Probate Court

Do I Need a Will?

Yahoo Finance’s recent article on this subject asks “Do You Really Need a Will?” As the article explains, without a will, you’ll be “intestate”—which means you’ll have no say in what happens to your assets and belongings once you pass away.

Do I need a will?
If you don’t have a will your assets will be distributed according to state law.

Many people ask the question, “Do I need a will?” Each state has its laws concerning the distribution of a person’s assets if they die without a will. These laws most likely won’t mesh with your personal wishes. If you don’t have a will, ask yourself why you don’t. Perhaps you think you don’t need one. However, more than likely you do. If you’re putting off starting this important estate planning task, here are some things to consider.

Just about everybody needs a will, but you definitely should have one if you’re married, you have minor children, you have real estate, or you have investments in the stock market. You should also have a will if you have possessions, such as cars, furniture, jewelry, paintings, and computers?

As far as your money and possessions, you probably have some thoughts as to who gets what. You may want to chip in on the education of some younger relatives or give specific pieces of jewelry to those who you know will appreciate them. If you have minor children, you probably have very definite ideas about who should be their guardians if you die.

With a will, you have control. Without a will, the state in which you live will distribute your assets according to its laws, regardless of your wishes.

After you pass away, there could be surprise money coming to you, and without a will, you have no control over where these funds go. Your estate could get some cash from returned security deposits, medical reimbursements, or refunds from utility companies. Furthermore, if you die in a car accident and there’s an insurance settlement, you have no say who gets those funds, which could be substantial.

You also need to think about your pets, and who would be the best person to care for your animals.

So, the answer to the question, “Do I need a will”, is almost certainly, yes.

Reference: Yahoo Finance (July 21, 2019) “Do You Really Need a Will?”

What Should I Keep in Mind in Estate Planning as a Single Parent?

Most estate planning conversation eventually come to center upon the children, regardless of whether they’re still young or adults.  So what should you keep in mind in estate planning as a single parent?

Talk to a qualified estate planning attorney and let him or her know your overall perspective about your children, and what you see as their capabilities and limitations. This information can frequently determine whether you restrict their access to funds and how long those limitations should be in place, in the event you’re no longer around.

Kiplinger’s recent article, “Estate Planning for Single Parents” explains that when one parent dies, the children typically don’t have to leave their home, school and community. However, when a single parent passes, a child may be required to move from that location to live with a relative or ex-spouse.

After looking at your children’s situation with your estate planning attorney to understand your approach to those relationships, you should then discuss your support network to see if there’s anyone who could serve in a formal capacity, if necessary. A big factor in planning decisions is the parent’s relationship with their ex. Most people think that their child’s other parent is the best person to take over full custody, in the event of incapacity or death. For others, this isn’t the case. As a result, their estate plan must be designed with great care. These parents should have a supportive network ready to advocate for the child.

Your estate planning attorney may suggest a trust with a trustee. This fund can accept funds from your estate, a retirement plan, IRA and life insurance settlement. This trust should be set up, so that any court that may be involved will have sound instructions to determine your wishes and expectations for your kids. The trust tells the court who you want to carry out your wishes and who should continue to be an advocate and influence in your child’s life.

Your will should also designate the child’s intended guardian, as well as an alternate, in case the surviving parent can’t serve for some reason. The trust should detail how funds should be spent, as well as the amount of discretion the child may be given and when, and who should be involved in the child’s life.

A trust can be drafted in many ways, but a single parent should discuss all of their questions with an estate planning attorney.

Reference: Kiplinger (May 20, 2019) “Estate Planning for Single Parents”

Your Will Isn’t the End of Your Estate Planning

Even if your financial life is pretty simple, you should have a will. And once you have a will, that’s not the end of your estate planning.  There’s still some work to be done to make sure your family isn’t left with an expensive mess to clean up.  Assets must be properly titled, so that assets are distributed as intended upon death.

Your Will is only one piece of your estate planning.

Forbes’ recent article, “For Estate Plan To Work As Intended, Assets Must Be Properly Titled” notes that with the exception of the choice of potential guardians for children, the most important function of a will is to make certain that the transfer of assets to beneficiaries is the way you intended.

However, not all assets are disposed of by a will—they pass to beneficiaries regardless of the intentions stated in the will. Your will only controls the disposition of assets that fall within your probated estate.

An example of when a designated beneficiary controls the disposition of a financial asset is life insurance. Other examples are retirement accounts, such as a 401(k) or an IRA. When there’s a named beneficiary, assets will be distributed accordingly, which may be different than the intentions stated in a will.

