Top Reasons Everyone Needs a Comprehensive Power of Attorney

The benefits of a highly detailed, comprehensive power of attorney are numerous. Unfortunately, many powers of attorney are more general in nature and can actually cause more problems than they solve, especially for our senior population. Here we highlight the benefits of a comprehensive, detailed power of attorney, including some of the provisions that should be included. A proper starting point is to emphasize that the proper use of a power of attorney as an estate planning and elder law document depends on the reliability and honesty of the appointed agent. 

The agent under a power of attorney has traditionally been called an "attorney-in-fact" or sometimes just "attorney." However, confusion over these terms has encouraged the terminology to change so more recent state statutes tend to use the label "agent" for the person receiving power by the document.

The "law of agency" governs the agent under a power of attorney. The law of agency is the body of statutes and common law court decisions built up over centuries that dictate how and to what degree an agent is authorized to act on behalf of the "principal"—in other words, the individual who has appointed the agent to represent him or her. Powers of attorney are a species of agency-creating document. In most states, powers of attorney can be and most often are unilateral contracts – that is, signed only by the principal, but accepted by the agent by the act of performance.

Much has been written about financial exploitation of individuals, particularly seniors and other vulnerable people, by people who take advantage of them through undue influence, hidden transactions, identity theft and the like. Even though exploitation risks exist, there are great benefits to one individual (the principal) privately empowering another person (the agent) to act on the principal's behalf to perform certain financial functions.

A comprehensive power of attorney may include a grant of power for the agent to represent and advocate for the principal in regard to health care decisions. Such health care powers are more commonly addressed in a separate "health care power of attorney," which may be a distinct document or combined with other health topics in an "advance health care directive."

Another important preliminary consideration about powers of attorney is "durability." Powers of attorney are voluntary delegations of authority by the principal to the agent. The principal has not given up his or her own power to do these same functions but has granted legal authority to the agent to perform various tasks on the principal's behalf. All states have adopted a "durability" statute that allows principals to include in their powers of attorney a simple declaration that no power granted by the principal in this document will become invalid upon the subsequent mental incapacity of the principal. The result is a "durable power of attorney" – a document that continues to be valid until a stated termination date or event occurs, or the principal dies. Absent durability provisions, the power of attorney terminates upon the principal’s death or incapacity.

Having covered the explanation of what a durable power of attorney is, let us look at the top benefits of having a comprehensive durable power of attorney.

1. Provides the ability to choose who will make decisions for you (rather than a court).

If someone has signed a power of attorney and later becomes incapacitated and unable to make decisions, the agent named can step into the shoes of the incapacitated person and make important financial decisions. Without a power of attorney, a guardianship or conservatorship may need to be established, and can be very expensive.

2. Avoids the necessity of a guardianship or conservatorship.

Someone who does not have a comprehensive power of attorney at the time they become incapacitated would have no alternative than to have someone else petition the court to appoint a guardian or conservator. The court will choose who is appointed to manage the financial and/or health affairs of the incapacitated person, and the court will continue to monitor the situation as long as the incapacitated person is alive. While not only a costly process, another detriment is the fact that the incapacitated person has no input on who will be appointed to serve.

3. Provides family members a good opportunity to discuss wishes and desires.

There is much thought and consideration that goes into the creation of a comprehensive power of attorney. One of the most important decisions is who will serve as the agent. When a parent or loved one makes the decision to sign a power of attorney, it is a good opportunity for the parent to discuss wishes and expectations with the family and, in particular, the person named as agent in the power of attorney.

4. The more comprehensive the power of attorney, the better.

As people age, their needs change and their power of attorney should reflect that. Seniors have concerns about long-term care, applying for government benefits to pay for care, as well as choosing the proper care providers. Without allowing, the agent to perform these tasks and more, precious time and money may be wasted. 

5. Prevents questions about principal's intent.

Many of us have read about court battles over a person's intent once that person has become incapacitated. A well-drafted power of attorney, along with other health care directives, can eliminate the need for family members to argue or disagree over a loved one's wishes. Once written down, this document is excellent evidence of their intent and is difficult to dispute.

6. Prevents delays in asset protection planning.

A comprehensive power of attorney should include all of the powers required to do effective asset protection planning. If the power of attorney does not include a specific power, it can greatly dampen the agent's ability to complete the planning and could result in thousands of dollars lost. While some powers of attorney seem long, it is necessary to include all of the powers necessary to carry out proper planning.

7. Protects the agent from claims of financial abuse.

Comprehensive powers of attorney often allow the agent to make substantial gifts to self or others in order to carry out asset protection planning objectives. Without the power of attorney authorizing this, the agent (often a family member) could be at risk for financial abuse allegations.

8. Allows agents to talk to other agencies.

An agent under a power of attorney is often in the position of trying to reconcile bank charges, make arrangements for health care, engage professionals for services to be provided to the principal, and much more. Without a comprehensive power of attorney giving authority to the agent, many companies will refuse to disclose any information or provide services to the incapacitated person. This can result in a great deal of frustration on the part of the family, as well as lost time and money.

