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How to Get Organized to Meet With Your Estate Planning Attorney

OK, great!  You’ve finally decided it’s time to meet with an estate planning attorney and get your affairs in order.  It’s time to make sure your family is protected.

Now that you’ve scheduled the first appointment, what’s the next step?

You can do one of two things: (1) Simply wait for the meeting date to arrive, or (2) Get yourself organized and prepared for the first meeting.

Before You Meet With Your Attorney:  3 Things

Taking the time to sort through your important papers and get your thoughts in order will go a long way to making the meeting productive and valuable.  Otherwise, the meeting will become a fishing expedition for your attorney and both tedious and confusing for you.

Here are 3 ways to get yourself organized and prepared for your first meeting:

  1. Make a complete list of your assets and liabilities.
  1. List what you own (e.g., bank accounts, investment accounts, real estate, retirement accounts, and life insurance). Fortunately, you do not need to make a list of your personal property.
  1. Jot down how you own it (e.g., in your sole name or in joint names with your spouse or someone else such as a child or sibling).
  1. Indicate whether you have already designated a beneficiary for the account or policy.
  1. Record how much you owe (e.g., mortgages, car loans and credit cards).
  1. Think about who you want to inherit your estate, when they’ll inherit it, and how they’ll inherit it.

There are many ways to pass your property to beneficiaries, including outright, in stages (such as after college or after getting married), at specific ages, or in lifetime discretionary trusts.

It’s wise to consider the advice of your attorney, but, at the very least, think about each beneficiary’s current needs and what they may need in the future.

  1. Think about who you want to be in charge if you become incapacitated or die.

Along with naming Guardians for your minor children, deciding will serve as your fiduciaries (including the Executor of your Will, Successor Trustee of your Trust, Attorney in Fact of your Power of Attorney, and Health Care Agent in your Medical Directive) is, by far, the most important decision you will need to make.

Why?  Because if you choose the wrong person for the job, or if someone you choose declines to serve or can’t serve, the estate plan that you have so carefully put together will come to a grinding halt.

If you’re like most people, you’ll need the advice of your attorney to choose the right people or institutions to serve as your fiduciaries, but think about which family members or friends will be good candidates – and which will not.

It’s a lot to think about and organize, but it will be well worth it in the end.

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Will Your Revocable Living Trust Avoid Probate? It Depends.

If you’ve set up a Revocable Living Trust, congratulations!  You’re definitely on the right track. But…you’re only half way there. Many believe because they took the time to create a Trust, their estate will automatically avoid probate.  Unfortunately, this is a false sense of security.

The key to probate avoidance is proper asset ownership, including the full funding of your Revocable Living Trust.

What are Probate Assets?

What assets require probate?

  • Accounts and real estate titled in your sole, individual name [without a payable on death (POD) or transfer on death (TOD) designation]
  • Accounts and real estate you own as a tenant in common
  • Contract assets naming your estate as beneficiary

What Assets Avoid Probate?

What assets automatically avoid probate after you die and, therefore, do not need to be funded (or cannot be funded) into your trust?

  • Accounts and real estate owned as joint tenants with rights of survivorship
  • Accounts and real estate owned as tenants by the entirety
  • Life insurance
  • Retirement accounts, including IRAs, 401(k)s, and annuities
  • Life estate property
  • Payable on death (POD) and transfer on death (TOD) accounts and, in some states, transfer on death or beneficiary deeds

What’s the Next Step?


Ask a qualified estate planning attorney to confirm that your Revocable Living Trust is fully funded and that all assets are aligned with your estate planning.  Proper asset ownership is key to probate avoidance.

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Why Does Probate Take So Long?

Probate can be easily avoided, but most estates are dragged through the process.  Why?  Many people fail to create an estate plan, so probate is required.  And – others plan with just a Will, so probate is required.  As a result, assets end up at the mercy of a probate judge, open to public scrutiny, and delayed passing to beneficiaries.

Frustratingly, probate can drag on for months – or even years.  Here are some of the most common reasons why probate takes so long:

  1. Many Beneficiaries. In general, estates with many beneficiaries take longer to probate than estates with just a few beneficiaries.

