Probate Attorney

Do I Need to Name a Guardian for My Children in the Will?

Many young couples with children and bills, when asked about estate planning and say, “what estate?”  However, a critical part of having a will—one frequently overlooked—is naming a guardian for minor children. If you don’t name a guardian, it could result in issues for your children after your death.

Naming a Guardian
Naming a guardian for your children can only be done through your estate planning documents.

For a young family, naming a guardian is one of the most important reasons to draft a will. If you and your spouse die together with no guardian designated in a will, the guardian will be chosen by the court.

In a worst-case scenario, if you have no close family or no one in your family who can take your child, the court could even send them to foster care until a permanent guardian can be named.

The judge will collect as much information as possible about your children and family circumstances to name a guardian for your children.

However, the judge won’t have any intimate knowledge of who you know or which of your relatives would be good guardians. This could result in a choice of one of the last people you might pick to raise your children.

Try to find common ground by agreeing to a set of criteria you want in a guardian. This could include:

  • The potential guardian’s willingness to be a guardian
  • The potential guardian’s financial situation
  • Where the child might live with that person
  • The potential guardian’s values, religion, or political beliefs
  • The potential guardian’s parenting skills; and
  • The potential guardian’s age and health.

Next, make a decision, get the chosen guardian’s consent, write it all down, and then set out to create a will so you can legally name a guardian.

Ask an experienced estate planning attorney to help you do it correctly.

Reference: Lifehacker (Oct. 27, 2020) “Why You Should Name a Guardian for Your Kids Right Away”

What Does Tenancy by the Entirety Mean in Estate Planning?

Choosing an ownership structure for real estate is is an important decision. As a result, it is crucial to understand the options. Motley Fool’s recent article entitled “What is Tenancy by the Entirety?” explains that the only owners of the property must be both spouses of a legally married couple. The couple must be a married couple, not just two people in a relationship or two otherwise unmarried individuals. The owners also can’t be a married couple that co-owns the property with another.

tenancy by the entirety
Tenancy by the entirety is limited to married couples.

With a tenancy by the entirety, both spouses have an equal ownership interest in the entire property.  It doesn’t matter what portion of the purchase price came from each joint owner. Both spouses also have equal rights, when it comes to actions involving the property, like whether to sell the property. If one of the spouses or owners dies while the property is owned under a tenancy by the entirety, the surviving spouse automatically becomes the sole owner of the home, even if the will of the decedent spouse distributes the property to somebody else.

If there’s a divorce, a tenancy by the entirety can be cancelled. If the divorced spouses continue to own the property, the arrangement will revert to tenants in common. This lets each owner sell or transfer their interest in the property to whomever they want. The property’s ownership structure could also be changed from tenancy by the entirety to another type, if both spouses agree to it.

Tenancy by the entirety has two main advantages for married couples: asset protection and estate planning. Tenancy by the entirety helps protect the property from the debts of one spouse. Creditors can’t attach a lien on a house owned as tenancy by the entirety, unless the debt is in the names of both spouses. TBE makes the owner of the house a separate legal entity from either spouse. It also avoids a costly and lengthy probate process because title to the home transfers automatically to the surviving spouse upon one spouse’s death.

However, TBE isn’t available in all states. Some owners also don’t like the fact that each spouse owns a 50% share, even if one spouse paid the entire cost of acquiring the home. Tenancy by the entirety is only used in certain states. They include AK, AR, DE, DC, FL, HI, IL (for some types of homestead property), IN, KY, MD, MA, MI, MS, MO, NJ, NY, NC, OK, OR, PA, RI, TN, VT, VA, and WY. Some of these states allow tenancy by the entirety for a number of types of property, while others allow TBE arrangements for just real estate.

There are a few other ways to own property. Here are some of the most commonly used methods for properties purchased for more than one adult tenant to live in:

Tenants in Common. It is an ownership structure similar to tenancy by the entirety, but it applies to non-married couples. Like tenancy by the entirety, tenants in common share an equal ownership interest in the property, but at the death of one owner, their share of the property passes to their heirs, not to the surviving owner. Tenants in common is the default ownership structure, unless another form of ownership is specifically chosen with an asset owned equally by two or more people.

Joint Tenants with Rights of Survivorship (JTWROS).  This is similar to tenancy by the entirety. Like tenancy by the entirety, JTWROS-held properties also pass to the survivor in the event of one spouse’s death. However, JTWROS isn’t limited to married couples, and there can be two or more owners. Each one has an equal interest in the property, but unlike TBE property, each owner has the right to sell or transfer their ownership interest to another. Another difference is that JTWROS owners aren’t considered to be a separate and single legal entity—each owner’s creditors can go after the property, even for debts that are owned by a single debtor spouse.

