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Estate Planning Blog

Tuesday, November 25, 2014

The ‘Sandwich Generation’

The ‘Sandwich Generation’ – Taking Care of Your Kids While Taking Care of Your Parents

“The sandwich generation” is the term given to adults who are raising children and simultaneously caring for elderly or infirm parents.  Your children are one piece of “bread,” your parents are the other piece of “bread,” and you are “sandwiched” into the middle.

Caring for parents at the same time as you care for your children, your spouse and your job is exhausting and will stretch every resource you have.  And what about caring for yourself? Not surprisingly, most sandwich generation caregivers let self-care fall to the bottom of the priorities list which may impair your ability to care for others.

Following are several tips for sandwich generation caregivers.

  • Hold an all-family meeting regarding your parents. Involve your parents, your parents’ siblings, and your own siblings in a detailed conversation about the present and future.  If you can, make joint decisions about issues like who can physically care for your parents, who can contribute financially and how much, and who should have legal authority over your parents’ finances and health care decisions if they become unable to make decisions for themselves.  Your parents need to share all their financial and health care information with you in order for the family to make informed decisions.  Once you have that information, you can make a long-term financial plan.
  • Hold another all-family meeting with your children and your parents.  If you are physically or financially taking care of your parents, talk about this honestly with your children.  Involve your parents in the conversation as well.  Talk – in an age-appropriate way – about the changes that your children will experience, both positive and challenging.
  • Prioritize privacy.  With multiple family members living under one roof, privacy – for children, parents, and grandparents – is a must.  If it is not be feasible for every family member to have his or her own room, then find other ways to give everyone some guaranteed privacy.  “The living room is just for Grandma and Grandpa after dinner.”  “Our teenage daughter gets the downstairs bathroom for as long as she needs in the mornings.”
  • Make family plans.  There are joys associated with having three generations under one roof.  Make the effort to get everyone together for outings and meals.  Perhaps each generation can choose an outing once a month.
  • Make a financial plan, and don’t forget yourself.  Are your children headed to college?  Are you hoping to move your parents into an assisted living facility?  How does your retirement fund look?  If you are caring for your parents, your financial plan will almost certainly have to be revised.  Don’t leave yourself and your spouse out of the equation.  Make sure to set aside some funds for your own retirement while saving for college and elder health care.
  • Revise your estate plan documents as necessary.  If you had named your parents guardians of your children in case of your death, you may need to find other guardians.  You may need to set up trusts for your parents as well as for your children.  If your parent was your power of attorney, you may have to designate a different person to act on your behalf.
  • Seek out and accept help.  Help for the elderly is well organized in the United States.  Here are a few governmental and nonprofit resources:
    • www.benefitscheckup.org – Hosted by the National Council on Aging, this website is a one-stop shop for determining which federal, state and local benefits your parents may qualify for
    • www.eldercare.gov – Sponsored by the U.S. Administration on Aging
    • www.caremanager.org  -- National Association of Professional Geriatric Care Managers
    • www.nadsa.org – National Adult Day Services Association

Tuesday, November 18, 2014

Leaving Assets to a ‘Troubled’ Heir

Estate Planning: Leaving Assets to a ‘Troubled’ Heir

If you have a child who is addicted to drugs or alcohol, or who is financially irresponsible, you already know the heartbreak associated with trying to help that child make healthy decisions.  Perhaps your other adult children are living independent lives, but this child still turns to you to bail him out – either figuratively or literally – of trouble.

If these are your circumstances, you are probably already worrying about how to continue to help your child once you are gone.  You predict that your child will misuse any lump sum of money left to him or her via your will.  You don’t want to completely cut this child out of your estate plan, but at the same time, you don’t want to enable destructive behavior or throw good money after bad.

Trusts are an estate planning tool you can use to provide an inheritance to a worrisome heir while maintaining control over how, when, where, and why the heir accesses the funds.  This type of trust is sometimes called a spendthrift trust.  

As with all trusts, you designate a trustee who controls the funds that will be left to the heir.  This trustee can be an independent third party (there are companies that specialize in this type of work) or a member of the family.  It is often wise to opt for a third party as a trustee, to prevent accusations among family members about favoritism.