9. Allows an agent to perform planning and transactions to make the principal eligible for public benefits.

One could argue that transferring assets from the principal to others in order to make the principal eligible for public benefits--Medicaid and/or non-service-connected Veterans Administration benefits--is not in the best interests of the principal, but rather in the best interests of the transferees. In fact, one reason that a comprehensive durable power of attorney is essential in elder law is that a Judge may not be willing to authorize a conservator to protect assets for others while enhancing the ward/protected person's eligibility for public benefits. However, that may have been the wish of the incapacitated person and one that would remain unfulfilled if a power of attorney were not in place.

10. Provides immediate access to critical assets.

A well-crafted power of attorney includes provisions that allow the agent to access critical assets, such as the principal’s digital assets or safety deposit box, to continue to pay bills, access funds, etc. in a timely manner. Absent these provisions, court approval will be required before anyone can access these assets. Digital assets are also important because older powers of attorney did not address digital assets, yet more and more individuals have digital accounts.  

11. Provides peace of mind for everyone involved.

Taking the time to sign a power of attorney lessens the burden on family members who would otherwise have to go to court to get authority for performing basic tasks, like writing a check or arranging for home health services. Knowing this has been taken care of in advance is of great comfort to families and loved ones.

Conclusion
This discussion of the Reasons Why Everyone Needs a Comprehensive Power of Attorney could be expanded by many more. Which benefits are most important depends on the situation of the principal and their loved ones. This is why a comprehensive power of attorney is so essential: Nobody can predict exactly which powers will be needed in the future. The planning goal is to have a power of attorney in place that empowers a succession of trustworthy agents to do whatever needs to be done in the future. Please call us if we can be of assistance in any way or if you have any questions about durable powers of attorney.

Justin Peltier is an estate planning attorney with offices located in Merrimac, MA with the sole focus of estate planning, elder law, probate and trust administration and business planning. Please view our website for more information at www.jpestateplanning.com. You can also reach me directly at justin@jpestateplanning.com or (978) 319-6006.

Benefits of Proper Estate Planning

What is Estate Planning?

Believe it or not, you have an estate. In fact, nearly everyone does. Your estate is comprised of everything you own— your car, home, other real estate, checking and savings accounts, investments, life insurance, furniture, personal possessions. No matter how large or how modest, everyone has an estate and something in common—you can’t take it with you when you die.
When that happens—and it is a “when” and not an “if”—you probably want to control how those things are given to the people or organizations you care most about. To ensure your wishes are carried out, you need to provide instructions stating whom you want to receive something of yours, what you want them to receive, and when they are to receive it. You will, of course, want this to happen with the least amount paid in taxes, legal fees, and court costs.
That is estate planning—making a plan in advance and naming whom you want to receive the things you own after you die. However, good estate planning is much more than that. It should also:

• Include instructions for passing your values (religion, education, hard work, etc.) in addition to your valuables.
• Include instructions for your care if you become disabled before you die.
• Name a guardian and an inheritance manager for minor children.
• Provide for family members with special needs without disrupting government benefits.
• Provide for loved ones who might be irresponsible with money or who may need future protection from creditors or divorce.
• Include life insurance to provide for your family at your death, disability income insurance to replace your income if you cannot work due to illness or injury, and long-term care insurance to help pay for your care in case of an extended illness or injury.
• Provide for the transfer of your business at your retirement, disability, or death.
• Minimize taxes, court costs, and unnecessary legal fees.
• Be an ongoing process, not a one-time event. Your plan should be reviewed and updated as your family and financial situations (and laws) change over your lifetime.