The title of real estate controls its disposition. When property is jointly owned, how it is titled determines if the decedent’s interest in the property passes to the surviving partner, becomes part of the decedent’s estate, or passes to a third party. Titling of jointly owned property can be complicated in community property states.

In the same light, a revocable trust is an inter vivos or living trust that’s created during the grantor’s life, as part of an estate plan.

Such a trust can be used to ensure privacy, avoid the expenses and delays in the probate process and provide for continuity of asset management. A critical part of the planning is that the grantor must transfer (or retitle) assets to the trust.

Wills are very important in estate planning. To ensure that your estate plan fulfills your intentions, talk to an estate planning attorney about the proper titling of your assets.

Reference: Forbes (May 20, 2019) “For Estate Plan To Work As Intended, Assets Must Be Properly Titled”

Why Do Singles Need These Two Estate Planning Tools?

Morningstar’s article, “2 Estate-Planning Tools That Singles Should Consider” explains that a living will, or advance medical directive, is a legal document that details your wishes for life-sustaining treatment. It’s a document that you sign when you’re of sound mind and says you want to be removed from life supporting measures, if you become terminally ill and incapacitated.

Powers of Attorney for healthcare and finances are often overlooked as critical estate planning documents for singles.

If you’re on life support with no chance of getting better, you’d choose to have your family avoid the expense and stress of keeping you alive artificially.

Like a living will, a durable power of attorney for healthcare is a legal document that names an agent to make healthcare decisions for you, if you are unable to make them yourself.

A durable power of attorney for healthcare can provide your instructions in circumstances in which you’re not necessarily terminally ill, but you are incapacitated.

When selecting an agent, find a person you trust enough to act on your behalf when you’re unable. Let this person know exactly how you feel about blood transfusions, organ transplants, disclosure of your medical information and other sensitive topics that may arise, if you’re incapacitated.

A power of attorney eliminates any confusion, especially if this person is someone other than your spouse. Your doctors will know exactly who the decision-maker is among your relatives and friends.

These two documents aren’t all that comprise a fully comprehensive estate plan. Singles should regularly make certain that the beneficiary designations on their checking and retirement accounts are up to date.

You should also consider your life insurance needs, especially if you have children and/or a mortgage.

It is also important to understand that a living will doesn’t address the issues of a will. A will ensures that your property is distributed after your death, in accordance with your wishes. Ask for help from an experienced estate planning attorney.

These two documents—a living will and a durable power of attorney—can help ensure that in a healthcare emergency, any medical and financial decisions made on your behalf are in accordance with what you really want. Speak with to an estate-planning attorney in your state to get definitive answers to your questions.

Reference: Morningstar (April 23, 2019) “2 Estate-Planning Tools That Singles Should Consider”

What Are the Six Most Frequent Estate Planning Mistakes?

It’s a grim topic, but it is an important one. Without a legal will in place, your loved ones may spend years stuck in court proceedings and spend a lot on legal fees and court costs to settle your estate.

The San Diego Tribune writes in its recent article, 6 estate-planning mistakes to avoid, that without a plan, everything is more stressful and expensive. Let’s look at the top six estate-planning mistakes that people need to avoid:

Estate Planning Mistakes
Estate planning is tricky to get right without the help of a trained professional.

No Plan. Regardless of your age or financial status, it’s critical to have a basic estate plan. This includes crafting powers of attorney for both healthcare and finances and a living will.

No Discussion. Once you create your plan, tell your family. Those you’ve named to take care of you, need to know what you’ve decided and where to find your plan.

Focusing Only on Taxes. Estate planning can be much more than just about tax avoidance. There are many other reasons to create an estate plan that have nothing to do with taxes, like charitable giving, special needs planning for a family member, succession planning in the event of incapacity and planning for children of a prior marriage, to name just a few.

Leaving Assets Directly to Children. If you leave assets directly to your children or grandchildren under age 18, it can cause unintended custodian or guardianship issues. Minors can’t own legal property, so a guardian will be appointed by the court to manage the property for them, until they reach age 18. If you don’t name a guardian, the court will appoint one for you and that person may have very different ideas about how your children should be raised.

Making Mistakes with Ownership and Property Titles. With many blended families, you may want to preserve assets from an inheritance as your own separate property or from a prior marriage for your children. There are many tax consequences and control issues in blended families about which you may not be aware.

Messing Up Your Trust. Many people don’t properly fund or update their trusts. An unfunded trust doesn’t do anyone any good. Assets that aren’t titled in the name of the trust don’t avoid probate.

Finally, the easiest way to avoid these frequent estate planning mistakes is by reviewing your estate plan regularly, as your circumstances change.

