Here is a great article from EstatePlanning.com

Letter to an Ex

By Martha J. Hartney, Esq.

Below is a fictional letter I drafted to a former partner because I know only too well what can happen when estate planning is not done properly—after divorce. I hope you enjoy this outreach to an ex-spouse or partner and consider taking steps to do everything this letter suggests for you. You can even send the link to your ex!


Dear Ex,

Though we’re not married (cohabitating, procreating) anymore, there are a few things I’d like to say about how you set up your affairs for our kids. You’re about to go on vacation, and I know you worry about being away from them and having an emergency or tragedy happen. I know I don’t have ANY say in how you set up your estate plan, but there are things that I’d like you to consider about the well-being and care of our beautiful children.

So please:

• Make sure your life insurance is up-to-date and your beneficiaries are listed properly. Don’t name our kids as direct beneficiaries! That will put them straight into a conservatorship where a judge will supervise their financial lives until 18, then they’ll get the assets outright in one fell swoop.
• Instead, leave your assets to them in trust, which will sidestep probate, keep the management of your assets private and in your control, and prevent the loss of those assets to our kids’ future creditors and predators and reduce the estate taxes that can take valuable resources away from our kids.
• Name a trustee that I can work with—someone you trust with your life—because your trustee will have to deal with me. If I were the only parent left, I would be legally responsible for ensuring the assets left to our children are properly managed. I would be looking at the annual accountings. I would be the one asking for court intervention if they are mismanaged or embezzled.
• Don’t leave your assets to our kids outright and don’t leave too much. There is nothing more damaging to a kid’s life purpose than having too much money at their fingertips. There’s a saying, “Leave them with enough to do something, but not enough to do nothing.” If you have a lot of assets, consider giving some to your favorite charity instead of the kids.
• Don’t cheap out on an estate plan. Whitney Houston did that. She bought a schlocky will that didn’t protect her assets from her daughter’s creditors, estate taxes, and probate. Please spend the money to get it done right. It’s really not that much in the scheme of things.
• Plan for a very long life. I know you want to leave our kids your accumulated wealth, but think of yourself first. We’re all living longer lives and, even though we’re not “in love” anymore, I do care about you and your welfare. Create a wealth plan that will give you a lifelong, passive income.
• Make sure you have disability insurance. Your ability to earn is your greatest asset. Nothing will diminish your wealth and put you in poverty quicker than not being able to earn money anymore. Even if you don’t need care, if you couldn’t work, you would run through savings quickly and may have to cheap out on things like your lifestyle, vacations, and even necessities like good, wholesome food or the roof over your head. Please don’t let that happen to our kids or to you.
• Get long-term care insurance. The person who is going to live to 150 is believed to have already been born! People will routinely live to be over 100, and that could be you. Long-term care is EXPENSIVE and it’s only going to get more so. Since you’re over 50 and in good health, consider buying a LTC policy on you or a rider on your life insurance policy.
• Name a guardian for our kids and ask me who I named. We might be able to agree still on that. Of course, I’ve taken care of my guardianship nomination, but if I didn’t, our kids would be subject to a guardianship proceeding and you and I both know that would be bad because our families would duke it out. You can even do that for FREE online at www.kidsprotectionplan.com. With that resource, there’s really no reason not to do that at the very least.
• When you decide to remarry, get guidance from an attorney in advance because remarriage can cause complications to your planning. I’m sure you’ve heard of assets going to a spouse instead of to kids, and while you may eventually want that, don’t let that happen by accident or oversight.
• Make sure you have your own healthcare documents in place, naming your agent for medical decision-making. Don’t name the kids as your agents until they are legally capable, over 18, and emotionally able to handle the job.
• Check with your attorney and your retirement account custodian to see if I need to sign any waiver to your retirement accounts. In some cases, if you haven’t remarried, as your previous spouse, I may retain some rights in a 401(k) or similar account that you may have had when we were married. I know that’s not what you want and that’s okay.
• Most importantly, shoot a video of yourself telling the kids your life story. Tell them about how we met and what you liked about me. Tell them that it’s not their fault that we didn’t work out, but that we did have some awesome times together. Tell them about your biggest life lessons, your values, your setbacks, and your victories. Tell them what a terrific businessperson you are and how you learned to be that. Tell them about your favorite hobbies and what you’re good at. Tell them what you love about them and how blessed you are that we brought them into the world.