Estate planning is for everyone.
It is not just for “retired” people, although people do tend to think about it more as they get older. Unfortunately, we can’t successfully predict how long we will live, and illness and accidents happen to people of all ages.
Estate planning is not just for “the wealthy,” either, although people who have built some wealth do often think more about how to preserve it. Good estate planning often means more to families with modest assets, because they can afford to lose the least.
Too many people don’t plan.
Individuals put off estate planning because they think they don’t own enough, they’re not old enough, they’re busy, think they have plenty of time, they’re confused and don’t know who can help them, or they just don’t want to think it. Then, when something happens to them, their families have to pick up the pieces.
If you don’t have a plan, your state has one for you, but you probably won’t like it.
At disability: If your name is on the title of your assets and you can’t conduct business due to mental or physical incapacity, only a court appointee can sign for you. The court, not your family, will control how your assets are used to care for you through a conservatorship or guardianship (depending on the term used in your state). It can become expensive and time consuming, it is open to the public, and it can be difficult to end even if you recover.
At your death: If you die without an intentional estate plan, your assets will be distributed according to the probate laws in your state. In many states, if you are married and have children, your spouse and children will each receive a share. That means your spouse could receive only a fraction of your estate, which may not be enough to live on. If you have minor children, the court will control their inheritance. If both parents die (i.e., in a car accident), the court will appoint a guardian without knowing whom you would have chosen.
Given the choice—and you do have the choice—wouldn’t you prefer these matters be handled privately by your family, not by the courts? Wouldn’t you prefer to keep control of who receives what and when? And, if you have young children, wouldn’t you prefer to have a say in who will raise them if you can’t?
An estate plan begins with a will or living trust.
A will provides your instructions, but it does not avoid probate. Any assets titled in your name or directed by your will must go through your state’s probate process before they can be distributed to your heirs. (If you own property in other states, your family will probably face multiple probates, each one according to the laws in that state.) The process varies greatly from state to state, but it can become expensive with legal fees, executor fees, and court costs. It can also take anywhere from nine months to two years or longer. With rare exception, probate files are open to the public and excluded heirs are encouraged to come forward and seek a share of your estate. In short, the court system, not your family, controls the process.
Not everything you own will go through probate. Jointly-owned property and assets that let you name a beneficiary (for example, life insurance, IRAs, 401(k)s, annuities, etc.) are not controlled by your will and usually will transfer to the new owner or beneficiary without probate. But there are many problems with joint ownership, and avoidance of probate is not guaranteed. For example, if a valid beneficiary is not named, the assets will have to go through probate and will be distributed along with the rest of your estate. If you name a minor as a beneficiary, the court will probably insist on a guardianship until the child legally becomes an adult.
For these reasons a revocable living trust is preferred by many families and professionals. It can avoid probate at death (including multiple probates if you own property in other states), prevent court control of assets at incapacity, bring all of your assets (even those with beneficiary designations) together into one plan, provide maximum privacy, is valid in every state, and can be changed by you at any time. It can also reflect your love and values to your family and future generations.
Unlike a will, a trust doesn’t have to die with you. Assets can stay in your trust, managed by the trustee you selected, until your beneficiaries reach the age you want them to inherit. Your trust can continue longer to provide for a loved one with special needs, or to protect the assets from beneficiaries’ creditors, spouses, and irresponsible spending.
A living trust is more expensive initially than a will, but considering it can avoid court interference at incapacity and death, many people consider it to be a bargain.
Planning your estate will help you organize your records and correct titles and beneficiary designations.
Would your family know where to find your financial records, titles, and insurance policies if something happened to you? Planning your estate now will help you organize your records, locate titles and beneficiary designations, and find and correct errors.
Most people don’t give much thought to the wording they put on titles and beneficiary designations. You may have good intentions, but an innocent error can create all kinds of problems for your family at your disability and/or death. Beneficiary designations are often out-of-date or otherwise invalid. Naming the wrong beneficiary on your tax-deferred plan can lead to devastating tax consequences. It is much better for you to take the time to do this correctly now than for your family to pay an attorney to try to fix things later.
Estate planning does not have to be expensive.
If you don’t think you can afford a complex estate plan now, start with what you can afford. For a young family or single adult, that may mean a will, term life insurance, and powers of attorney for your assets and health care decisions. Then, let your planning develop and expand as your needs change and your financial situation improves. Don’t try to do this yourself to save money. An experienced attorney will be able to provide critical guidance and peace of mind that your documents are prepared properly.
The best time to plan your estate is now.
None of us really likes to think about our own mortality or the possibility of being unable to make decisions for ourselves. This is exactly why so many families are caught off-guard and unprepared when incapacity or death does strike. Don’t wait. You can put something in place now and change it later…which is exactly the way estate planning should be done.
The best benefit is peace of mind.
Knowing you have a properly prepared plan in place - one that contains your instructions and will protect your family - will give you and your family peace of mind. This is one of the most thoughtful and considerate things you can do for yourself and for those you love.

4 Reasons Why a Living Trust is Preferred over a Will

 

Posted on: June 26th, 2014

Many consumers and professionals now prefer an estate plan that uses a revocable living trust over a will as the primary estate planning document. Here are four reasons why:

1. A properly prepared and funded revocable living trust plan avoids probate at death, including multiple probates if you own property in other states. A will must go through probate to be verified and enforced, and if you own property in more than one state, your family could face multiple probates, each one according to the laws in that state. Avoiding the cost of probate is often a factor when choosing a living trust, but many people are just as interested in avoiding the court process altogether, along with its delays, lack of privacy, loss of control and emotional stress.
2. A properly prepared and funded living trust avoids court interference at incapacity. Most people prefer to have their care and assets managed privately by people they know and trust, instead of being placed in a court guardianship, which is costly, time consuming, public and stressful. It’s important to note that a will is of no help at incapacity because a will can only go into effect when you die.
3. A living trust brings all of your assets together under one plan with one set of instructions. (Possible exceptions are IRAs and other tax-deferred plans.) This makes it much easier to provide fair inheritances to your beneficiaries, as opposed to trying to balance inheritances with beneficiary designations and joint ownership because of fluctuating values of investment accounts, life insurance policies and other assets. By contrast, a will only controls assets that are titled solely in your name; it does not control most jointly owned assets or those for which you have named a valid beneficiary.
4. A properly prepared and funded living trust is more private than a will and is not as easily contested. Because probate is a public process, disgruntled heirs and other interested parties are invited to submit claims and contest your will, and unwanted solicitors can have access to your family’s personal and financial information. While a living trust cannot guarantee complete privacy, it is much more private than a will, which is guaranteed to be made public through probate.

