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Why Do I Need Estate Planning If I’m Not Rich?

Most people spend more time planning a vacation than they do thinking about who will inherit their assets after they pass away. Although estate planning isn’t the most enjoyable activity, without it, you don’t get to direct who gets the things you’ve worked so hard for after you pass away.

Estate Planning isn't only for the rich
An Estate Plan will protect your assets and your loved ones

Investopedia asks you to consider these four reasons why you should have an estate plan to avoid potentially devastating results for your heirs in its article “4 Reasons Estate Planning Is So Important.”

Wealth Won’t Go to Unintended Beneficiaries. Estate planning may have been once considered something only rich people needed, but that’s changed. Everyone now needs to plan for when something happens to a family’s breadwinner(s). The primary part of estate planning is naming heirs for your assets and a guardian for your minor children. Without an estate plan, the courts will decide who will receive your property and raise your kids.

Protection for Families With Young Children. If you are the parent of small children, you need to have a will to ensure that your children are taken care of. You can designate their guardians, if both parents die before the children turn 18. Without a will with a guardianship clause, a judge will decide this important issue, and the results may not be what you would have wanted.

Avoid Taxes. Estate planning is also about protecting your loved ones from the IRS. Estate planning is transferring assets to your family, with an attempt to create the smallest tax burden for them as possible. A little estate planning can reduce much or even all of their federal and state estate taxes or state inheritance taxes. There are also ways to reduce the income tax that beneficiaries might have to pay. However, without an estate plan, the amount your heirs will owe the government could be substantial.

No Family Fighting (or Very Little). One sibling may believe he or she deserves more than another. This type of fighting happens all the time, and it can turn ugly and end up in court, pitting family members against each other. However, an estate plan enables you to choose who controls your finances and assets, if you’re unable to manage your own assets or after you die. It also will go a long way towards settling any family conflict and ensuring that your assets are handled in the way you wanted.

To protect your assets and your loved ones when you no longer can do it, you’ll need an estate plan. Without one, your family could see large tax burdens, and the courts could say how your assets are divided, or even who will care for your children.

Reference: Investopedia (May 25, 2018) “4 Reasons Estate Planning Is So Important”

Estate Planning for Blended Families: The Importance of Updating Your Estate Plan

A recent Massachusetts case highlights the importance of estate planning for blended families, especially the need to update an estate plan after remarriage.

Estate Planning for Blended Families
An outdated will could wreak havoc in estate planning for blended families.

The Massachusetts Supreme Judicial Court recently unanimously ruled for the second wife of a man who demanded her share of the real estate her husband had willed to his four adult children. The Boston Globe reports in the article “SJC says spouses are entitled to part of significant other’s estate when they are left out of will” that the ruling written by Justice Elspeth B. Cypher says that widow Susan Ciani was protected by the law and has the right to cancel out the estate plan her husband approved before he died. The court held that the law was clear that “the Legislature intended for the surviving spouse to have an ownership interest in the real property for life, not merely an interest in the income produced by the real property.”

The husband, Raymond Ciani, created a will in 2000 that left his estate to his first wife, Mary. Under the will, after her death, his four children were to be sole beneficiaries of the estate, which was worth an estimated $675,000. But Mary died before her husband. Raymond then married Susan in 2013 and died in 2015 without changing his will.

After her husband’s death, Susan challenged the will in court and remained in the family home. Both Susan and the children went into Probate and Family Court and agreed to sell the family home and other assets, while judges decide who gets what.

The attorney for the four children, Maria L. Remillard, said the Court has created what could become a legal problem for blended families, because the law is obscure.

“It’s a rude awakening for a lot of people,’’ Remillard said of the law and the SJC’s endorsement of it. “It isn’t until someone passes away that the parties and surviving spouses realize the impact . . . After a second marriage, the second spouse could, in fact, totally disrupt the estate plan.”

The Supreme Judicial Court’s decision allows Susan to get one-third of the value of her husband’s real estate holdings and a similar share in the estate. If both sides had not agreed to sell the family home, Susan also would have been allowed to live there for the rest of her life.

Some states adhere to community property laws that permit a spouse to keep half ownership of all property in a marriage. However, Massachusetts follows an elective share law to protect spouses against disinheritance.

The decision emphasizes the importance of keeping your estate plan up to date, especially if you have remarried.