The trust can specify the exact circumstances under which money will be disbursed to the heir.  Or, more simply, the trust can specify that the trustee has complete and sole discretion to disburse funds when the heir applies for money.  Most parents in these circumstances discover that they wish to impose their own incentives and restrictions, rather than rely on the judgment of an unknown third party.

The types of conditions or incentives that can be used with a trust include:

  • Drug or alcohol testing before funds are released
  • Payments directly to landlords, colleges, etc., rather than payment to the heir
  • Disbursement of a specified lump sum if the heir graduates from university or keeps the same job for a certain time period
  • Payment only to a drug or alcohol rehab center if the child is in an active period of addiction
  • Disbursement of a lump sum if the child remains drug free
  • Payments that match the child’s earned income

If you are considering writing this type of complex trust, it is advisable to seek assistance from a qualified and experienced estate planning attorney who can help you devise a plan that best accomplishes your wishes with respect to your child.
 


Tuesday, November 4, 2014

Preparing to Meet With an Estate Planning Attorney

Preparing to Meet With an Estate Planning Attorney

A thorough and complete estate plan must take into account a significant amount of information about your assets, your family, your property, and your wishes during and after your life.  When you make your first appointment with an estate planning attorney, ask the attorney or the paralegal if they can provide a written list of important information and documents that you should bring to the meeting.  

Generally speaking, you should gather the following information before your first appointment with your estate planning lawyer.

Family Information
List the names, birth dates, death dates, and ages of all immediate family members, specifically current and former spouses, all children and stepchildren, and all grandchildren.

If you have any young or adult children with special needs, gather all information you have about their lifetime financial needs.

Property Information
For all real property you own or can reasonably expect to acquire, gather the property description, your ownership interest information, the address, market value, any outstanding mortgage balance, and the most recent tax assessment.

For any personal property of value (such as vehicles, jewelry, coins, antiques, stamps, and art), compile a list that includes a description, the physical location of each item, your ownership interest information, the market value, and any liens against the property.

Business Information
If you have an ownership interest in a business, make sure you have documents showing your ownership interest in the business, the business location, the names and contact information of other owners, and 2-3 years of past profit and loss statements.

Financial Information
Compile a list of all your financial accounts, including: checking accounts, savings accounts, investment accounts, stocks and bonds, and U.S. Treasury notes.  If any of these accounts currently have designated beneficiaries, bring that information as well.

Gather all retirement savings information, including 401(k) plans, 403(b) plans, IRAs, life insurance policies, Social Security statements, and pension information.  Make sure you have the account names, account numbers, current balances, outstanding loan balances, and currently named beneficiaries.

If any family members owe you debts, compile that information.

Questions to Think About
The following are some of the first questions your estate planning attorney will ask.  You are not required to have answers ready for all these questions, but because some of them are complex, it is a good idea to think through these issues before your appointment.

  • Who will be beneficiaries of your property?
  • Do you want to bequeath any specific items of property to specific individuals?
  • Is there anyone you do not want to be a beneficiary of any of your property?
  • Do you plan to make any bequests to any nonprofit organizations – university, church, charity, or other organization?
  • Do you know who you want to act as executor of your will?
  • Do you know who you want to act as trustee of any trusts you establish?
  • If you have minor children, who do you want to appoint as guardian?
  • Do you want to make arrangements for your health and financial well-being in the event you become unable to make decisions for yourself?
  • Do you have specific wishes for your funeral?
  • Are you a registered organ donor?

During your initial consultation, your estate planning attorney will review your family and financial situation, discuss your wishes, answer your questions and suggest strategies to protect your family, wealth and legacy.


Tuesday, October 28, 2014

Borrowing from your retirement accounts

Borrowing from your retirement accounts: Issues to consider

So you have credit card debt, overdue mortgage payments, or suddenly need to buy a new car. We’ve all been there. You need money now, and your retirement accounts continue to climb. Fortunately, many employers allow you to take out loans on these accounts, but should you really begin spending that money before you retire?

On one hand, there are benefits to borrowing from your retirement accounts. You are essentially borrowing your own money, so the payments you make, plus interest, go back into your account. Since it’s your own money, these payments do not affect your credit score, and most 401(k) loans have relatively low interest rates.

However, there are many risks associated with taking money from accounts like your 401(k). It is recommended that you see a financial advisor before making this decision to address the cost and potential ramifications of the loan.