Sole Ownership. With sole ownership, just one person holds title to a property. It is often used when a single individual purchases a home. However, it can also be used if a married couple buys a home, but only one spouse will legally own it. A big advantage of sole ownership is its simplicity—the owner is able to make any decisions about the property on their own. However, transfer of ownership when a sole owner dies can be more complicated than any of the other ownership structures above.

Joint Tenancy. This is typically what happens when two people are listed on a deed, and there’s no other ownership structure designated. Here, both owners have equal ownership rights to a property, and in the event of a deceased spouse or owner, the property passes to the surviving joint tenant. However, joint tenancy doesn’t protect the property from creditors of one of the owners.

Tenancy by the entirety has several key benefits for married couples, in states where it’s permitted. Review these with an experienced estate planning attorney before deciding.

Reference: Motley Fool (Aug. 23, 2020) “What is Tenancy by the Entirety?”

Intestate Succession: Should I Let The State Write My Will?

It’s a common question to ask an estate planning attorneys: “I’m not wealthy, Do I Really Need A Will?” A recent article in The Sun explains that the answer is “yes.” If you die without a will you are said to die “intestate,” state probate laws will determine who will receive the assets in your estate. This is is known as “Intestate Succession.” Of course, that may not be how you wanted things to go. That’s why you need a will.

Intestate Succession
If you don’t have a will the state will decide who will receive your assets.

When you die, your assets (i.e., your “estate”) are distributed to family members and loved ones in your estate plan, if there is no surviving joint owner or designated beneficiary (e.g., life insurance, annuities, and retirement plans). No matter the complexity, a will is a key component of any basic plan.

A will allows you make decisions about the distribution of your assets, such as your real estate, personal property, family heirlooms, investments and businesses. You can make donations to your favorite charities or a religious organization. Your will is also important, if you have minor children: it’s where you nominate a guardian to care for them if you die.

Of course, you can avoid intestate succession by writing your own will or paying for a program on the Internet, but it’s better to have one prepared by an experienced estate planning attorney. Prior to sitting down with an attorney, make a listing of all your assets (your home, real estate, bank accounts, retirement plans, personal property and life insurance policies). If you have prized possessions or family heirlooms, be sure to also detail these.

Make a list of all debts, such as your mortgage, auto loans and credit cards. You should also collect contact information for all immediate living family members, detailing their addresses and birth dates.

When meeting with an attorney, ask about other components of an estate plan, such as a power of attorney and medical directive.

The originals of these documents should be kept in a safe place, where they can be easily accessed by your estate administrator or executor.

You should also review your estate plan every few years and at significant points in your life, like marriage, divorce, the adoption or birth of a child, death of a beneficiary and divorce.

Do your homework, then visit an experienced estate planning attorney to make sure you avoid intestate succession and receive important planning insights from their experience working with estate plans and families.

Reference: The (Jonesboro, AR) Sun (July 15, 2020) “Do I Really Need A Will?”

What Basic Estate Planning Documents Do I Need?

AARP’s recent article entitled “Sign These Papers” suggests that the following documents will give you and your family financial protection, as well as peace of mind.

Advance Directive. This document gives your family, loved ones and medical professionals your instructions for your health care. A living will, which is a kind of advance directive, details the treatment you’d like to have in the event you’re unable to speak for yourself. It covers things like when you would want doctors to stop treatment, pain relief and life support. Providing these instructions helps your family deal with these issues later.

Durable Power of Attorney for Health Care. This document, regularly included in a comprehensive estate plan, lets you name a trusted person (plus a backup or two) to make medical decisions on your behalf, when you’re unable to do so.

Revocable Living Trust. Drawn up correctly by an experienced estate planning attorney, this makes it easy to keep track of your finances, allow a trusted person step in, if necessary, and make certain that there are fewer problems for your heirs when you pass away. A revocable living trust is a powerful document that allows you to stay in control of all your finances as long as you want. You can also make changes to your trust as often as you like.

When you pass away, your family will have a much easiest task of distributing the assets in the trust to your beneficiaries. Without this, they’ll have to go through the probate process.  It can be a long and possibly costly process, if you die with only a will or intestate (i.e., without a will).