Reference: The Boston Globe (January 8, 2019) “SJC says spouses are entitled to part of significant other’s estate when they are left out of will”

Theft Reported in Aretha Franklin’s Estate

Careful estate planning can prevent heirs from stealing assets from your estate. Aretha Franklin’s estate is a sad example.

Careful Estate Planning
Aretha Franklin’s estate woes highlight the need for careful estate planning.,

Detroit area police told the Free Press that an active theft investigation was ongoing, involving Aretha Franklin’s suburban mansion. However, the investigation began prior to her death.

The 76-year-old Queen of Soul passed away from pancreatic cancer in August in her Detroit riverfront apartment. When she died, she still owned her 4,100-square-foot Colonial-style home in Bloomfield Township, Michigan, which is in the sights of the IRS.

Wealth Advisor says in its article, “Police investigate theft from Aretha Franklin’s estate,” that the theft investigation was first reported by The Blast, a celebrity news website claiming Franklin’s estate is fighting with Franklin’s 61-year-old son, Edward, who was born when Aretha was only 14.

Her son Edward has been attempting to get a court order to force the estate to provide monthly financial documents to his mother’s heirs. However, the estate won’t turn over the information because it contends such information could negatively impact the criminal investigation involving stolen estate property.

Late last year, the IRS filed a claim in the County Probate Court, alleging that the Franklin estate owed millions in back taxes and penalties. An attorney for the estate stated that it had repaid more than $3 million in back taxes, since Franklin’s death. It’s believed that Franklin owed more than $6.3 million in back taxes from 2012 to 2018 and $1.5 million in penalties.

The Oakland County court documents did not state the exact value of her estate, which is believed to be in the tens of millions.

Immediately after her death, Franklin’s mansion, which is part of a gated community, was listed for sale at $800,000. However, it was then taken off the market. The custom-built home features six bedrooms, seven bathrooms, white marble floors and floor-to-ceiling windows overlooking two small ponds and a lap pool. The mansion also sports a sauna, a three-car garage and a jetted tub.

Franklin is said to have purchased the mansion for $1.2 million in 1997, according to The Detroit News. The home was built in 1990 and remodeled in 2002.

You can read more about asset protection on our website.

Reference: Wealth Advisor (January 11, 2019) “Police investigate theft from Aretha Franklin’s estate”

How Do I Find the Right Estate Planning Attorney?

When looking for an estate planning attorney, many people feel more comfortable with getting a personal referral, than by trying to find an attorney on their own.

While a referral from friends can be a good start to finding an experienced attorney, it may not be enough to cultivate a successful working relationship, says The San Francisco Business Times in the recently published article, “Guide to finding an estate planning attorney who is right for you.”

  1. Identify the type of estate planning attorney needed. Many people can use the services of an estate planning attorney to draft wills, powers of attorney, healthcare directives and basic trusts. However, some situations require an attorney with certain focuses. For example, those who are concerned about maximizing benefits for beneficiaries with special needs or who are interested in programs like Medicaid or addressing long-term care may want a practitioner who concentrates in elder law.
  2. Interview your short list. See if there’s a fee for a “meet and greet” before you schedule a meeting. Most attorneys welcome the opportunity to meet with potential clients.
  3. Ask practical questions. At the introductory meeting, ask procedural questions rather than asking for specific legal advice. You may want to ask about topics such as relevant experience, preferred methods of communication and points of contact, billing practices and whether the attorney has the bandwidth (capacity) to work on your issues.
  4. Make an assessment after the meeting. After the interview, assess how the meeting went. Ask yourself the following questions:
  • Did he respond in a timely manner?
  • Did you understand the answers he gave you?
  • Did you feel comfortable asking follow-up questions?

If you weren’t totally comfortable with this first meeting, you may never develop the type of open conversation that’s critical to have with your estate planning attorney. You don’t need your estate planning attorney to be your best friend, but you do need to trust them with your family’s future. If one does not suit you, continue looking until you find one who is a good fit.

  1. Move ahead. If you felt good and liked the attorney’s approach, go ahead and move forward.
  2. Get all the fee info out in the open. An estate planning attorney will usually prepare fee engagement letters that sets out the scope of services and billing practices. If your attorney doesn’t give this type of letter for you to review and sign, ask her to put the fee agreement in writing. Make certain that you understand the letter. If you have questions, get answers before signing.