First consider the reason for taking out a loan, and the multiple options that you face. A dire emergency is the only recommended cause for borrowing from these accounts; some plans even require it. If you’re looking to spend the money on something more frivolous, like a family vacation or a new entertainment system, however, you should consider alternate financing options.

The downside to these loans comes in handling the repayment plan. Interest paid to your own account sounds easy enough, but these payments are subject to taxes. Furthermore, once money is borrowed from your retirement account, it is no longer eligible for tax-deferred growth. Payments you make on the loan come from after-tax assets, so the money you repay into your account can end up getting taxed for a second time once you withdraw after retirement.  

A standard 401(k) loan allows you to borrow up to half of your balance, with a maximum of $50,000. Normally, you have up to five years to repay the loan. Failure to do so within the five-year period means your loan will be deemed an early withdrawal, and will be subject to taxes as well as a 10% early withdrawal penalty.

If you are looking to borrow money from your retirement accounts, carefully consider your repayment plan in advance. It’s especially important to make certainthat you are secure in your employment; if you leave or lose your job, your loan payments will be due within 90 days. Consider borrowing only if interest on a loan from your retirement plan would be less than that of another loan alternative. A final tip: Continue contributing to your 401(k) while you pay off the loan to lessen the impact on your savings.

 


Thursday, October 16, 2014

Help Relieve the Worries of Alzheimer’s Disease

Advance Planning Can Help Relieve the Worries of Alzheimer’s Disease

The “ostrich syndrome” is part of human nature; it’s unpleasant to observe that which frightens us.  However, pulling our heads from the sand and making preparations for frightening possibilities can provide significant emotional and psychological relief from fear.

When it comes to Alzheimer’s disease and other forms of dementia, more Americans fear being unable to care for themselves and burdening others with their care than they fear the actual loss of memory.  This data comes from an October 2012 study by Home Instead Senior Care, in which 68 percent of 1,200 survey respondents ranked fear of incapacity higher than the fear of lost memories (32 percent).

Advance planning for incapacity is a legal process that can lessen the fear that you may become a burden to your loved ones later in life.

What is advance planning for incapacity?

Under the American legal system, competent adults can make their own legally binding arrangements for future health care and financial decisions.  Adults can also take steps to organize their finances to increase their likelihood of eligibility for federal aid programs in the event they become incapacitated due to Alzheimer’s disease or other forms of dementia.

The individual components of advance incapacity planning interconnect with one another, and most experts recommend seeking advice from a qualified estate planning or elder law attorney.

What are the steps of advance planning for incapacity?

Depending on your unique circumstances, planning for incapacity may include additional steps beyond those listed below.  This is one of the reasons experts recommend consulting a knowledgeable elder law lawyer with experience in your state.
 

  1. Write a health care directive, or living will.  Your living will describes your preferences regarding end of life care, resuscitation, and hospice care.  After you have written and signed the directive, make sure to file copies with your health care providers.
     
  2. Write a health care power of attorney.  A health care power of attorney form designates another person to make health care decisions on your behalf should you become incapacitated and unable to make decisions for yourself.  You may be able to designate your health care power of attorney in your health care directive document, or you may need to complete a separate form.  File copies of this form with your doctors and hospitals, and give a copy to the person or persons whom you have designated.
     
  3. Write a financial power of attorney.  Like a health care power of attorney, a financial power of attorney assigns another person the right to make financial decisions on your behalf in the event of incapacity.  The power of attorney can be temporary or permanent, depending on your wishes.  File copies of this form with all your financial institutions and give copies to the people you designate to act on your behalf.
     
  4. Plan in advance for Medicaid eligibility.  Long-term care payment assistance is among the most important Medicaid benefits.  To qualify for Medicaid, you must have limited assets.  To reduce the likelihood of ineligibility, you can use certain legal procedures, like trusts, to distribute your assets in a way that they will not interfere with your eligibility.  The elder law attorney you consult with regarding Medicaid eligibility planning can also advise you on Medicaid copayment planning and Medicaid estate recovery planning.

Tuesday, October 7, 2014

Things a Will Won’t (or Can’t) Do

Will or Won’t? Things a Will Won’t (or Can’t) Do

Wills offer many benefits and are an important part of any estate plan, regardless of how much property you have. Your will can ensure that after death your property will be given to the loved ones you designate. If you have children, a will is necessary to designate a guardian for them. Without a will, the courts and probate laws will decide who inherits your property and who cares for your children. But there are certain things a will cannot accomplish.