What, then, is a properly prepared and funded living trust? “Properly prepared” means the documents are written correctly according to the law and your desires. This is best accomplished by having an experienced estate planning attorney prepare your trust. “Properly funded” means you all assets are properly titled in the name of your revocable living trust and proper beneficiary designation forms are completed naming your revocable living trust as beneficiary. Your revocable living trust only controls the assets that have been transferred to it. If you forget to put an asset into your trust, it will be added to your trust after you die through probate before it can be distributed along with your other assets according to your desires as set forth in your revocable living trust.

 

For all your Massachusetts estate planning needs, contact Massachusetts estate planning attorney Justin Peltier here: justin@jpestateplanning.com.

 

Trust Based Estate Plans vs. Will Based Plans

Many people now choose a revocable living trust instead of relying on a will or joint ownership in their estate planning. A living trust that has been properly prepared and funded with your assets can provide many benefits for you and your loved ones.

How many of these benefits of a revocable living trust are you familiar with?

• Avoids the time and expense of probate when you die.
• Avoids multiple probates if you own assets in more than one state.
• Provides easier, more efficient administration of your estate.
• Prevents court interference at incapacity.
• Gives you and your family maximum privacy by avoiding public court processes.
• Minimizes emotional stress on your family.
• Brings all of your assets into one plan controlled by one set of instructions.
• Prevents unintentional disinheriting.
• Makes it easier to make equitable (fair) distributions to your beneficiaries.
• Lets you keep assets in the trust until your beneficiaries reach the age(s) you want them to inherit.
• Can continue longer to provide for a loved one with special needs.
• Assets can remain in the trust and be protected from beneficiaries’ creditors, spouses, divorce proceedings, irresponsible spending and future death taxes.
• Prevents the court from controlling inheritance of minor children.
• More difficult than a will to contest.
• Provides effective pre-nuptial protection.
• Can be changed or cancelled at any time.
• Allows for professional asset management with a professional trustee.
• Can include tax planning to reduce or eliminate state and/or federal estate taxes.
• Lets you keep maximum control while you are living (even if incapacitated) and after you die.
• Peace of mind.

It will probably cost more initially to set up a well-drafted living trust than to have a will prepared. One reason is that a living trust usually has more provisions because it deals with issues while you are living as well as after you die, and a will only deals with issues after you die. When comparing costs, remember that the true cost of a will must include the costs of probate when you die, of a possible conservatorship if you become incapacitated and the costs of a guardianship if you leave assets to minor children.

After weighing the costs and benefits, it is easy to see why so many people and professionals prefer a living trust.

An Estate Plan For Cinderella's Parents

 

I saw Cinderella for the first time with my daughter recently, and though I (and likely you) were familiar with the outline of the story, we often forget the backstory. It starts with the disaster, specifically, an estate planning disaster in a world that does not need to worry about the estate tax or probate, or even lawyers.

You see, Cinderella’s mother died when she was a child. Her father decided to remarry a woman with two girls that are about the age of his own daughter. Cinderella’s father dies next, when she is still a child. He leaves the estate to his widow (the normal thing to do in the real world), who serves as Cinderella’s stepmother. This woman takes control of the estate for the benefit of herself and her own two daughters. Cinderella then, as presumably everybody who is reading this knows, is treated as a servant in her own home by the infamous wicked stepmother. Cinderella is now reduced to befriending rodents and birds with dressmaking skills.

What is interesting about the Cinderella backstory is how common it is. It is a theme that exists throughout all of human civilization and in stories from ancient times. Rhodopis is essentially the name of Cinderella in ancient Greece. There are many other versions of the story told throughout history around the globe. It is also well known that men are very likely to remarry when they become widowers, a social phenomenon that has been noted and studied for years.

The theme of subjugation of a child (in Cinderella’s case, being a presumably unpaid servant) using the orphan’s own assets is based on the inherent structural problems of asset succession, much of which cannot be addressed through legislation. The old manage the money of the young. This is often what leads to a version of the oppression experienced by fictional Cinderella. Of course, societies have attempted to remedy these concerns by regulating individuals and institutions known as “fiduciaries.” Minors are often represented in court by a “guardian ad litem.” Judges in probate court often presume to protect the interests of minors in what seems to many as a paternalistic system. Indeed, in some jurisdictions, probate court is known as “orphan’s court.”

The structural problems, however, can never really go away. For the most part, societies developed remedies that may be imposed when it is already too late. The presence of laws by itself will not completely stop men (or wicked stepmothers) from taking advantage of wealth when the opportunity presents itself.

Every year in virtually every jurisdiction in the United States with a sizable population there are cases involving breach of trust or similar claims relating to estates. The cost of such disputes could easily surpass the cost of probating a last will and testament or paying an estate tax to the federal government, if there was one.