Reference: San Francisco Business Times (January 4, 2019) “Guide to finding an estate planning attorney who is right for you”

Should I Use an Online Will Service?

More than 50% of Americans don’t have a will, according to a 2017 survey by Caring.com. Spelling out how your assets should be divided, is an essential start to estate planning that can be easily overlooked.

A U.S. News & World Report’s article asks “Should You Make a Free Will Online?” According to the article, before writing your will or using an online service, you need to know the legal requirements in your area. In many instances, this is best left to a legal professional in your state.

There are plenty of online tools that will help you create a will. However, before clicking on a website’s promise, you need to evaluate the available options. There are three main ways to write a will:

  1. Do it yourself;
  2. Use a do-it-yourself program; or
  3. Get help from a qualified estate planning attorney.

If you draft a will on your own, you’ll need to be absolutely certain you understand all of the applicable probate, tax and property laws in your state.

If you use an online service, you’ll have access to software that walks you through the process. In this case, you’ll need to be sure that the software company has all the applicable laws covered, as required for your state. You also want a program that lets you make updates later, if your situation changes.

However, if you engage the assistance of an experienced estate planning attorney, you’ll have the opportunity to have an expert help you think through the details. The result will be a well-drafted will. Yes, it will cost a bit more, but for many situations—like those with blended families, families with minor children, complex investments, or property in several states—it’s worth it.

Remember that the probate laws can vary widely from state to state. For example, the basic form requirements may allow a handwritten will in some states, but in other states the will must be typewritten. Some states require only two witnesses, and others require that the will be witnessed, notarized and typed.

If you have a larger estate or heirs with medical conditions, it may be wise to work with an attorney who can counsel you on the best solutions for your situation. For example, if you have a child with special needs receiving government benefits, you should have an attorney create a trust so their inheritance doesn’t negatively impact their benefits.

You should also use an attorney if you want to reduce your exposure to probate fees. Some people transfer their assets into a revocable living trust, so they are not subject to probate fees. An online service can’t give you this type of attention or personalized service.

If you have a complex situation, you may end up paying less by using an attorney. An experienced estate planning attorney has helped numerous families. He or she can offer insight into setting up guardians for minor children or appointing an individual to be in charge of the distribution of the estate. There are frequently estate and gift tax considerations about which the average person doesn’t know or monitor.

Reference: U.S. News & World Report (January 9, 2019) “Should You Make a Free Will Online?”

Market Volatility Got You Worried? Here’s Something You Can Control

When investors are faced with turbulent markets, there’s a human response to want to do something—sometimes, anything. We’re hardwired to try to take control. That doesn’t always help us make the best investment decisions. However, as reported in this Daily Camera’s article, there is something that you can do that may make you feel better: “Freaked out about the market? Resolve to get your estate in order.”

If you care about your health care, financial affairs, minor children and even your beloved pets, this is an important task to take care of. An estate plan includes legal documents that help you, when you are living and helps your heirs, when you die. In addition to a will, powers of attorney that will give your loved ones the ability to manage your affairs, if you become incapacitated. An updated will ensures that your assets go to the inheritors you chose. Don’t forget your beneficiaries.

Your beneficiaries are the people who are named on several accounts and life insurance policies. You may have named people on investment accounts, life insurance policies, IRAs, bank accounts, annuities and other assets. If you have not done a full review of those documents in a while, you want to take care of this right away. Life and relationships change over time, and the people you originally named as your beneficiaries, may no longer be the ones you would select today. Note that any changes must be made while you are living—when you are passed, the beneficiaries receive the asset, regardless of what is written in your will.

If you’re not sufficiently motivated to make an appointment with an estate planning attorney, you should be aware that if you don’t have a will, the laws of your state will determine who gets your assets and even, lacking a will that names a guardian, who rears your minor children. You may or may not be a fan of court proceedings, but if you don’t have a properly prepared will, the court is going to be making a lot of decisions on your behalf.

Contact an estate planning attorney to begin the process of putting your affairs in order. An attorney whose practice focuses in this area of the law, is most likely a better choice than one who does wills on the side. There are many complex laws in estate planning, and there are many opportunities available to make the most out of your assets and grow your legacy. An estate planning attorney will know what will work best for you and your family.