A will has no effect on the distribution of certain types of property after your death. For example, if you own property in joint tenancy with another co-owner, your share of that property will automatically belong to the surviving joint tenant. Any contrary will provision would only be effective if all joint tenants died at the same time.

If you have named a beneficiary on your life insurance policy, those proceeds will not be subject to the terms of a will and will pass directly to your named beneficiary. Similarly, if you have named a beneficiary on your retirement accounts, including pension plans, individual retirement accounts (IRAs), 401(k) or 403(b) retirement plans, the money will be distributed directly to that named beneficiary when you pass on, regardless of any will provisions.

Brokerage accounts, including stocks and bonds, in which you have named a transfer-on-death (TOD) beneficiary will be transferred directly to the named beneficiary. Vehicles may also be titled with a TOD beneficiary, and would therefore transfer to your beneficiary, regardless of any provisions contained in your will. Similar to TODs, bank accounts may have a pay-on-death beneficiary named.

The will’s shortcomings are not limited to matters of inheritance. Generally, wills are not as well suited as trusts for putting conditions on a gift such as requiring someone to get married or divorced, or obtain a certain education level, as a prerequisite to inheriting a portion of your estate. A simple will cannot reduce estate taxes the way some kinds of trust plans can.

A trust, not a will, is also necessary to arrange for care for a beneficiary who has special needs. A will cannot provide for long-term care arrangements for a loved one. However, a special needs trust can provide financial support for a disabled beneficiary, without risking government disability benefits.

If you want to leave your estate to Fido, you’re out of luck in many states. Without a special pet trust, your will may not be able to provide for pets to inherit your assets. You can use your will to leave your pet to someone, and then leave money to that person in trust to help take care of your pet.

A will cannot help you avoid probate. Assets left through a will generally must be transferred through a court-supervised probate proceeding, which can take months, or longer, at significant expense to your estate. If it’s probate you want to avoid, consider establishing a living trust to hold your significant assets.

 


Tuesday, September 30, 2014

Veteran’s Aid & Attendance Benefit

Veteran’s Aid & Attendance Benefit: Avoid Scams and Get Trustworthy Advice

Many veterans are unaware of the Aid and Attendance benefit, a component of the Veteran’s Administration Improved Pension that was designed to provide much-needed financial help to elderly veterans and their spouses. Even veterans who know about this pension benefit, however, are frequently targeted by scam artists attempting to take advantage of elderly or infirm veterans and their families.

By educating yourself about the Aid and Attendance benefit and learning how to recognize a scam, you can ensure your family gets the help it deserves without falling prey to veteran’s pension fraud.

What is the Aid and Attendance benefit?

The Aid and Attendance benefit provides additional financial benefits to veterans and their surviving spouses, over and above any other veteran’s pension they receive.  The benefit is available if the veteran or spouse requires a regular attendant to accomplish daily living tasks such as eating, bathing, undressing, taking medications, and toileting.  The benefit is also available to veterans and their surviving spouses who are blind, who are patients in a nursing home due to physical or mental incapacity, or who are living in an assisted care facility.

The Aid and Attendance benefit is not limited to veterans with service-related injuries.  Furthermore, it provides assistance to a veteran who is independent but has a sick spouse.  In these situations, the pension benefit provides financial assistance to compensate for the income depletion caused by the care needs of the sick spouse.


How to avoid Aid and Attendance benefit scams

The most common scams target veterans through seminars and other types of outreach programs about the Aid and Attendance benefit.  Usually, they promise to file a claim with the Veteran’s Administration on behalf of the veteran, for a fee, but the claim is never filed or is filed incorrectly.  Not only does this type of scam harm the veteran financially, an incorrectly filed claim could damage the veteran’s ability to get approval of a correctly filed application.

Another type of scam targets homeless veterans.  The scam artist promises to file an Aid and Attendance benefit application for the veteran, in exchange for a monthly fee taken out of the veteran’s benefit check.  The veteran agrees to have the check mailed to the scam artist’s home or business address, and the scam artist takes the entire check or continues to take a monthly fee without performing any work for the vet.