The good news for people litigating with a competent attorney is that they actually have some sort of a claim that they can make to a court. Much of the time, affairs are structured so poorly that there is nothing anybody can do about the resulting injustice. It is common for spouses to own their property jointly, even widowers who remarry. Married couples like to name each other as beneficiaries in their retirement plans and life insurance, and they like to structure ownership of their homes in such a way that all of the property passes to the surviving spouse through the deed (joint tenancy with right of survivorship for example). They do the same with their financial accounts and everything else that they own. There is no probate, no trust administration, and no notice to anybody. The surviving spouse just gets everything. Often, even when there is a trust or a will, the spouse gets everything in a way that makes the Cinderella problem no less likely. Now in the era of portability and a high estate tax exemption where the vast majority of the U.S. population will never have to worry about the estate tax, this type of “estate planning” may threaten to become the norm.

Married couples often plan for their own convenience. When people plan their estates, they often think about their own mortality but not the consequences of the mortality of others and the results that may come from other unfortunate occurrences. Most have little to do with the government.

In the non-Disney world, wicked stepmothers are everywhere. We call them bankruptcy trustees, judgment creditors and yes, actual wicked stepmothers. The stories of modern-day Cinderellas are remade and retold every day throughout the country. The wicked stepmothers are often real brothers and sisters, uncles and aunts, people will assume the title of “trustee” or simply hold assets that should belong to others but have been usurped.

The parents of modern-day Cinderellas were not bad people in life; they often failed to properly plan. They certainly did not wish ill for their children. Though ill they wrought by not planning for things common in the human experience. An attorney and client, often with other advisors, collaboratively develop solutions for issues such as creditor protection, remarriage protection, guardianship and special needs. This type of planning requires attorneys as counselors. State legislatures and the Federal Government cannot write laws to protect families they have never met.

Litigation attorneys in the trust and estates world are not Fairy Godmothers. They may be helpful in fighting injustice and helping resolve the agony that occurs when there is a cause of action, something a lawyer can file in court in the first place. Unlike fictional Fairy Godmothers, litigation attorneys are paid. Litigation itself is not only expensive, but burdensome and difficult in a myriad of other ways. There is no guarantee that good estate planning will eliminate the risk of litigation, though all good estate plans certainly plan for risks that are known. Some risks have been known for thousands of years.

Fairy tales may end well because of magical fairies and rodents, but like Cinderella, they start with avoidable tragedy common to the human experience in a world without talking mice. A good estate planning attorney will help families avoid what could be avoided.

This article was original posted in estateplannin.com and can be seen here http://www.estateplanning.com/An-Estate-Plan-for-Cinderellas-Parents/

Estate Planning for Young Families

Many young families put off estate planning. If asked, they may say they are too young, healthy or can’t afford it. Some have trouble just thinking about what could happen if they should die while their minor children and spouse are depending on them. But even a healthy, young adult can be taken suddenly by an accident or illness, and those with young families need estate planning precisely because others are depending on them.

Of course, you are not expecting to die while your family is young, but planning for the possibility is being prudent and responsible, and it shows your family how much you care.

A good estate plan for a young family will include naming someone to administer the estate (a trustee or executor), naming a guardian to care for minor children, providing instructions for the distribution of your assets, and naming someone to manage the inheritance for the children until they become adults. It will also include reviewing your insurance needs and planning for disability.

Naming an Executor or Trustee for Your Estate
This person will be responsible for handling your final financial affairs—locating and valuing assets, locating and paying bills, distributing assets, hiring an attorney and other advisors—so it should be someone who is trustworthy, willing, able, knows you and will carry out your wishes.

Naming a Guardian for Minor Children
If something happens to one parent, the other parent will continue to raise the children (unless he or she is physically or emotionally unable to do so). But who will raise them if something happens to both of you? This is often a difficult decision for parents, but it is very important because if you have not named a guardian, the court will have to appoint someone without knowing your wishes, your children or your family members.

Providing Instructions for Distribution of Your Assets
Most married couples want their assets to go to the surviving spouse if one of them dies. If both parents die and the children are young, they want their assets to be used to care for their children. Some assets will transfer automatically to the surviving spouse by beneficiary designations and how title is held. However, an estate plan is still needed in the event this spouse becomes disabled or dies, so that the assets can be used to provide for the children.

Naming Someone to Manage Your Children’s Inheritance
Unless you include this in your estate planning, the court will appoint someone to oversee your children’s inheritance. This will likely be a friend of the judge and a stranger to your family. It will cost money, which will be paid from the inheritance. Also, the children will receive their inheritance (in equal shares) when they reach legal age, usually age 18. Most parents prefer that their children inherit when they are older and to keep the money in one “pot” so it can be used to care for the children’s different needs. Establishing a trust for your children’s inheritance lets you accomplish these goals and select someone you know and trust to manage it.

Reviewing Insurance Needs
Part of the estate planning process is to review the amount of life insurance on both parents. Income earned by one or both parents would need to be replaced; also, one or more people would probably be needed to take over the responsibilities of a stay-at-home parent. Additional coverage may be needed to provide for your children until they are grown; even more if you want to pay for college.

Planning for Disability
There is the possibility that one or both parents could become disabled due to injury, illness or even a random act of violence. This should be planned for, as well. Both parents need medical powers of attorney that give someone else legal authority to make health care decisions for you if you are unable to do so. You would probably name your spouse to do this, but one or two others should be named in case your spouse is also unable to act. HIPPA authorizations will give your doctors permission to discuss your medical situation with others (parents, siblings and close friends). Disability income insurance should also be considered because life insurance does not pay at disability.