Why? It takes time to communicate with each and every beneficiary and, if documents need to be signed, there are always beneficiaries who fail to return their signed documents in a timely manner.  Regardless of advances in modern technology and communications, it simply takes a long time to reach multiple beneficiaries, spread out across the United States or in a foreign country.

  1. Estate Tax Return. Estates, required to file an estate tax return at the state and/or federal level, are usually complicated. And, the personal representative can’t make a final asset distribution until she is absolutely sure that the estate tax return has been accepted and the estate tax bill has been paid in full.  At the federal level, it can take up to a year before the IRS gets around to reviewing and accepting an estate tax return.
  1. Angry Beneficiaries.  Nothing can drag out the probate process like a family feud. When beneficiaries don’t get along or won’t speak to each other, the personal representative may be forced to go to court to get permission to do just about everything.  That takes time.
  1. Incompetent Personal Representative. A personal representative, who is not good with money, irresponsible, disorganized, or busy with his job or family, will drag probate on and on.  Why?  Because a personal representative must efficiently and effectively handle the responsibilities and duties that go along with serving.  It’s a lot of work.

What Can Be Done to Speed Up Probate?

The best way to speed up probate is to avoid it altogether.  Avoidance is the only way to eliminate probate delays.   If properly drafted and funded, a Revocable Living Trust will avoid probate perils, stresses, and delays.  It’s easy.

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Should I Write My Own Will?

I’m sure you have heard this less than eloquent phrase before – “Garbage in, garbage out.” The phrase is typically used in computer programming and scientific research.  Unfortunately, it also applies to the law, legal documents, and writing your own Will.

What’s Wrong With Writing Your Own Estate Plan?

Legally, you have the right to draft your own documents; however, that doesn’t mean you have the right to have them actually work.  Do-it-yourselfers accidentally disinherit children, fail to protect assets from lawsuits, trigger probate, invite court interference, give assets outright to a drug addicted beneficiaries, and incur huge fees to straighten out a big mess.

Creating an effective set of estate planning documents involves many moving parts and deep analysis.  An estate planning attorney will consider your family situation and financial status coupled with where you live and where you own real estate.  Your goals and concerns are also carefully considered.

With a myriad of variables at play, how can a book of generic forms, computer program, or website possibly address all correctly?  It simply can’t.

Even attorneys, who don’t focus on estate planning, are hesitant to write their own estate plans.  Instead, they turn to their colleagues who understand probate and trust laws and are experienced in putting together estate plans that work.

Use Books and Software to Learn About Estate Planning, Not for Estate Planning

Estate planning books and software should only be used as tools to learn about the estate planning process. They should not be used a substitute for the hands-on, legal counseling from an experienced estate planning attorney.

While there are many tasks you can complete on your own, designing, drafting, and implementing an estate plan is not one of them.

What’s the Biggest Problem With Do-It-Yourself Estate Planning?

The biggest problem with do-it-yourself estate planning is that it often creates a huge burden for loved ones.  It’s your loved ones who will find out you tried to save a few bucks and, as a result, caused a huge stressful mess that will cost thousands of dollars.

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Estate Planning Basics for Newlyweds – How to Get Prepared for the Unexpected

It’s that time of year – the time for beautiful weddings, fun receptions, delicious cakes, special gifts, and romantic honeymoons. While this is a joyous time for everyone, it’s also time for you and your new spouse to plan for your future – for richer or for poorer, in sickness and in health.

Why Newlyweds Need to Plan Their Estates

Why should newlyweds care about estate planning? Because everyone – young or old, married or single – needs to protect themselves and those they love.

Unfortunately, many couples spend more time planning their honeymoon than they do planning the best way to protect each other.

What Happens Without an Estate Plan?

This fallout of becoming incapacitated or dying without an estate plan is serious, expensive, and painful. It often causes financial ruin and family discord, lasting for generations.

Without an estate plan:

• You will leave your spouse and the rest of your family in the dark – they won’t know what you would want to happen if you became incapacitated or died. This often leads to family fights as each individual champions for what she thinks you would have wanted.

• You’ll leave a huge burden on your loved ones to make tough decisions about medical heroics and the withdrawal of life support.