If you or a family member has questions about the Aid and Attendance benefit or any other aspect of veteran’s pensions, find a qualified veteran’s pensions attorney or accredited service officer to give you the answers you and your family deserve. 

 


Tuesday, September 16, 2014

Important Steps to Plan for the Future of a Special Needs Child

Important Steps to Plan for the Future of a Special Needs Child

#1 Establish a Comprehensive Plan
Most estate planning attorneys will say that no person should use a “do-it-yourself” will kit to establish their estate plan.  If you have a child with special needs, it is extremely important to seek competent legal counsel from an estate planning lawyer with special needs planning experience before and during the process of writing your will.

In your estate plan, make sure that any bequests to your child are left to his or her trust (see #2, below) instead of to the child directly.  Your will should also name the person or persons you want to serve as guardian of your child (see #3, below).

Once your estate plan is complete you should give copies to all the guardians and executors named in the will.

#2 Establish a Special Needs Trust
A special needs trust is the most important legal document you will prepare for your child.  In order to preserve your child’s eligibility for federal financial benefits like Supplemental Security Income (SSI) and Medicaid, all financial assets for your child should be placed into this trust instead of being held in your child’s name.  This is because federal benefit programs restrict the amount of income and assets the recipient may have.  If your child has too many financial assets, he or she could lose his eligibility for important federal assistance programs.

You can use this trust as a depository for any money you save for your child’s future, money others give as a gift, funds awarded in a legal settlement or successful lawsuit, and other financial assets.

Should you create a special needs trust if your child doesn’t currently have any financial assets?  Yes.  Once you create the special needs trust, then the trust can immediately become the named beneficiary of any life insurance policies or planned bequests, either yours or family members’.

#3 Appoint a guardian and complete necessary guardianship papers

Like any parent, you worry about who will care for your child if you were to die before the child becomes an adult.  Unlike other parents, you worry about who will care for your child and provide guidance even after he or she is an adult.

A legal guardian is the person who will care for your child after your death and until the child turns 18.  If your child is unable to live independently, then you can either make arrangements for adult care or discuss your preferences with the appointed guardian.

As you consider choices of a guardian for your special needs child, consider how much time is required to raise a child with special needs.  Who do you know who can respond to the challenge?  Who do you know who has already formed a bond with your child?

After you make a choice, ask the individual if he or she will accept the responsibility of serving as your child’s named, legal guardian.  It is never wise to keep this decision a secret.  Also, discuss with your selected guardian how he or she will probably still have responsibilities toward your child even after his or her 18th birthday.

#4 Apply for an adult guardianship

Even if your child is still a minor, you can start planning now for when he or she reaches the age of majority.  When children turn 18, the law considers them adults and able to make their own financial and medical decisions.  If your special needs child will be incapable of managing his or her own health and finances, consider a legal guardianship.

#5 Prioritize your savings account
Parents of special needs children quickly learn that their children need many resources and equipment that insurance and school systems do not cover.  The more financial assistance you can give your child, the better.  Start saving as early as possible for your child’s lifetime needs – just remember to not open the savings account in your child’s name

Savings can help pay for therapies, equipment, an attorney to advocate for your child in the school system, or a special education expert who can help you make sure your child is getting access to all the programs he or she qualifies for.

#6 Plan for your child’s adulthood

Early planning for your child’s adult years will help you bring the legal and financial picture into sharper focus.  Will your child continue to live with you?  If so, will he or she need in-home assistance?  How often?  Do adult day care programs for people with special needs exist in your community?  How are they rated?

Is your goal for your child to live independently?  If so, what support will he or she need?  Will your child live in a group home, an assisted living community, an apartment with on-site nursing care, or another type of situation?  The earlier you research available options in your community, the sooner you can add your child’s name to the waiting list for the living situation you both prefer.

#7 Write a letter of intent
A letter of intent is not a formal legal document.  It is more like a manual of instruction, containing your wishes for your child’s upbringing.  In the best case scenario, you would give this letter of intent to your child’s chosen guardian and to anyone else who will play a significant role in his or her life after your death. 

  • What is your child’s daily routine?  What kind of weekly and monthly routine does she have?
  • What does he find especially comforting?  What frightens her?  What are favorite foods, books and movies?  Be as detailed as you wish.
  • List all of your child’s health care and educational providers.
  • List all current medications, doses and schedules.
  • List all allergies.
  • Are there people you don’t want your child to spend time with? Be specific.
  • Are there people you want your child to spend time with? Who?
  • Are there activities you especially want your child to try, such as sports or arts and crafts?