Reference: Daily Camera (Jan. 6, 2019) “Freaked out about the market? Resolve to get your estate in order”

Why Did the Hawaii Attorney General Oppose a Change to the Trust of a Hawaiian Princess?

Attorney General Russell Suzuki claimed in a court filing that 92-year-old Native Hawaiian princess Abigail Kawananakoa’s amendment to her trust is too complex and invalid based on a prior court ruling, according to The Honolulu Star-Advertiser.

The Clay Center Dispatch reports in the recent article, “Attorney general opposes Hawaiian princess’ trust amendment,” that Judge Robert Browning ruled last fall that Kawananakoa doesn’t have the mental capacity to manage her $215 million trust, after she suffered a stroke in 2017. The judge appointed First Hawaiian Bank to serve as trustee and removed Jim Wright, her longtime attorney who stepped in as trustee following her stroke.

Kawananakoa has indicated that she is feeling okay. She fired attorney Wright and then married Veronica Gail Worth—her girlfriend of 20 years.

Kawananakoa is considered a princess, because she is a descendant of the family that ruled the islands before the overthrow of the Hawaiian Kingdom in 1893.

The princess inherited her wealth as the great-granddaughter of James Campbell, an Irish businessman who made his fortune as a sugar plantation owner and one of the state’s largest landowners.

The Hawaiian princess says she also wants to create a foundation to benefit Hawaiians and exclude board members appointed by Wright. She previously created a foundation to benefit Native Hawaiian causes.

“I will not contribute any further assets to that foundation because I do not want those individuals having anything to do with my trust, my estate and any charitable gifts I make during my lifetime or at my passing,” she said in the amended trust.

Her current foundation has requested a judge to appoint a guardian for Kawananakoa.

In his filing, Attorney General Suzuki wrote that the proposed changes will substantially alter the estate plan Kawananakoa executed before her mental capacity came into question.

In this case, the state represents the public interest in the protection of the trust’s charitable assets, Suzuki said.

A court hearing on the trust amendment is scheduled for next month.

Reference: The Clay Center Dispatch (January 3, 2019) “Attorney general opposes Hawaiian princess’ trust amendment”

What is a Blind Trust?

A blind trust is designed to eliminate any real or perceived conflicts of interest.

A blind trust can be revocable. That means the grantor or creator of the trust can change it later. It also can be irrevocable, meaning it can’t be modified or terminated.

Investopedia says in the article “How to Establish a Blind Trust” that while the concept of putting assets into a trust and then giving up all knowledge and control of those assets might sound a bit draconian, in certain situations, it can make perfect sense.

Blind trusts are most commonly used in the political community, but this vehicle can also be quite valuable in other situations.

To avoid any conflicts of interest, a blind trust may be used by retiring or retired business owners and executives who keep large amounts of company stock and may be interested in politics, charitable work, or board membership that requires them to act objectively.

A blind trust also may be a good idea when a person suddenly comes into a large, unexpected sum of money and wants to keep the matter private (e.g., lottery winners).

Creating a blind trust requires an attorney to draft a document that the creator signs to give full power of attorney over the trust assets to an independent, third-party trustee. An experienced trust attorney is the best professional to handle this, because there are state and federal laws governing the creation of blind trusts.

When the trust is drafted, you can provide input like what the investment objective of the trust will be. However, after that, you stop communicating with the trustee and have no further information on how the trust’s assets are being handled.

You also must select the right trustee. It should be someone who’s honest and investment savvy, and if you’re trying to separate yourself from your investments, it should be a person with whom you’re not close.

Reference: Investopedia (May 25, 2018) “How to Establish a Blind Trust”

A Will is an Essential Component of Estate Planning

Drafting a will is a fundamental and essential component of estate planning.

Drafting a will with an experienced estate planning attorney helps avoid unnecessary work and perhaps some stress, when a family member passes away. A will permits the heirs to act with the decedent’s wishes in mind and can make certain that assets and possessions are passed to the correct individuals or organizations.

The Delaware County Daily Times’ recent article, “Senior Life: Things people should know about creating wills,” says that estate planning can be complicated. That’s the reason why many people use an experienced attorney to get the job done right. Attorneys who specialize in estate planning will typically discuss the following topics with their clients.