• The court or state law, not you, will decide who makes health care decisions if you are unable to make those decisions yourself.

• A judge, not you, will decide who raises your children.

• The court can lock down your assets so even your spouse has to get court permission before making a financial move.

• Any assets you leave to loved ones can be taken by their divorcing spouses, bankruptcy creditors, medical crisis creditors, predators, and frivolous lawsuits.

• You may accidentally disinherit your spouse and your children.

• Your beloved pet could end up in a shelter or euthanized.

What Should You Do?

We invite you and your new spouse to telephone our office to set up a meeting. We’ll walk you through how to protect each other and those you love; how to protect your beloved pets; and how to protect your assets and make things easier for you and your families. Call now; we look forward to hearing from you.

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Parental Warning: If You Own Your Property this Way, You May Accidentally Disinherit Your Own Children

Owning property as Joint Tenants with Right of Survivorship is easy, common, and often disastrous. Sadly, children – both minor and adult – are often disinherited.

While there are several forms of joint ownership, the one most people use (and the one considered in this discussion) is called “Joint Ownership with Right of Survivorship.” When one owner dies, the jointly owned asset automatically, by operation of law, transfers to the surviving owner.

• Joint ownership is a very common way for married people to own their assets.
• Joint ownership is also commonly used by aging parents and their adult children.

Joint Ownership Just Postpones Probate
In most cases, joint ownership merely postpones probate; it doesn’t totally avoid it. If the surviving owner does not add a new joint owner (or place the asset in trust) before she dies, the asset will have to go through probate before it can go to the heirs. Or, if the owners die at the same time, probate is required immediately.

Joint Ownership Can Cause You to Unintentionally Disinherit Your Beloved Children
Surprising to most parents, assets titled as “Joint Tenants with Right of Survivorship” are NOT controlled by their Will or Trust. In fact, if you are the first owner to die, you can’t control what happens to that asset.

• If you add a spouse who is not the parent of all of your children as a joint owner, you will disinherit your children from a previous relationship.
• If you add one child as a joint owner, you will disinherit your other children.

The transfer of ownership takes place immediately upon your death. Even if your Will or Trust directs that you want someone in particular to receive your share of a jointly owned asset, it will still go to the surviving owner. The surviving owner can then do whatever he or she wants with the entire asset.

Here’s an example:

After Robert died, Joan owned their vacation home outright. She remarried a few years later, and she added her new spouse’s name to the title. When Joan died, her children were shocked to learn that the new husband now owned the property, even though their father had always promised it would stay in the family and go to the three of them.

Other Risks of Joint Ownership
• While it’s easy to add a co-owner’s name to a title, taking someone’s name off a title can be difficult. If the person does not agree, you could end up in court.
• Your assets are exposed to the other owner’s debt and obligations. For example, if you add your adult son on the title of your home and he is successfully sued, you could be forced to sell your home.
• There could be serious gift and/or income tax consequences.
• If you add a minor as a joint owner, the only way to sell or refinance the asset is through a court guardianship.
• If you need to sell or refinance and your co-owner is incapacitated and unable to conduct business, you’ll have to ask the court to appoint someone to sign for your co-owner (even if that co-owner is your spouse). Once the court gets involved, it usually stays involved to protect the incapacitated owner’s interest until the incapacity ends or the person dies.

Actions to Consider
• To avoid both inconvenience and tragedy, call our office immediately to set up an appointment and have your asset ownership reviewed.
• We will review your asset ownership and explain what will happen to your assets if you become disabled and when you die.
• We will show you how to own your assets to best ensure your estate plan works, meaning it does what you think it’s going to do.

Joint ownership with a sibling, life partner, business partner, child, spouse, or anyone else, puts your assets and your children’s inheritance at risk. It may cause significant and unnecessary taxes and cause your estate plan to fail. To avoid both inconvenience and tragedy, you are invited to call our office right now.

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AB Trusts – Do You Need to Get Rid of Yours?

Are you married and is the last time you and your spouse updated your estate plan more than a few years ago?  Then chances are your estate plan contains good old “AB Trust” planning (also called “Marital and Family Trusts” or “QTIP” and “Bypass Trusts”) which, up until 2011, was the only way for married couples to double the value of their federal estate tax exemptions.  All of this changed in 2011 when “portability” of the estate tax exemption between spouses was introduced for the first time.