Reference: San Diego Tribune (April 18, 2019) “6 estate-planning mistakes to avoid”

Why Do Even the Middle Class Need Estate Planning?

When it comes to estate planning, you may think that you don’t have the wealth that would require you to engage in extensive estate planning. If you have a will, you might think that’s good enough.  Forbes’ recent article, “Why Estate Planners Aren’t Just for the Ultra-Rich,” says that nothing could be further from the truth.

estate planning for middle class
Estate planning for middle class families is important for many reasons.

Although some estate plans are more complicated than others, just about everyone can benefit from having one. Let’s examine the main reasons why:

Avoiding probate. This is a big reason why the importance of estate planning is for everyone. You don’t have to be part of the 1% to want to avoid putting your family through the stress and expense of probate. Creating a trust and strategically placing assets within its control, eliminates many headaches.

Naming a Guardian for Your Children.  Naming a Guardian for your children can only be done through estate planning documents.  In most states a will is the only document where you can legally name a guardian to raise your children.  If your estate planning documents don’t name a Guardian, the courts will name on for you, and it may not be the person you would have chosen.

Protecting your legacy. When you consider leaving a legacy for the next generation, it may have lofty pursuits. However, those aren’t necessarily reasonable goals for everyone. Leaving a legacy can also mean making certain that heirs properly respect all the effort and sacrifice that it took to save and create a retirement fund—whatever its size.

Creating a business succession plan. Among the countless small businesses in the U.S., most will continue to remain viable after the legacy owner dies. A business owner can plan for this within an estate plan, which details exactly what they want to happen, if they die unexpectedly. That could include outlining specific roles and responsibilities for surviving heirs or putting into place a buy-sell agreement with a business partner and directing the distribution the proceeds of the sale.

Be sure to revisit your estate plan regularly, especially if your life includes big events, like a birth of a child, a divorce, or an irreconcilable difference with a loved one.

It’s a myth that estate planning is something only wealthy people do. The middle class need estate planning too.  It’s for everyone.

Reference: Forbes (April 15, 2019) “Why Estate Planners Aren’t Just For The Ultra-Rich”

What is a Transfer on Death (TOD) Account?

Transfer on Death accounts allow for assets to avoid probate and be transferred directly to a beneficiary after the death of the account holder.

Most married couples share a bank account from which either spouse can write checks and add or withdraw funds without approval from the other. When one spouse dies, the other owns the account. The deceased spouse’s will can’t change that.

This account is wholly owned by both spouses while they’re both alive. As a result, a creditor of one spouse could make a claim against the entire account, without any approval or say from the other spouse. Either spouse could also withdraw all the money in the account and not tell the other. This basic joint account offers a right of survivorship, but joint account holders can designate who gets the funds, after the second person dies.

Kiplinger’s recent article, “How Transfer-on-Death Accounts Can Fit Into Your Estate Planning,” explains that the answer is transfer on death (TOD) accounts (also known as Totten trusts, in-trust-for accounts, and payable-on-death accounts).

In some states, this type of account can allow a TOD beneficiary to receive an auto, house, or even investment accounts. However, retirement accounts, like IRAs, Roth IRAs, and employer plans, aren’t eligible. They’re controlled by federal laws that have specific rules for designated beneficiaries.

After a decedent’s death, taking control of the account is a simple process. What is typically required, is to provide the death certificate and a picture ID to the account custodian. Because TOD accounts are still part of the decedent’s estate (although not the probate estate that the will establishes), they may be subject to income, estate, and/or inheritance tax. TOD accounts are also not out of reach for the decedent’s creditors or other relatives.

Account custodians (such as financial institutions) are often cautious, because they may face liability if they pay to the wrong person or don’t offer an opportunity for the government, creditors, or the probate court to claim account funds. Some states allow the beneficiary to take over that responsibility, by signing an affidavit. The bank will then release the funds, and the liability shifts to the beneficiary.

If you’re a TOD account owner, you should update your account beneficiaries and make certain that you coordinate your last will and testament and TOD agreements, according to your intentions. If you fail to do so, you could unintentionally add more beneficiaries to your will and not update your TOD account. This would accidentally disinherit those beneficiaries from full shares in the estate, creating probate issues.

TOD joint account owners should also consider that the surviving co-owner has full authority to change the account beneficiaries. This means that individuals whom the decedent owner may have intended to benefit from the TOD account (and who were purposefully left out of the Last Will) could be excluded.

If the decedent’s will doesn’t rely on TOD account planning, and the account lacks a beneficiary, state law will govern the distribution of the estate, including that TOD account. In many states, intestacy laws provide for spouses and distant relatives and exclude any other unrelated parties. This means that the TOD account owner’s desire to give the account funds to specific beneficiaries or their descendants would be thwarted.