Putting Your Plan in Place
Estate planning will require you to think about family relationships and some decisions may be difficult. But an experienced estate planning attorney will be able to help you through the process, provide valuable guidance and make sure your plan will do what you want when it is needed. If finances are tight, as they usually are for young families, start with the most essential legal documents and term life insurance, then update and upgrade your plan as your financial situation improves. The most important thing is to not put this off. Once your plan is in place, you will have peace of mind that your family will be protected if something should happen to you.

 

 

 

Justin Peltier is an estate planning attorney with offices located in Merrimac, MA with the sole focus of estate planning, elder law, probate, trust administration and business planning. Please view our website for more information at www.jpestateplanning.com or join our social media community below. You can also reach me directly at justin@jpestateplanning.com or (978)319-6006.

 

10 Things To Do Before the End of This Year

The end of the year will be here before we know it. But there is still time to get some major estate planning goals accomplished. Here are ten things to do before the end of 2012.

1. Have your estate planning done. Set the end of the year as your deadline to finally get this completed. Figure out why you have been procrastinating and conquer your fears. If it’s because you don’t have an attorney, ask friends and acquaintances for referrals. If it’s because you aren’t sure who you want to be the guardian for your minor children or who you want to be your executor or trustee or how to divide your estate, your attorney can help you decide. (You can always change your mind later; don’t let these decisions keep you from putting a plan in place now.) If money is an issue, start with what you can afford (a will, power of attorney, health care documents) and upgrade later when you can. Your attorney may also be willing to accept payments.

2. Review and update your existing estate plan. Personal and financial circumstances will change throughout your lifetime, and your plan needs to change with them. Revisions should be made any time there are changes in your family (birth, death, marriage, divorce, remarriage), your finances, tax laws, or if a trustee or executor can no longer serve. Now is a perfect time to do this; if there are changes you want to share with family members, you can do that when they are home for the holidays. (See #9 below.)

3. Use your $5.12 million exemption. For the rest of this year, every American can transfer up to $5.12 million free of federal gift, estate and generation-skipping transfer tax. (A married couple can transfer up to $10.24 million.) If Congress does not change the current law, the federal estate tax exemption in 2013 will be just $1 million. You do not have to die in 2012 to use this exemption; you can use it to make gifts now, while you are living. You do not have to completely give away your assets; you can make the transfers in ways that will let you keep control and even keep the income your assets are generating. And you do not have to use the full $5.12 million exemption to benefit; even those with less than $1 million should consider some planning to prevent future tax liability.

4. Make tax-free gifts. Under current federal law, you can give up to $13,000 to as many people as you wish each year. This is a great way to reduce the size of your estate (and potentially save estate taxes) over time. For example, if you give $13,000 per year to your two children and three grandchildren, you would remove $65,000 from your estate in just one year and $325,000 in five years. (You can double these amounts if you are married.) Charitable gifts are unlimited. So are gifts for tuition and medical expenses, if you give directly to the institution.

5. Secure/update health care documents. At the minimum, everyone over the age of 18 needs 1) a Durable Power of Attorney for Heath Care, which gives another person legal authority to make health care decisions (including life and death decisions) for you if you are unable to make them for yourself; and 2) HIPPA Authorizations, which give written consent for doctors to discuss your medical situation with others, including family members. In addition, a Revocable Living Trust is preferable over a Will at incapacity because it can prevent the court from controlling your assets.

6. Review/update guardian for minor kids. It is quite likely that the person you name as guardian for your children when they are small will not be the best choice as they get older. Also, this person could change his/her mind, move away or even become ill or die. Revisit your choice from time to time, and name more than one in case your first choice cannot serve. Remember, if you haven’t named a guardian who is able and willing to serve and something happens to you, the court will decide who will raise your kids.

7. Review/update beneficiary designations. This is especially important if your beneficiary has died or if you are divorced. If your beneficiary is incapacitated or is a minor, setting up a trust for this person and naming the trust as beneficiary will prevent the court from taking control of the proceeds.

8. Review/update your insurance. Check the amount of your life insurance coverage and see if it meets your family’s current needs. Consider getting long-term care insurance to help pay for the costs of long-term care (and preserve your assets for your family) in the event you and/or your spouse should need it due to illness or injury.

9. Talk to your children about your estate plan. You don’t have to show them bank and financial statements, but you can talk in general terms about what you are planning and why. The more they understand it, the more likely they are to readily accept it—and that will help to avoid discord after you are gone. You can also talk to them about your values and the opportunities that money can provide. Even better, show your values by doing—the holidays are an excellent time for families to do charitable work together.

10. Get basic documents for your unmarried kids who are over 18. It’s a mild shock when we learn we can’t see our college kids’ grades without their permission, even though we pay the tuition. It can be much worse if they become ill. Unmarried adults (18 and over) need to have a Durable Power of Attorney for Health Care and HIPPA Authorization so you can act on their behalf in a medical emergency. (See #5 above.) And, while you’re at it, go ahead and have your attorney prepare a Simple Will and Durable Power of Attorney. Hopefully, these will not be needed but if an event does occur, you will be glad you have them.