In simple terms, “portability” means that when the first spouse dies, the surviving spouse can claim the deceased spouse’s unused federal estate tax exemption and add it to his or her own exemption.  The good news is that portability has been made a permanent part of the federal estate tax laws.  The bad news is that the AB Trust planning in your old estate plan may now do more harm than good.

Take, for example, Fred and June who have been married for 40 years.  If Fred dies in 2014 and none of his $5.34 million estate tax exemption is used, then June can add Fred’s $5.34 million exemption to her own $5.34 million exemption so that June now has an exemption equal to $10.68 million.  Better yet, all property passing outright to June from Fred’s estate, revocable trust, or by right of survivorship will receive a full step up in income tax basis to the fair market values as of Fred’s date of death.  Subsequently, when June dies her beneficiaries will receive a full, second step up in income tax basis to the fair market value as of June’s date of death.

What if instead Fred and June have a typical 1990’s estate plan, which uses those good old AB Trusts to ensure full use of both spouses’ federal estate tax exemptions?  If Fred and June were lax and neglected to update their 1990’s estate plan and Fred dies in 2014, then not only will June be stuck with AB Trusts that were drafted using decades-old planning priorities, but their heirs won’t receive any step up in income tax basis for the assets remaining in the B Trust when June dies.  Instead, the heirs will inherit the B Trust assets with the income tax basis calculated as of Fred’s 2014 date of death.  If June lives for a long time, then this could very well result in a large income tax bill when the heirs decide to sell the inherited assets many years down the road.

Fred and June’s story is only one scenario.  It shows the down side of an old estate plan that uses AB Trust planning.  On the other hand, there are still many good reasons for married couples to keep AB Trust planning in their updated estate plans.  If you’re married and your estate plan is more than a few years old, then give us a call so that together we can determine if an AB Trust plan still makes sense for you and your family.  It is quite possible that your existing estate plan can be revised so that it takes advantage of the good features of AB Trust planning while gaining the benefits of an additional step up in basis.

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What is Treating Your Children Fairly Means Unequal Inheritances?

When planning their estate, most parents express the desire to treat their children equally out of a sense of fairness.  However, sometimes being fair or doing what’s right by your children may not mean equal or the same inheritances.

The Key Takeaways

  • Treating children fairly does not always mean equal inheritances.
  • How and wheneach child receives an inheritance may need to be customized to your children as individuals.
  • Not providing an outright inheritance is usually a good choice, as assets that stay in a trust are protected from irresponsible spending, divorce, predators, and creditors.

When Unequal Inheritances May Be Fair

There are often special circumstances to consider before you divide the family pie into equal parts. For example:

  • You may want to leave more assets to your son who struggles to support his family on a modest teacher’s salary than to your daughter who makes six figures, married a Wall Street tycoon, and has chosen not to have children.
  • You may want to give a larger inheritance to a child who has dedicated himself to volunteer work, the arts, religion, or public service.
  • You may want to compensate a child who has given up part of his own life to care for you.
  • You may want to provide for grandchildren even if one child has more children than another.
  • You may have a much younger child who needs care into adulthood whereas your adult children are financially independent.
  • You may have a special needs child who will need care for his entire lifetime.
  • You may have a child who has contributed to the family business and other children who have not.  Instead of making them all equal owners in the business, you may want to leave the business to the one who has contributed and shown an interest, and then provide for the others with other assets and/or life insurance.

Distribution of Inheritances May Also Vary

Not only do you need to decide how much your children should receive, but also when they will receive it—and that can be different for each child. You can distribute inheritances in one lump sum or in installments; or, you can keep an inheritance in a trust. Consider factors such as the size of the potential inheritance, your children’s ages and family situation, how they have handled their own money, and how much they need your financial gift.

What You Should Know

Many parents do not provide outright inheritances, preferring to keep the assets in a trust for their children. The trustee can make distributions for your children’s benefit based on guidelines you provide, but assets that stay in the trust are protected from irresponsible spending, creditors (bankruptcy, lawsuits, and divorce), and predators (those with undue influence on your child).