Will. Drafting a will with the guidance of an experienced estate planning attorney lets you avoid potential family fighting over what you’ve left behind. Your will can describe in succinct language whom you want to inherit items that might not be in your trust — your home or car, or specific keepsakes, such as your baseball card collection and your Hummel Figurines.

Durable Financial Power of Attorney. If you’re alive but incapacitated, the only way a trusted person, acting on your behalf, can access an IRA, pension or other financial account in your name is with a durable financial power of attorney. Many brokerages and other financial institutions have their own power of attorney forms, so make sure you ask about this.

These five documents (sometimes four, if your advance directive and health care power of attorney are combined) help you enjoy a happier, less stressful life.

With these documents you know that you’ve taken the steps to make navigating the future as smooth as possible. By making your intentions clear and easing the inheritance process as much as you possibly can, you’re taking care of your family. They will be grateful that you did.

Reference: AARP (August/September 2018) “Sign These Papers”

What are the Estate Planning Basics?

Estate planning is an all-encompassing term that refers to the process of organizing, inventorying and making plans for the proper handling of your affairs during incapacity and after you die. This typically involves writing a will, setting up a power of attorney and healthcare directives with the help of an experienced estate planning attorney.

CNET’s article entitled “Estate planning 101: Your guide to wills, trusts and all your end-of-life documents” provides us with some of the key steps in getting started with estate planning.

Create an Inventory. Your estate includes all of the things you own, such as your car and other valuable possessions, plus “intangible assets” like investments and savings. If you own a company, that’s also part of your estate. Everything you own should be given a valuation. Have your home and other valuables appraised.

Evaluate your family’s needs. A big reason for estate planning is to make certain that your family is cared for, in the case of your death or incapacitation. If you’re a breadwinner for your family, the loss of your income could be devastating financially. Consider a life insurance policy to help provide a financial cushion that can be used to cover living expenses, college tuition cost, and mortgage payments. You may also need to designate a guardian, if you have children under the age of 18.

Make job assignments. Dividing up a person’s property can be a tough and emotional task. Make it easier by ensuring that all of your assets have been assigned a beneficiary. You’ll also name a few people to coordinate the process of dividing up your belongings. List your beneficiaries, so they know who gets what.

Create a Will. You should have a legally binding document setting everything out in as much detail as possible. A will is a legal document that directs the way in which you want your assets and affairs handled after you die. This includes naming an executor, who is someone to manage how your will is executed and take care of the distribution of your assets.

Help your family if you’re incapacitated. A living will (also known as a medical care or health care directive) states your healthcare preferences, in case you’re unable to communicate or make those decisions on your own. If you need life support, a living will states your preferences.

Start estate planning sooner rather than later. Talk to an experienced estate planning attorney today.

Reference: CNET (June 8, 2020) “Estate planning 101: Your guide to wills, trusts and all your end-of-life documents”

What Do I Do If I’m Named Financial Power of Attorney?

A financial power of attorney (POA) is a document in which the “principal” appoints a trusted someone known as the “attorney-in-fact” or “agent” to act on behalf of the principal, especially when the principal is incapacitated. It typically permits the attorney-in-fact to pay the principal’s bills, access his accounts, pay his taxes and buy and sell investments or even real estate. In effect, the agent steps into the shoes of the principal and is able to act for him or her in all matters, as described in the POA document.

Kiplinger’s recent article entitled “What Are the Duties for Financial Powers of Attorney?” points out that these responsibilities may sound overwhelming, and it’s only natural to feel this way initially. Let’s look at the steps to take to do this important job:

  1. Start by reading the document. Review the POA document to determine precisely what the principal has given you power to do on their behalf. A POA typically includes information addressed to the agent that explains the legal duties he or she owes to the principal.
  2. See what you have to handle for the principal. Ask for a list of the principal’s assets and liabilities. If the principle is organized, it’ll be easy. If not, you will want to find about their brokerage and bank accounts, 401(k)s/IRAs/403(b)s, the mortgage, taxes, insurance and other monthly or recurring bills (like utilities, phone, cable and internet).
  3. Protect the principal’s property. Be sure the principal’s home is secure.  It’s often helpful to make a video to inventory the home. If it looks like the principal will be incapacitated for an extended period of time, you may cancel the phone and newspaper subscriptions. If you have control of the principal’s investments and their incapacitation may continue for a long time, review their brokerage statements for high-risk positions that you don’t understand, like options, puts and calls, or commodities. Get advice on any assets you don’t know how to handle.
  4. Pay all bills, as necessary. Review the principal’s bills and credit card statements, as you would your own, for potential fraud. Note that they may have bills automatically paid by credit card and plan accordingly.
  5. Pay taxes. Many powers of attorney give the agent the power to pay the principal’s taxes and deal with the IRS. If so, you’ll be responsible for filing and paying taxes on behalf of the principal. If the principal passes away, the executor or personal representative of the principal’s last will is responsible for preparing any final taxes.
  6. Keep meticulous records. Track every expenditure you make and every action you take on the principal’s behalf. You’ll be asked to demonstrate that you have upheld your duties and acted in the principal’s best interests. It will also be important for you to receive reimbursement for expenses, and (if the power of attorney provides for it) the time you spent acting as agent.