Update this letter at least once a year.  Keep a copy wherever you keep copies of your will.  And be sure to give a copy to your child’s appointed guardian.

#8 Talk with family members
Either in person or in writing, explain the major decisions you have made to important family members.  It is especially important to explain to generous grandparents and other relatives why they must not leave gifts of money – or inheritances – directly to your child.  Give relatives the information about your child’s special needs trust and instruct them to leave any financial gifts to the trust.  Similarly, explain that family members should designate the trust – not the child – as the beneficiary of life insurance policies and so forth.

If you have made decisions you fear will be unpopular (such as naming a guardian), consider explaining your reasons directly to family members whom you fear will be unhappy.  You could also consider including the named guardian in these difficult conversations.

The process of planning for your special needs child’s future may seem long and arduous at times, but you will experience a great relief when the major pieces of the plan are in place.  Creating a plan for the future will allow you to relax and enjoy the present with your child and family.


Thursday, September 4, 2014

What is Estate Tax Portability and How Does it Affect Me?

At the end of 2012, the entire country watched as major changes were made to income tax  laws with the adoption of the American Taxpayer Relief Act of 2012 (ATRA). The act also made significant changes in estate tax laws.

Estate Tax Portability

One important change is that the estate tax portability law is now permanent.  Estate tax portability means that the unused portion of the first-to-die spouse’s estate tax exemption passes to the surviving spouse.  The current estate tax exemption is $5.25 million ($5 million with adjustments for inflation).  This means that a married couple’s total estate tax exemption is currently $10.5 million.  For example, a husband dies with $2 million in separate assets.  He has $3.25 million remaining in his estate tax exemption, which passes to his wife, giving her a total of $7.5 million in estate tax exemption.  Without portability, the husband’s remaining exemption might have been forfeited if the couple had not implemented special tax planning techniques as part of their estate plans.

How Do You Claim the Portability?

This is where married couples and estate executors can get into trouble.  The estate tax portability rule is not automatic.  In order to claim the remainder of the first-to-die spouse’s estate tax exemption, the surviving spouse or the deceased spouse’s estate executor must file an estate tax return soon after the death, usually within nine months.

If this filing deadline is missed, then the couple will not get the benefit of estate tax portability.  Missing the estate tax filing deadline can result in hundreds of thousands of unnecessary and avoidable estate taxes.

In a recent report in The Wall Street Journal, estate planning experts expressed concern that executors of small estates may be unaware of the estate tax return filing requirement and may believe that an estate tax return is unnecessary if the deceased spouse’s assets fall under the $5.25 million exemption amount. To preserve portability, however, the estate tax return must be filed after the first spouse’s death.  Alternatively, married couples can utilize a special trust, referred to as a “credit shelter trust” or “bypass trust” to prevent forfeiture of their individual exemptions.  This planning technique must be undertaken when both spouses are still alive.

The Consequences of Failing to File an Estate Tax Return

As a simple example, consider a husband and wife who have a total of $7.5 million in assets, $6 million in a business the husband owns and the remaining $1.5 million owned by the wife.  Upon the wife’s death, the estate’s executor files a timely estate tax return and the wife’s remaining $3.75 million in estate tax exemptions passes to the husband.  When the husband dies, his entire $6 million business passes to his heirs tax free, even though his personal estate tax exemption is only $5.25 million.  If portability is not claimed, then $1 million of the husband’s business will be taxed (the current rate is 40 percent).  The husband’s heirs would be required to pay approximately $400,000 in estate taxes which could have been avoided if the wife’s estate executor had filed an estate tax return within the time limit.

Even if both spouses together have assets under the current $5.25 million exemption, it is still a good idea to file an estate tax return after the death of the first spouse.  Filing the estate tax return and preserving the portability benefit protects the surviving spouse’s heirs in the event the surviving spouse receives a windfall during his or her lifetime that raises his or her assets above the $5.25 million exemption level.


Tuesday, August 26, 2014

Think Treasure Hunts are Fun and Games? Think Again

You’ve had an attorney draft your estate planning documents, including your living trust and will. Probate avoidance and tax saving strategies have been implemented. Your documents are signed, notarized and witnessed in accordance with all applicable laws, and are stored in a location known to your chosen executor or estate administrator. Your work is done, right? Not exactly.