Ask an experienced estate planning attorney, if a TOD account is suitable to your needs and make sure that it coordinates with your overall estate plan.

Reference: Kiplinger (March 18, 2019) “How Transfer-on-Death Accounts Can Fit Into Your Estate Planning”

What If My Beneficiary Isn’t Ready to Handle an Inheritance?

A recent Kiplinger article asks: “Is Your Beneficiary Ready to Receive Money?” In fact, not everyone will be mentally or emotionally prepared for the money you wish to leave them. Here are some things estate planning attorney’s suggest you consider:

inheritance
Even the most responsible young adults aren’t likely ready to handle an inheritance.

The Beneficiary’s Age. Children under 18 years old cannot sign legal contracts. Without some planning, the court will take custody of the funds on the child’s behalf. This could occur via custody accounts, protective orders or conservatorships. If this happens, there’s little control over how the money will be used. The conservatorship will usually end and the funds be paid to the child, when they become an adult. Giving significant financial resources to a young adult who’s not ready for the responsibility, often ends in disaster. Work with an estate planning attorney to find a solution to avoid this result.

The Beneficiary’s Lifestyle. There are many other circumstances for which you need to consider and plan. These include the following:

  • A beneficiary with a substance abuse or gambling problem;
  • A beneficiary and her inheritance winds up in an abusive relationship;
  • A beneficiary is sued;
  • A beneficiary is going through a divorce;
  • A beneficiary has a disability; and
  • A beneficiary who’s unable to manage assets.

All of these issues can be addressed, with the aid of an estate planning attorney. A testamentary trust can be created to make certain that minors (and adults who just may not be ready) don’t get money too soon, while also making sure they have funds available to help with school, health care and life expenses.

Who Will Manage the Trust? Every trust must have a trustee. Find a person who is willing to do the work. You can also engage a professional trust company for larger trusts. The trustee will distribute funds, only in the ways you’ve instructed. Conditions can include getting an education, or using the money for a home or for substance abuse rehab.

Estate Plan Review. Review your estate plan after major life events or every few years. Talk to a qualified estate planning attorney to make the process easier and to be certain that your money goes to the right people at the right time.

Reference: Kiplinger (April 1, 2019) “Is Your Beneficiary Ready to Receive Money?”

When Do I Need a Revocable Trust?

A will is a legal document that states how your property should be distributed when you die.  It also names guardians for any minor children. Whatever the size of your estate, without a will, there’s no guarantee that your assets will be distributed, according to your wishes. For those with a desire to simplify asset transfers after death and avoid probate, those with substantial assets, more complicated situations, or concerns of diminished capacity in later years, a revocable trust might also be considered, in addition to a will.

Revocable trusts have many benefits
A revocable trust is useful for anyone who wants to simplify the transfer of their assets or avoid probate.

Forbes’ recent article, “Revocable Trusts And Why Should You Consider One,” explains that a revocable trust, also called a “living trust” or an inter vivos trust, is created during your lifetime. On the other hand, a “testamentary trust” is created at death through a will. A revocable trust, like a will, details dispositive provisions upon death, successor and co-trustees, and other instructions. Upon the grantor’s passing, the revocable trust functions in a similar manner to a will.

A revocable trust is a flexible vehicle with few restrictions during your lifetime.  You usually designate yourself as the trustee and maintain control over the trust’s assets. You can move assets into or out of the trust, by retitling them. This movement has no income or estate tax consequences, nor is it a problem to distribute income or assets from the trust to fund your current lifestyle.

A living trust has some advantages over having your entire estate flow through probate. The primary advantages of having the majority of your assets avoid probate, is the ease of asset transfer and the lower costs. Another advantage of a trust is privacy, because a probated will is a public document that anyone can view.

Even with a revocable trust, you still need a will. A “pour over will” controls the decedent’s assets that haven’t been titled to the revocable trust, intentionally or by oversight. These assets may include personal property. This pour-over will generally names the revocable trust—which at death becomes irrevocable—as the beneficiary.

Another reason for creating a revocable trust is the possibility of future diminished legal capacity, when it may be better for another person, like a spouse or child, to help with your financial affairs. A co-trustee can pay bills and otherwise control the trust’s assets. This can also give you financial protection, by obviating the need for a court-ordered guardianship.

Talk to an experienced estate planning attorney about the best options for your situation to protect your estate and provide the peace of mind that your family will receive what you intended for them to inherit, with the least possible costs and stress.

Reference: Forbes (March 11, 2019) “Revocable Trusts And Why Should You Consider One”

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