  • Assets: Create a list of known assets and determine which of those are covered by the will and which have to be passed on according to other estate laws, such as through joint tenancy or a beneficiary designation, like life insurance policies or retirement plan proceeds. A will also can dispose of other assets, such as photographs, mementos and jewelry.
  • Guardianship: Parents with minor children should include a clause regarding whom they want to become the guardians for their underage children or dependents. (For more about this, download Mastry Law’s FREE report A Parent’s Guide to Protecting Your Children Through Estate Planning.
  • Pets: Some people use their will to instruct the guardianship of pets and to leave assets for their care. However, remember that pets don’t have the legal capacity to own property, so don’t give money directly to pets in a will.
  • Funeral instructions: Finalizing probate won’t occur until after the funeral, so wishes may go unheeded.
  • Executor: This individual is a trusted person who will carry out the terms of the will. She should be willing to serve and be capable of executing the will.

Those who die without a valid will become intestate. This results in the estate being settled based upon the laws where that person lived. A court-appointed administrator will serve in the capacity to transfer property. This administrator will be bound by the laws of the state and may make decisions that go against the decedent’s wishes.

To avoid this, a will and other estate planning documents are critical. Talk to an estate planning attorney or download a FREE copy of our estate planning book, Failing to Plan is Planning to Fail.

Reference: The Delaware County Daily Times (January 7, 2019) “Senior Life: Things people should know about creating wills”

Thinking about Giving It All Away? Here’s What You Need to Know

There are some individuals who just aren’t interested in handing down their assets to the next generation when they die. Perhaps their children are so successful, they don’t need an inheritance. Or, according to the article “Giving your money away when you die: 10 questions to ask” from MarketWatch, they may be more interested in the kind of impact they can have on the lives of others.

If you haven’t thought about charitable giving or estate planning, these 10 questions should prompt some thought and discussion with family members:

Should you give money away now? Don’t give away money or assets you’ll need to pay your living expenses, unless you have what you need for retirement and any bumps that may come up along the way. There are no limits to the gifts you can make to a charity.

Do you have the right beneficiaries listed on retirement accounts and life insurance policies? If you want these assets to go to the right person or place, make sure the beneficiary names are correct. Note that there are rules, usually from the financial institution, about who can be a beneficiary—some require it be a person and do not permit the beneficiary to be an organization.

Who do you want making end-of-life decisions, and how much intervention do you want to prolong your life? A health care power of attorney and living will are used to express these wishes. Without these documents, your family may not know what you want. Healthcare providers won’t know and will have to make decisions based on law, and not your wishes.

Do you have a will? Many Americans do not, and it creates stress, adds costs and creates real problems for their family members. Make an appointment with an estate planning attorney to put your wishes into a will.

Are you worried about federal estate taxes? Unless you are in the 1%, your chances of having to pay federal taxes are slim to none. However, if your will was created to address federal estate taxes from back in the days when it was a problem, you may have a strategy that no longer works. This is another reason to meet with your estate planning attorney.

Does your state have estate or inheritance taxes? This is more likely to be where your heirs need to come up with the money to pay taxes on your estate. A local estate planning attorney will be able to help you make a plan, so that your heirs will have the resources to pay these costs.

Should you keep your Roth IRA for an heir? Leaving a Roth IRA for an heir, could be a generous bequest. You may also want to encourage your heirs to start and fund Roth IRAs of their own, if they have earned income. Even small sums, over time, can grow to significant wealth.

Are you giving money to reputable charities? Make sure the organizations you are supporting, while you are alive or through your will, are using resources correctly. Good online sources include GuideStar.org or CharityNavigator.org.

Could you save more on taxes? Donating appreciated assets might help lower your taxes. Donating part or all your annual Required Minimum Distributions (RMDs) can do the same, as long as you are over 70½ years old.

Does your family know what your wishes are? To avoid any turmoil when you pass, talk with family members about what you want to happen when you are gone. Make sure they know where your estate planning documents are and what you want in the way of end-of-life care. Having a conversation about your legacy and what your hopes and dreams are for family members, can be eye-opening for the younger members of the family and give you some deep satisfaction.

Reference: MarketWatch (Oct. 30, 2018) “Giving your money away when you die: 10 questions to ask”

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