Finally, it’s important to know that your powers and obligations as the principal’s agent end when the principal passes away.  At that point, all powers conferred under the POA are extinguished and the person named as executor or personal representative in the principal’s will take over all duties.

Reference: Kiplinger (April 22, 2020) “What Are the Duties for Financial Powers of Attorney?”

When Should I Update My Estate Plan?

Forbes’ recent article entitled “Do You Need A Trust? 8 Important Goals A Trust Can Help You Achieve” discusses eight ways a trust can help you achieve specific legacy planning goals. The first step is to meet with an experienced estate planning attorney.

Everybody needs a will, but not everyone requires a trust. A trust provides greater flexibility and control over how your property and assets are distributed. Many people create a trust to avoid probate. As a result, it’s faster and easier for your named trustee(s) to distribute your assets to your heirs. There are a many different types of trusts with advantages and disadvantages. Talk about what will be best for you with your estate planning attorney.

  1. No probate. This process can take months or more to complete, and it can be very expensive. A trust is designed to settle your estate in a timely and relatively inexpensive manner.
  2. Privacy and confidentiality. Probate is public, so your will and other private financial and business info is available to everyone. However, a trust maintains privacy and confidentiality.
  3. Protection for beneficiaries. A trust can shield beneficiaries from lawsuits, creditors, or divorce. A trust can also protect the interests of a minor, by including direction for when distributions are made.
  4. Provide for children. This type of trust provides for the health care and personal needs of a minor child.
  5. Flexibility. As the creator of the trust, you determine the terms of the trust, and can put restrictions on how trust assets are managed. For instance, the trust could state that assets may only be used by the beneficiary to purchase a home or to pay medical bills but may not be distributed directly to the beneficiary.
  6. Preserve family wealth. Divorce and remarriage can result in assets that were supposed to stay in the family wind up leaving with the ex-spouse. A trust can make certain that your estate is preserved for grandchildren.
  7. Family values. A trust can be a wonderful way to pass down family values concerning education, home ownership, land conservation, community service, religious beliefs and other topics.
  8. Lessening family conflict. Challenging a trust is difficult and costly. Having a trust in place that clearly articulates your wishes for your family, reduces the potential for misunderstanding.

Whether you have a trust in place or are thinking about creating one, it’s important to meet regularly with your estate planning attorney to be certain your strategy and estate planning documents reflect any new state and federal tax laws, as well as any changes in your goals and circumstances.

Reference: Forbes (Feb. 24, 2020) “Do You Need A Trust? 8 Important Goals A Trust Can Help You Achieve”

Rules for the HIPAA Waiver Relaxed?

The United States Department of Health and Human Services has announced that it won’t enforce penalties for violations of certain provisions of the HIPAA privacy rule against healthcare providers or their business associates for good-faith disclosures of protected health information (PHI) for public health purposes during the COVID-19 emergency.

The HHS Office for Civil Rights said that it was exercising its “enforcement discrimination” in announcing its change in policy during the coronavirus pandemic, a declared emergency period, reports Modern Healthcare in its article “HHS eases HIPAA enforcement on data releases during COVID-19.”

A HIPAA waiver of authorization is a legal document that permits an individual’s protected health information (PHI) to be used or disclosed to a third party. This waiver is part of a series of patient-privacy measures set forth in the Health Insurance Portability and Accountability Act (HIPAA) of 1996.

PHI covered under HIPAA is information that can be connected to a specific individual and is held by a covered entity, like a healthcare provider. HIPAA has set out 18 specific identifiers that create PHI, when linked to health information.

The notification was issued to support federal and state agencies, including the CMS and the Centers for Disease Control and Prevention, that require access to COVID-19 related data, including protected health information.

