts
Have you seriously considered what will become of your faithful companion – your beloved pet – upon your death or disability? If not, now is the time. If you don’t have a plan in place that quickly and easily provides for your pet’s food, shelter and care, it’s essential that you take steps to include your cherished pet in your estate plan. The specific estate planning method that ensures a quality life for your pet will depend a number of factors including state laws, your pet’s needs, your wishes and financial resources.
Can I provide for my pet in my estate plan?
You can provide for your pet in your estate plan, though it is important to understand that, even though you consider your pet as a companion and devoted friend, legally, your pet is ‘personal property’ – and is not given the status of a person. That makes it critical to choose the right planning method. You can provide for your pet in your last will and testament or by creating a trust.
Even though it may seem ‘easy’ to include a bequest for your pet within your will, it may not be the best approach. Why? Because your will must go through probate before it takes effect. This can be time consuming and uncertain, and since your pet needs food, water, shelter, and love every day, this may not be the best way to provide for your pet. During probate, your pet’s care, or even ownership, can be in jeopardy. So, while you may want to include provisions in your will for your pet, first consider other methods. Many people are now using a ‘trust’ to provide funds and direction for the care of their pets.
Unlike a will that is subject to the probate process, a trust becomes effective immediately upon the terms outlined in your trust – usually death or disability. Your trust specifies the details concerning the care and control of your pet, as well as making funds available. Your trust can also give specific directions about the daily care, medical attention, physical control and even burial of your pet.
A trust is a legal entity set up to accomplish a particular purpose. We will work with you to establish a plan that will determine when and under what circumstances the trust will take effect. This includes how the trust will be funded, who will be the trustee, successor trustee, beneficiary and caretaker, and how the trustee or caretaker will manage your pet and the funds for your pet.
You want your loving pet to be fed, cared for, and to receive medical attention. You may also want to designate funds for pet insurance, or even to enforce the trust. In your trust, you can also leave real property for housing your beloved companion.
A ‘pet trust’ is really a generic term and is applied to a trust that provides for your pet. A pet cannot be a beneficiary of a traditional legal trust because one of the legal requirements for a trust is that there must be a beneficiary, and that beneficiary must be able to enforce the terms of the trust. Obviously, a pet cannot enforce a trust. So, the choice and structure of a trust must take this into account and be properly worded to accomplish your goals.
Most trusts for the care of pets include the following:
• Statutory Pet Trust – Some states have enacted statutes that allow for enforceable pet trusts. This generally means that the trust can designate a third party who will have the power to enforce the terms of the trust – to compel the caretaker or trustee to use the trust funds for your pet. Some issues that arise with these trusts include whether the amount of funds in the trust is ‘reasonable’ according to court standards, and who the designated third party to enforce the trust would be.

• Honorary Trust – This is a type of trust set up for a specific purpose (such as to provide for a pet) but without a definite beneficiary. The problem with an honorary trust is that without a statute specifically authorizing it as a pet trust, it is essentially unenforceable.

• Traditional Legal Trust – One of the best methods to ensure the care of your beloved pet is to set up a traditional legal trust. This can be achieved by placing the pet and sufficient funds for its care into the trust. You can designate the caretaker of your pet as the ‘beneficiary’ of the trust as well as a trustee who will be legally responsible for managing the funds and overseeing the caretaker.

 

Special Needs Planning

If you currently provide care for a child or loved one with special needs (such as mental or physical disabilities), you must have contemplated what may happen to him or her when you are no longer able to serve as the caretaker.
While you can certainly plan for them to receive money and assets upon your passing, such a bequest may prevent them from qualifying for essential benefits under the Supplemental Security Income (SSI) and Medicaid programs. If you do not leave them any assets, the benefits provided by these and other programs are generally limited to the bare necessities such as food, housing and clothing. As you can imagine, these limited benefits will not provide the resources that would allow your loved one to enjoy a richer quality of life. Fortunately, the government has established rules allowing assets of the individual with special needs to be held in trust, called a “Special Needs” or “Supplemental Needs” Trust without resulting in disqualification for SSI and Medicaid, as long as certain requirements are met.
Our law firm can help you set up a Special Needs Trust so that government benefit eligibility is preserved while at the same time providing assets that will meet the supplemental needs of the person with a disability (those that go beyond food, shelter, and clothing and the medical and long term support and services of Medicaid). The Special Needs Trust can fund those additional needs. In fact, the Special Needs Trust must be designed specifically to supplement, not replace public benefits. Parents should be aware that funds from the trust cannot be distributed directly to the disabled beneficiary. Instead, it must be disbursed to third parties who provide goods and services for use and enjoyment by the disabled beneficiary.
The Special Needs Trust can be used for a variety of life-enhancing expenditures without compromising your loved one’s eligibility such as:
• Annual check-ups at an independent medical facility
• Attendance of religious services
• Supplemental education and tutoring
• Out-of-pocket medical and dental expenses
• Transportation (including purchase of a vehicle)
• Maintenance of vehicles
• Purchase materials for a hobby or recreation activity
• Funds for trips or vacations
• Funds for entertainment such as movies, shows or ballgames.
• Purchase of goods and services that add pleasure and quality to life. This may include computers, videos, furniture or electronics.
• Athletic training or competitions
• Special dietary needs
• Personal care attendant or escort
Special Needs Trusts are a critical component of your estate planning if you have disabled beneficiaries for whom you wish to provide for after your passing. Generally, Special Needs Trusts are either stand alone trusts funded with a separate asset like a life insurance policy or they can be structured as a sub-trust in your existing living trust.