Frank and Jen have two sons who are stable and responsible with their own money; they will receive their inheritances in a lump sum after their parents both have died. But their daughter is in and out of rehab and has been irresponsible with her own money. Fearing she will misuse her inheritance, they decided to keep her share in a trust so it can provide for her without being completely available to her.

Actions to Consider

  • If you can afford it, consider giving your children some of their inheritance now. Not only will you have the opportunity to witness them enjoying your gift, but it will provide insight as to how your children will handle an inheritance.
  • Consider whether your children should inherit everything you own.  Perhaps you have additional goals such as providing for your grandchildren’s education, gifting other loved ones, providing for beloved pets, making charitable contributions, or setting up a family foundation or donor-advised fund.

It’s essential that you take action to ensure your children receive their inheritances as is best for them as individuals.  Our office can ensure your estate plan and your children’s best interests match… and continue to match as life unfolds.

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Who Needs an Estate Plan?

If you’re reading this, you need an estate plan.  Why?  The short answer is “Everyone, age 18 and older needs an estate plan.” It doesn’t matter if you are old or young, if you have built up considerable wealth or if you are just entering adulthood —you need a written plan to keep you in control and to protect yourself and those you love.

The Key Takeaways

  • Every adult, regardless of age or wealth, needs both a lifetime plan and an after-death estate plan.
  • Planning for incapacity will keep you in control and let your trusted loved ones care for you without court interference – and without the loss of control and expense of a guardianship or conservatorship proceeding.
  • Every adult needs up-to-date health care directives.
  • You need to leave written instructions to make sure you are the one who selects who’s in charge of when and how your assets will be distributed.
  • We all need the counseling and assistance of an experienced estate planning attorney.

What is an Estate Plan?

Your estate is comprised of the assets you own—your car, home, bank accounts, investments, life insurance, furniture and personal belongings. No matter how large or how small your estate, you can’t take it with you when you die, and you probably want certain people to have certain things you own.

To make sure that happens, you need to provide written instructions stating who you want to receive your assets and belongings, what you want them to receive, and when they are to receive it—that is the essence of an estate plan. If you have young children, you will need to name someone to raise them in your place and to manage their inheritance.

A properly prepared estate plan also will have instructions for your care (and the management of your assets) if you become incapacitated, even for a short time, due to illness or injury. Without the proper documents in place, your family will have to ask the court for permission to use your assets to take care of you and to oversee your care. That process is out of your control and it takes time and costs money, making an already difficult situation even more difficult for your family.

It might surprise you, but having a plan in place often means more to families with modest means because 1) they can least afford to pay unnecessary court costs and legal fees and 2) state laws, which take over in the absence of planning, often distribute assets in an undesirable way. Here’s an example:

Sam and Meg had two young children. Sam died in a car accident on his way to work. Because he had no estate plan, the laws in his state divided his estate into thirds: one third went to Meg and one third to each of his children. Meg, a stay-at-home mom, was forced to go back to work. The court set up guardianships for each child, which required ongoing court costs, including accounting, guardianship and attorney fees. By the time the children reached 18 and received their inheritances, there was not enough left for them to go to college.

What You Need to Know

Don’t try to do this yourself. You need the counseling and assistance of an experienced estate planning attorney who knows the laws in your state and has the expertise to guide you in making difficult decisions such as who will raise your children and who will look after your care at incapacity.  That attorney will also know how to carefully craft the appropriate estate planning documents, so that what you think will happen when you become incapacitated or die actually happens.

Actions to Consider

  • Call or email our office now to set up an estate planning consultation appointment.  We make tough topics manageable to discuss and talk about.
  • Don’t worry about how life will unfold; the best practice is to have your plan prepared now based on your current situation.

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How to Minimize the (Voluntary) Federal Estate Tax with Portability

Surprising to most people, the federal estate tax is a voluntary tax.  Estate planning attorneys used to say, “You only pay if you don’t plan.”  Now, portability provides both an alternative and a back up plan to lifetime tax planning.  This means you might be able to minimize or even eliminate federal estate taxes even if you didn’t plan.  Here’s how.