“The CDC, CMS, and state and local health departments need quick access to COVID-19 related health data to fight this pandemic,” OCR director Roger Severino said in a statement. “Granting HIPAA business associates greater freedom to cooperate and exchange information with public health and oversight agencies, can help flatten the curve and potentially save lives.”

HIPAA’s privacy rule only permits business associates of HIPAA-covered entities to disclose protected health information for certain purposes, under explicit terms of a written agreement.

The moratorium enforcement doesn’t extend to other requirements or prohibitions under the privacy rule, nor to any obligations under the HIPAA security and breach notification rules, OCR said.

Reference: Modern Healthcare (April 2, 2020) “HHS eases HIPAA enforcement on data releases during COVID-19”

What Should I Know about Beneficiary Designations?

A designated beneficiary is named on a life insurance policy or some type of investment account as the designated recipient of those assets, in the event of the account holder’s death. The beneficiary designation doesn’t replace a signed will but takes precedence over any instructions about these accounts in a will. If the decedent doesn’t have a will, the beneficiary may see a long delay in the probate court.

If you’ve done your estate planning, most likely you’ve spent a fair amount of time on the creation of your will. You’ve discussed the terms with an established estate planning attorney and reviewed the document before signing it.

FEDweek’s recent article entitled “Customizing Your Beneficiary Designations” points out, however, that with your IRA, you probably spent far less time planning for its ultimate disposition.

The bank, brokerage firm, or mutual fund company that acts as custodian undoubtedly has a standard beneficiary designation form. It is likely that you took only a moment or two to write in the name of your spouse or the names of your children.

A beneficiary designation on account, like an IRA, gives instructions on how your assets will be distributed upon your death.

If you have only a tiny sum in your IRA, a cursory treatment might make sense. Therefore, you could consider preparing the customized beneficiary designation form from the bank or company.

You can address various possibilities with this form, such as the scenario where your beneficiary predeceases you, or she becomes incompetent. Another circumstance to address, is if you and your beneficiary die in the same accident.

These situations aren’t fun to think about but they’re the issues usually covered in a will. Therefore, they should be addressed, if a sizeable IRA is at stake.

After this form has been drafted to your liking, deliver at least two copies to your custodian. Request that one be signed and dated by an official at the firm and returned to you. The other copy can be kept by the custodian.

Reference: FEDweek (Dec. 26, 2019) “Customizing Your Beneficiary Designations”

Fixing an Estate Plan Mistake

When an issue arises, you need to seek the assistance of a qualified and experienced estate planning attorney, who knows to fix the problems or find the strategy moving forward.

For example, an irrevocable trust can’t be revoked. However, in some circumstances it can be modified. The trust may have been drafted to allow its trustees and beneficiaries the authority to make certain changes in specific circumstances, like a change in the tax law.

Those kinds of changes usually require the signatures from all trustees and beneficiaries, explains The Wilmington Business Journal’s recent article entitled “Repairing Estate Planning Mistakes: There Are Ways To Clean Up A Mess.”

Another change to an irrevocable trust may be contemplated, if the trust’s purpose has become outdated or its administration is too expensive. An estate planning attorney can petition a judge to modify the trust in these circumstances when the trust’s purposes can’t be achieved without the requested change. Remember that trusts are complex, and you really need the advice of an experienced trust attorney.

Another option is to create the trust to allow for a “trust protector.” This is a third party who’s appointed by the trustees, the beneficiaries, or a judge. The trust protector can decide if the proposed change to the trust is warranted. However, this is only available if the original trust was written to specify the trust protector.

A term can also be added to the trust to provide “power of appointment” to trustees or beneficiaries. This makes it easier to change the trust for the benefit of current or future beneficiaries.

There’s also decanting. This is when the assets of an existing trust are “poured” into a new trust with different terms. This can include extending the trust’s life, changing trustees, fixing errors or ambiguities in the original language, and changing the legal jurisdiction. State trust laws vary, and some allow much more flexibility in how trusts are structured and administered.

The most drastic option is to end the trust. The assets would be distributed to the beneficiaries, and the trust would be dissolved. Approval must be obtained from all trustees and all beneficiaries. A frequent reason for “premature termination” is that a trust’s assets have diminished in value to the extent that administering it isn’t feasible or economical.

Again, be sure your estate plan is in good shape from the start. Anticipating problems with the help of your lawyer, instead of trying to solve issues later is the best plan.

Reference: Wilmington Business Journal (Jan. 3, 2020) “Repairing Estate Planning Mistakes: There Are Ways To Clean Up A Mess”

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