 

Irrevocable Life Insurance Trusts

There is a common misconception that life insurance proceeds are not subject to Federal Estate Taxes. While the proceeds are received by your loved ones free of any income taxes, they are countable as part of your taxable estate and therefore your loved ones can lose as much as half of the policy’s value to estate taxes.
An Irrevocable Life Insurance Trust (ILIT) is created specifically for the purpose of owning your life insurance policy. A properly established and administered trust holds the policy outside of your estate and keeps the proceeds from being taxable to your estate. The proceeds from the insurance policy can then be used to provide your estate with the liquidity to pay estate taxes, pay off debts, pay final expenses and provide income to a surviving spouse or children. The ILIT will be the policy owner and beneficiary. Once your trust is established, you can use your annual gift tax exclusion to make cash gifts to your trust. Your beneficiaries forgo the present gift (in lieu of the future proceeds) and the trustee uses the remaining gift to pay the premium on the life insurance policy.
There are many options available when setting up an ILIT. For example, ILITs can be structured to provide income to a surviving spouse with the remainder going to your children from a previous marriage. You can also provide for distribution of a limited amount of the insurance proceeds over a period of time to a financially irresponsible child.
Our firm is dedicated to helping clients make educated, informed decisions about their assets and will work with you and your team of financial advisors and CPAs to implement a highly sophisticated and effective estate plan that allows for the maximum transfer of assets to your loved ones.

 

Guardianships

For some members of our society, legal protection may be necessary even after they have entered adulthood. These individuals may have been injured in an accident, continue to suffer from an incapacitating physical illness or psychological disorder, or have some other condition that prevents them from caring for themselves. In these cases, a guardianship may be established.
Guardians and Protected Persons
Guardianship, also referred to as conservatorship, is a legal arrangement that places an individual, also known as a ward or protected person, under the supervision of a guardian, or custodian. There are two main types of guardianship: guardianship of the person and guardianship of the estate or property.
A guardian is typically a family member, friend, or fiduciary appointed by the court. A protected person can be a minor without a parental guardian or an adult who can no longer make safe and sound decisions about his or her own person or property. Additionally, a person who is prone to fraud or undue external influence may be placed under guardianship for protection.
Appointment of a guardian can materially limit the rights and privileges of the protected individual in areas such as:
• Choosing residence
• Providing informed consent to medical treatment
• Making end-of-life decisions
• Making property transactions
• Obtaining a driver’s license
• Owning, possessing, or carrying a firearm or other weapon
• Contracting or filing law suits
• Marriage
• Voting
Right to Due Process
In order to safeguard the protected person’s right to due process, he or she is usually provided with notice and is entitled to attend all legal proceedings related to guardianship. In addition, the protected person may obtain representation by an attorney, present evidence, and confront and cross-examine all witnesses.
Guardianship of the Person
Guardianship of the person grants authority over non-financial matters such as issues that impact the personal well-being of the protected person, including making important medical decisions. The appointed guardian is normally tasked with the following responsibilities
• Determining and maintaining residence
• Providing informed consent to and supervising medical treatment
• Consenting to and supervising non-medical services such as education, psychiatric or behavioral counseling
• Making end-of-life decisions
• Maintaining the protected person’s autonomy as much as possible
Guardianship of the Estate or Property
Guardianship of the estate or property empowers the guardian to make important financial decisions on behalf of the protected person, including:
• Organizing, gathering and protecting assets
• Arranging appraisals of property
• Safeguarding property and assets from loss, whenever possible
• Managing income from assets
• Making appropriate payments
• Obtaining court approval prior to any sale of major assets
The guardian may be required to report to the court about his or her activities on an annual basis.
Many guardianships are temporary arrangements, meant to protect an incapacitated individual until he or she regains capacity.
Guardianship of Minors
Guardianships may also be used to protect the legal rights of a minor. In the event that a parent is no longer able to act on behalf of his or her child, a guardian, usually a relative, is appointed. Unlike an adoption, under a guardianship, parents may remain responsible for supporting the child financially and they do not necessarily forfeit their parental rights.
A minor may be considered for legal guardianship if his or her parent cannot provide shelter, does not have a steady income, suffers from an illness, or is incarcerated. In most instances, parental approval is sought prior to any legal proceedings.

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