Portability allows married couples to use two estate tax exemptions and save significant amounts in estate taxes without lifetime planning and without the division of assets.  This planning option first appeared in 2010, but, because it was a temporary measure, many estate planners were hesitant to rely on it.  It became permanent law in 2013 and is now considered a viable tool for many married couples.

The Key Takeaways

  • EVERYONE still needs lifetime estate planning to protect themselves, their families, and their assets.  (Estate planning is not just about tax planning and it’s not just about money.)
  • The failure to use both federal estate tax exemptions may cause an unnecessarily high tax bill for married couples.
  • Portability lets married couples use both of their exemptions without lifetime tax planning.
  • Portability is not automatic—an estate tax return must be filed after the death of the first spouse, generally within nine months.
  • Trust planning is still highly useful for both tax and non-tax reasons (e.g., asset protection and family line protection) and can be used with or without portability.

How Portability Works

When portability was made permanent in 2013, Congress also made the $5 million federal estate tax exemption permanent (with annual increases tied to inflation).  As a result, most families don’t have to worry about federal estate taxes.

However, if your net estate is more than $5 million and you are married, portability allows your surviving spouse to use your individual estate tax exemption as well as his or her own, allowing the transfer of up to $10+ million in assets with no estate taxes, saving millions from Uncle Sam’s clutches.

Unlike trust tax planning, which must be done while both spouses are alive, portability is available after the first spouse dies and is a valuable back-up plan for couples who neglected lifetime tax planning.

Note: Portability is not automatic. An estate tax return (Form 706) must be filed within nine months after the death of the first spouse, or within any extension granted. If no timely return is filed, portability and the deceased spouse’s unused exemption (estate planning attorneys call this the “DSUE”) are forever lost, perhaps, causing the estate to pay more in estate taxes than was necessary and leaving less for the family.

Interestingly, remarriage does not change the identity of the most recently deceased spouse, and a surviving spouse can use multiple DSUEs.

Here’s an example:

Bob and Sue were married for many years.  When Bob died, Sue’s attorney filed an estate tax return, thereby “electing” portability. Some time later, Sue married Phil. She decided to use Bob’s DSUE during her lifetime and made gifts to their children.

When Phil died a few years later, Sue’s attorney filed an estate tax return for Phil’s estate, making portability available.  And, when Sue died, her estate was able to use both her exemption and Phil’s DSUE.  Sue was able to use three federal estate exemptions and completely avoided the federal estate tax.

Keep in mind that if Sue had not used her first husband’s (Bob’s) DSUE before Phil died, it would have been wasted.  Why?  Because Phil would have become her most recently deceased spouse.

What You Need to Know

Trust planning can be used with or without portability and is still highly relevant for couples with any size of estate.

When there are children involved, especially if they are from a previous marriage or relationship, trust planning can allow the first spouse who dies to provide for the surviving spouse and keep control over who will eventually receive his/her share of the estate.

In addition, trust planning can protect assets from a beneficiary’s irresponsible spending, creditors, medical crises, lawsuits, and divorce proceedings, allowing the assets to remain within the family for generations to come. Trust assets can also provide for a special needs beneficiary without losing valuable government benefits.

Actions to Consider

  • Ask your estate planning team if and when you need to be concerned about state estate taxes and state inheritance taxes.  (Some states have their own death/inheritance tax, often with a lower exemption than the federal estate tax. As a result, it is possible that an estate will be subject to state taxes even though it is exempt from federal taxes.)
  • When a spouse dies, ask your estate planning attorney whether using portability is appropriate for you.  (Most married couples can benefit from portability, even if only as a preventive estate planning measure.  The value of assets may increase to more than one exemption before the surviving spouse dies.)
  • If your second (or third) spouse is seriously ill, ask your estate planning attorney you should use any remaining DSUE to make lifetime gifts to beneficiaries.
  • Ask your estate planning attorney whether the generation skipping transfer (GST) tax is a factor for you.  The GST tax is not portable and needs its own planning analysis.
  • When your spouse dies, be sure the estate tax return (Form 706) is prepared and filed by a qualified professional such as an estate planning attorney.

Ask your estate planning team about non-tax trust protections such as asset protection and family line protection.

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