Although treasure hunts may be fun for youngsters, the fiduciaries of your estate will not find inventorying your assets to be nearly as exciting. When it comes time to settle your affairs, your estate representatives will be charged with the responsibility to gather and manage your assets, pay off debts and taxes, and distribute your assets to your named beneficiaries. This can be a tall order for an outsider who is likely unaware of the full scope of your assets.

If your fiduciaries cannot determine exactly what property you own, and its value and location, you are setting up your loved ones for a frustrating treasure hunt that can delay the settlement of your estate and rack up additional estate-related expenses. You may be remembered for the frustration of locating your assets, rather than the gifts made upon your death – not a legacy many wish to leave.

Instead, as you are establishing your estate plan take the extra time to record a comprehensive asset inventory and make sure those who will be responsible for settling your estate know where that inventory is stored. Do not presume that everything is handled once you meet with a lawyer and sign your documents. The legal instruments you have gone to the time, trouble and expense to prepare are practically worthless if your assets cannot be identified, located and transferred to your beneficiaries. However, creating a thoughtful asset inventory will aid your loved ones in closing your estate and honoring your memory.

Nobody knows better what assets you own than you. And who better than you to know an item’s value, age or location? Your fiduciaries may not have the benefit of tax or registration renewal notices for titled assets, and certainly won’t have copies of the titles or deeds – unless you provide them. It’s a good idea to include copies of the following items with your asset inventory:
 

 

  • Deeds to real property
  • Titles to personal property
  • Statements for bank, brokerage, credit card and retirement accounts
  • Stock certificates
  • Life insurance policy
  • Tax notices

For each of the above assets you should also list names and contact information for individuals who can assist with each the underlying assets, such as real estate attorneys, brokers, financial planners and accountants.

If your estate includes unique objects or valuable family heirlooms, a professional appraisal can help you plan your estate, and help your representatives settle your estate. If you have any property appraised, include a copy of the report with your asset inventory.

Care should be taken to continually update your asset inventory as things change. There will likely be many years between the time your estate plan is created and the day your fiduciaries must step in and settle your estate. Properties may be bought or sold, and these changes should be reflected in your asset inventory on an ongoing basis.
 


Tuesday, August 19, 2014

What Does the Term "Funding the Trust" Mean in Estate Planning?

What Does the Term "Funding the Trust" Mean in Estate Planning?

If you are about to begin the estate planning process, you have likely heard the term "funding the trust" thrown around a great deal. What does this mean? And what will happen if you fail to fund the trust?

The phrase, or term, "funding the trust" refers to the process of titling your assets into your revocable living trust. A revocable living trust is a common estate planning document and one which you may choose to incorporate into your own estate planning. Sometimes such a trust may be referred to as a "will substitute" because the dispositive terms of your estate plan will be contained within the trust instead of the will. A revocable living trust will allow you to have your affairs bypass the probate court upon your death, using a revocable living trust will help accomplish that goal.

Upon your death, only assets titled in your name alone will have to pass through the court probate process. Therefore, if you create a trust, and if you take the steps to title all of your assets in the name of the trust, there would be no need for a court probate because no assets would remain in your name. This step is generally referred to as "funding the trust" and is often overlooked. Many people create the trust but yet they fail to take the step of re-titling assets in the trust name. If you do not title your trust assets into the name of the trust, then your estate will still require a court probate.

A proper trust-based estate plan would still include a will that is sometimes referred to as a "pour-over" will. The will acts as a backstop to the trust so that any asset that is in your name upon your death (instead of the trust) will still get into the trust. The will names the trust as the beneficiary. It is not as efficient to do this because your estate will still require a probate, but all assets will then flow into the trust.

Another option: You can also name your trust as beneficiary of life insurance and retirement assets. However, retirement assets are special in that there is an "income" tax issue. Be sure to seek competent tax and legal advice before deciding who to name as beneficiary on those retirement assets.


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The Fenelli Law Firm located in Laguna Hills, CA serves clients with estate planning, special needs trusts, planning for children, asset protection, probate & trust administration, conservatorship / guardianships, business succession planning, & corporate entity formation needs throughout Los Angeles, San Diego, and Orange County CA.



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