Blended Families Underscore the Need for Estate Planning

Blended Families Underscore the Need for Estate Planning

Posted on: June 27th, 2012

Anyone with children or modest assets should seriously consider some minimal estate planning, but the increasing number of blended families underscores the need for proper estate planning.
Blended families can involve children from a prior marriage as well as joint children, sometimes joking referred to as “his, hers and theirs.”  And blended families involve both younger and older couples, and nearly everyone in between.
When the new spouse is significantly younger, this sometimes means that the older spouse’s children are close in age to the younger.  These relationships can cause more than friction between the step-parent and step-children.
Most parents want to ensure that their assets will pass to their children, not their stepchildren.  However, absent good estate planning, there is no guarantee that their children will inherit their assets.  In fact, if the couple creates common “I love you” wills such that their assets pass to the survivor of them, there is a significant likelihood their children will be totally disinherited.
This is because all of their assets will pass to the surviving spouse to do with as he or she pleases. More often than not this means excluding the stepchildren, who then receive nothing.
The fact that Americans are living longer, and sometimes remarrying much later in life, means that blended family issues come into play there too. A recent USA Today article, titled With more blended families, estate planning gets ugly, highlights some of these issues. (The full article is available online at http://www.usatoday.com/news/parenting-family/story/2012-03-13/With-more-blended-families-estate-planning-gets-ugly/53516094/1?csp=34news.)
As this article states, “[a]dd the gaping generational divide between Depression-era parents, who valued frugality above all else, and their Baby Boomer children, who relish self-reward, and the dynamics can be explosive.”
Thus, baby boomer children expecting an inheritance may have to wait much longer than expected. But perhaps more difficult, who should pay for the cost of the surviving spouse’s care? Should the stepchildren be forced to use their inheritance to pay for an aging step-parent’s care, particularly after only a short-term marriage?  Or should this burden fall on the children?
There is no one right answer here, but these questions epitomize the many questions that arise with blended families. These questions should be answered with the help of counsel and proper planning.

If estate planning for a blended family is a concern for you, please contact Justin Peltier, a Massachusetts Estate Planning Attorney.

Beneficiary Designation Mistakes

Potential Problems with Beneficiary Designations

Many clients use beneficiary designations, and for good reason. Some significant assets, including life insurance policies, IRAs, retirement plans and even bank accounts, allow a beneficiary to be named. It’s free, it’s easy, and, when the owner dies, these assets are designed to be paid directly to the individual(s) named as beneficiary, outside of probate.

But that is not always what happens. For example:

*    If your beneficiary is incapacitated when you die, the court will probably have to take control of the funds. That’s because most life insurance companies and other financial institutions will not knowingly pay to an incompetent person; they may insist on court supervision.

*    If you name a minor as a beneficiary, you are probably setting up a court guardianship for the child. Life insurance companies and other financial institutions will not knowingly pay these funds directly to a minor, nor will they pay to another person for the child, not even to a parent. They do not want the potential liability and will usually require proof of a court-supervised guardianship.

*    If you name “my estate” as beneficiary, the court will have to determine who that is. The funds will have to go through probate so they can be distributed along with your other assets.

*    If your beneficiary dies before you (or you both die at the same time) and you have not named a secondary beneficiary, the proceeds will have to go through probate so they can be distributed with the rest of your assets.

Even if the funds are paid to the named beneficiary, things may not work out as the owner intended. For example:

*    Some people just cannot handle large sums of money. They may spend irresponsibly, be influenced by a spouse or friend, make bad investment choices, or lose the money to an ex-spouse or creditor. If the beneficiary receives a tax-deferred account, he/she may decide to “cash out” and negate your careful planning for continued long-term tax-deferred growth.

*    If you name someone as a beneficiary with the “understanding” that the funds will be used to care for another or will be “held” until a later time, you have no guarantee that will happen. The money may just be too tempting.

*    If the person you name as beneficiary is receiving government benefits (for example, a child or parent who requires special care), you could be jeopardizing their ability to continue to receive these benefits.

*    If your estate is larger, your choice of beneficiary could limit your tax planning options, causing serious tax consequences for your family.

Beneficiary designations can be quite useful, but they need to be considered as part of an overall estate plan. Naming a trust as beneficiary will generally prevent the problems described above, and by bringing all of the client’s assets together under one plan, you can be sure that each beneficiary will receive the amount the client wants them to have—something that can be difficult to accomplish with multiple designations.

When meeting with a potential client, or reviewing a client’s existing plan, it is important for the estate planning professional to see all beneficiary designations. Correcting any designations now, and making sure the client understands them, will help to prevent significant future problems.

These are very important financial and legal decisions.  Be sure to consult with an Massachusetts Estate Planning Attorney knowledgeable in this area.