So, dear Ex, I do want the best for our kids and I hope you consider my wishes so that if something did happen to you, they’d be okay. I promise that if something did, I would do everything in my power to make sure they’re able to heal, to thrive, and to honor you every day of their lives.

With love,
Your Ex

Picking the Best Way to Hold Title to Your Home

 

 

 

One of the last things most home buyers think about is how to take title to their new house.

It's best to consult an estate attorney before deciding but, unfortunately, most homeowners don't do that.

To help with the decision, here are the pros and cons of the five most common ways to hold title to your home:

1. Sole ownership
If you are single, one way to hold title to your home is in your name alone. This method is also called ownership in severalty.

When a married person takes title to real property in his or her name alone in sole ownership, the spouse is usually asked to sign a quitclaim deed giving up any ownership interest in the property.

This might be done, for example, when a husband invests in properties but his wife is not involved with the realty investments.

There are no special tax or other advantages of holding title in sole ownership. When the sole owner dies, any property held this way is subject to probate court costs and delays.

2. Tenants in common
When two or more co-owners take title to real estate, especially if they are not married to each other, they often become tenants in common. For example, two realty investors might select this method.

Each tenant in common owns a specified interest in the property. It need not be equal. For example, one owner might own a 50% interest, another could own a 10% interest and a third tenant in common could own a 40% share. The percentage ownership is specified on the deed.

A major advantage is that each tenant in common can sell or pass his interest by his will to whomever he or she wishes.

For this reason, tenancy in common is especially popular in second marriages, so each spouse can will his or her share to the children from a first marriage. Tenancy in common property is subject to probate court costs and delays.

A disadvantage is that the remaining tenant in common could wind up co-owning property with a stranger.

Another disadvantage (also true for joint tenancy) is that a tenant in common can bring a partition lawsuit to force a property sale if the other co-owners are unwilling to sell. The court can then order the property sold, with the proceeds split among the co-owners according to their ownership shares.

3. Joint tenancy with right of survivorship
When title is held in joint tenancy with right of survivorship, all co-owners must take title at the same time; they own equal shares and the surviving co-owner winds up owning the entire property. In some states, when husband and wife use this method, it is called tenancy by the entireties.

After a joint tenant dies, the surviving joint tenant(s) receives the deceased's share. The deceased's will has no effect on joint tenancy property.

A major advantage is that probate costs and delays are avoided when a joint tenant dies. The surviving joint tenant(s) usually needs only record an affidavit of survivorship and a certified copy of the death certificate to clear the title.

However, except for tenancy by the entireties, a major disadvantage is that a joint tenant can sell or give his property interest to a new owner without permission of the other joint tenant(s).

If there are only two joint tenants, the joint tenancy is ended by such a conveyance, creating a tenancy in common.

4. Community property
Husbands and wives who acquire realty in the community property states of California, Nevada, Louisiana, Wisconsin, Texas, Arizona, Washington, Idaho and New Mexico can take title as community property. Each spouse then owns half the property, which can be passed by the spouse's will either to the surviving spouse or someone else.

A special advantage is that community property assets willed to a surviving spouse receive a new stepped-up basis at market value on the date of death. In 1987, the IRS extended this community property stepped-up basis advantage to husbands and wives holding joint tenancy titles in community property states.

To qualify, IRS Revenue Ruling 87-98 requires spouses to acknowledge in writing to each other that their joint tenancy property is also community property.

5. Living trust
Probably the best way to hold title to homes and other real property is in a revocable living trust. There are many advantages, such as avoidance of probate costs and delays.

Other than the modest cost of creating a living trust (usually less than $1,000) and deeding real property into the living trust, there are no disadvantages.

Until the death or disability of the trust creator, the home and other real estate in the living trust are treated normally.

Stocks, bonds, bank accounts, automobiles and other major assets can also be held in a living trust. Since the living trust is revocable, these assets can be bought, sold and financed normally.

If the trustor becomes incompetent, the named alternate trustor (such as a spouse or adult child) takes over management of the trust assets. When the trustor dies, the assets are distributed according to the trust's terms.

Privacy is a major advantage. Unlike a will, which becomes part of the public probate file, the living trust terms remain private. For example, late Bing Crosby held virtually all his assets in a living trust and its terms never became public.

Still another advantage is that court challenges of living trusts are virtually impossible, whereas will challenges by disappointed relatives occur frequently.

Summary
The five most popular methods of holding residence titles all have their pros and cons. Overall, the best method for most homeowners is the living trust, because of all its advantages.

 

 

This article was written by Robert J. Bruss and published in the LA Times on 1/9/2013