Estate and Asset Protection Planning Opportunities 2011-2012

The 2010 tax year certainly proved to be a challenge for estate planners due to the uncertainty of the estate tax and the generation-skipping transfer (GST) tax. However, with the enactment of the 2010 Tax Act there is a least a little more certainty over the next couple of years.
The new $5 million gift tax and generation skipping transfer tax exemptions provide a powerful gifting opportunity for clients in the next two years. Because the $5 million exemption is scheduled to expire in 2013, it is important for advisors to understand the estate planning techniques that should be explored with their clients before the expiration of these high exemption amounts.

In addition to the increased exemption amount, the 2010 Tax Act includes a provision giving the executor of the estate of a first spouse to die the option of shifting any unused estate tax exemption amount to the surviving spouse. Thus, for example, if the first spouse used only $3,000,000 of his $5,000,000 exemption amount, his estate could elect to have the remaining $2,000,000 pass to the surviving spouse, giving her a total of $7,000,000 of estate tax exemption. Although this portability provision seems simple on the surface, it introduces important planning considerations that will be discussed during this session.
With a good fundamental understanding of the current gift and generation skipping transfer tax exemption rules, one will be able to identify significant opportunities to shift wealth to future generations.

To visits me website for Massachusetts Estate Planning from a MA estate planning attorney go to http://www.jpestateplanning.com/


This post was written by Robert Keebler, CPA, MST, AEP and can be viewed here.

Estate Planning Considerations for Blended Families

As the rates of divorce and remarriage climb, those with recently blended families may be witnessing the emergence of troublesome estate planning issues. The interests of a new spouse and child can create conflict with a parent’s desire to provide fairly for children from a previous relationship, causing unforeseen complications, misunderstandings, and damage to the blended family unit. For those family members without a clear understanding of their new rights and obligations, the following scenarios provide examples of common planning problems and potential solutions to these issues.

Scenario #1: All Assets to Surviving Spouse. Many married couples choose to leave all of their assets to each other upon the first death, under the assumption that the surviving spouse will treat all of the decedent’s children equally. However, children from a prior relationship may not be provided for by the surviving spouse in accordance with the desires of the deceased parent. Since a surviving spouse has no legal obligation to support or provide an inheritance for the predeceased spouse’s children, a parent may unknowingly disinherit a natural child by leaving all of his or her assets to a new spouse. Also, if the surviving spouse is substantially younger than the deceased spouse, a majority of the child’s eventual inheritance could be depleted during the lifetime of the survivor, greatly reducing what amount, if any, is left for the child upon the death of the surviving spouse. The QTIP Marital Trust is often the best estate planning vehicle by which to address this issue. While the surviving spouse must be entitled to receive the current income of the QTIP Trust, he or she does not have to be granted the ability to ultimately dispose of the property. Therefore, the first to die can control the final distribution of the QTIP Trust and be assured that the property will go to his or her children upon the second death.

Scenario #2: All Assets to Children. When a deceased parent leaves all, or a majority, of the family assets to his or her children, the surviving spouse may not have sufficient resources to continue to live comfortably. In order to alleviate the financial burden caused by this situation, many states allow a surviving spouse to claim an “elective share of the augmented estate” of the deceased spouse in order to ensure that no spouse is entirely disinherited. The elective share amount is statutorily calculated, allocated to the surviving spouse, and paid from the assets left to the children of the deceased. A marital agreement (either prenuptial or postnuptial) can prevent these complications. In the classic marital agreement, each spouse agrees to give up some or all of their right to the other spouse’s assets. Each spouse is then able to arrange his or her estate plan so that it will be distributed in accordance with their wishes, free of claims (such as the elective share claim) which might otherwise be made by the surviving spouse.

Scenario #3: Assets to Minor Children. If a deceased parent unwittingly leaves assets outright to a minor child from a prior marriage, the surviving parent (usually an ex-spouse) is likely to acquire control over the inheritance until the child reaches the statutory age of majority. Upon attaining that age, the child would legally be allowed to access – and spend – the entire inheritance. The most common vehicle for achieving flexibility and fairness in this situation is the trust, with provisions requiring an appointed trustee (rather than an ex-spouse) to hold the assets in trust until the child reaches a predetermined age. The trustee is also granted varying degrees of discretion to distribute trust funds to the child until he or she reaches the final withdrawal age, which allows the child to benefit from the inheritance without the ability to squander the assets.

Scenario #4: Assets Split Between “Old” and “New” Family. Although many parents desire to treat all of their children equally, others have determined that fairness does not always mean equality. Instead of evenly splitting an estate among living children, some parents prefer to divide their assets unequally after considering the respective needs of each child. It is not uncommon for a client with a much younger spouse to create benefits for his or her children from a prior marriage by purchasing a life insurance policy and designating the proceeds payable to them. Rather than postponing the child’s inheritance until the death of a stepparent, the child can receive a large cash sum immediately upon their parent’s death, and the remaining estate assets can be left to the new spouse.

Consider Family Goals. Successful blended family estate planning is a matter of setting and communicating goals, learning the available legal strategies, implementing the chosen documents and setting appropriate expectations for the client. With guidance from experienced counsel, the various goals of each family can be met by crafting and implementing estate plans that provide for each spouse and protect the interests of their respective children.

This post was from Jennifer L. Moccia, JD, LL.M., also a member of WealthCounsel and can be seen here.