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Category: Estate Planning

Do College Kids Need Estate Planning?

The topic of estate planning is frequently overlooked in the craze to get kids to college.

When your child leaves home, it’s important to understand that legally you may not hold the same rights in your relationship that you did for the first 18 years of your child’s life.

Wealth Advisor’s article entitled “Estate Planning Documents Every College Student Should Have in Place” says that it’s crucial to have these discussions as soon as possible with your college student about the plans they should put into place before going out on their own or heading to college. An experienced estate planning attorney can give counsel on the issues concerning your child’s physical health and financial well-being.

When your child turns 18, you’re no longer your child’s legal guardian. Therefore, issues pertaining to his or her health can’t be disclosed to you without your child’s consent. For instance, if your child is in an accident and becomes temporarily incapacitated, you couldn’t make any medical decisions or even give consent. As a result, you’d likely be denied access to his or her medical information. Ask your child to complete a HIPAA release. This is a medical form that names the people allowed to get information about an individual’s medical status, when care is needed. If you’re not named on their HIPAA release, it’s a major challenge to obtain any medical updates about your adult child, including information like whether they have been admitted to a hospital.

In addition, your child also needs to determine the individual who will manage their healthcare decisions, if they’re unable to do so on their own. This is done by designating a healthcare proxy or agent. Without this document, the decision about who makes choices regarding your child’s medical matters may be uncertain.

Your child should ensure his or her financial matters are addressed if he or she can’t see to them, either due to mental incapacity or physical limitations, such as studying abroad. Ask that you or another trusted relative or friend be named agent under your child’s financial power of attorney, so that you can help with managing things like financial aid, banking and tax matters.

Reference: Wealth Advisor (Sep. 24, 2021) “Estate Planning Documents Every College Student Should Have in Place”

Can Cryptocurrency Be Inherited?

Cryptocurrency accounts are not like any traditional investment accounts. However, their growing prevalence and value means they need to be considered for more and more estate plans, especially when they take an enormous leap in value. These accounts are more vulnerable, according to the recent article “Millennial Money: What happens to your crypto if you die?” from The Indiana Gazette, and in most cases, there’s no way to name a beneficiary for your crypto accounts.

If you store your cryptocurrency on a physical device at home and a few friends know your key—the crypto password that grants access to a crypto wallet—one of those friends could very easily wander into your home and steal your crypto without you even noticing.

On the flip side, if you don’t share your key with anyone and become incapacitated or die, your crypto assets could be lost forever. Knowing how to store these assets safely and communicate your wishes for loved ones is extremely important, more so than for traditional assets.

How is crypto stored? Crypto “wallets” are digital wallets, managed on an app or a website, or kept on a thumb drive (also known as a memory stick). How you store crypto depends in part on how you intend to use it.

A “Hot Wallet” is used to buy and sell crypto. They are usually free and convenient but may not be as secure as other methods because they are always connected to the internet.

“Cold Wallets” are used to store crypto for a longer period of time, like a deep freezer.

The Hot Wallet is more like a checking account, with money moving in and out. The Cold Wallet is like a savings account, where money is kept for a longer period of time. You can have both, just as you probably have both a checking and savings account.

Whoever holds the “keys” to the wallets—whoever has custody of the password, which is a series of randomly generated numbers and letters—has access to your cryptocurrency. It might be just you, a third-party crypto exchange, or a hybrid of the two. Consider the third-party exchange a temporary and risky solution, as you don’t have control of the keys and exchanges do get hacked.

Naming a beneficiary in your will and adding a document to your estate plan containing an inventory of cryptocurrency and any passwords, PINs, keys and instructions to find your cold wallet is part of an estate plan addressing this new digital asset class.

Do not under any circumstances include any of the crypto information in your will. This document becomes part of the public record when filed in court and giving this information is the same as sharing your checking, saving and investment account information with the general public.

Some platforms, like Coinbase, have a process in place for next of kin, when an owner dies. Others do not, so it’s up to the crypto owner to make plans, if they want assets to be preserved and passed to another family member.

Preparing for cryptocurrency is much the same as preparing for the rest of your estate plan. Keep the plan updated, especially after big life events, like marriage, divorce, birth, or death. Keep instructions up to date, so the executor and beneficiaries know what to do. Bear in mind that crypto wallets need occasional updates, like every other kind of digital platform.

Reference: The Indiana Gazette (Nov. 7, 2021) “Millennial Money: What happens to your crypto if you die?”

How Do You Split Estate in a Blended Family?

Blended Family word cloud on a white background.

When it comes to blended families and estate planning, there are no guarantees, especially concerning estate planning. However, there are some classic mistakes to avoid, reports this recent article from AARP titled “Remarried With Children? 5 Estate Planning Mistakes to Avoid.”

Most people mean well. They want to protect their spouses and hope that their heirs will share in any proceeds when the second spouse dies. They want all the children to be happy. They also hope that the step siblings will still regard each other as “siblings” after the parents are passed. However, there are situations where children get shut out of their inheritance or an ex-spouse inherits it all, even if that wasn’t the plan. Here are five mistakes to avoid:

#1: Not changing named beneficiaries. People neglect to update their wills and beneficiary designations. This is something to do immediately, before or after the wedding. By changing the name of the beneficiary on your 401(k), for instance, it passes directly to the surviving spouse without probate. All financial accounts should be checked, as should life insurance beneficiaries. You can designate children as secondary beneficiaries, so they receive assets, in the event that both parents die.

While you’re doing that, update legal directives: including the medical power of attorney and the power of attorney. That is, unless you’d like your ex to make medical and financial decisions for you!

#2 Not updating your will. Most assets pass through the will, unless you have planned otherwise. In many second marriages, estate planning is done hoping the spouse inherits all the assets and upon their death, the remaining assets are divided among all of the children. There is nothing stopping a surviving spouse from re-writing their will and for the late spouses’ children to be left without anything from their biological parent. An estate planning attorney can explore different options to avoid this from occurring.

#3 Treating all heirs equally. Yes, this is a mistake. If one person came to the marriage with significantly more assets than another, care must be taken if the goal is to have those assets remain in the bloodline. If one person owned the house, for instance, and a second spouse and children moved into the house, the wish might be to have only the original homeowner’s children inherit the proceeds of the sale of the house. The same goes for pension and retirement accounts.

#4 Waiting to give until you’ve passed. If you are able to, it may be worth gifting to your heirs while you are still living, rather than gifting through a will. You may give up to $15,000 per person or $30,000 to a couple without having to pay a federal gift tax. Recipients don’t pay tax on most gifts. Let’s say you and your spouse have four children and they are all married. You may give each child and their spouse $30,000, without triggering any taxes for you or for them. It gets better: your spouse can also make the same size gift. Therefore, you and your spouse can give $60,000 to each couple, a total of $240,000 per year for all eight people and no taxes need be paid by anyone. This takes assets out of your estate and is not considered income to the recipients.

#5 Doing it yourself. If you’re older with a second marriage, ex-spouses, blended families and comingled assets, your estate planning will be complicated. Add a child with special needs or an aging parent and it becomes even more complex. Trying to create your own estate plan without a current and thorough knowledge of the law (including tax law) is looking for trouble, which is what you will leave to your children. The services of an estate planning attorney are a worthwhile investment, especially for blended families.

Reference: AARP (July 9, 2021) “Remarried With Children? 5 Estate Planning Mistakes to Avoid”

What Do I Need in My Estate Plan?

Digital Journal’s recent article entitled “What is an Estate Plan and What are its Benefits?” explains that an estate plan usually includes the following:

  • A will;
  • A financial power of attorney and a medical power of attorney (with consent);
  • A living will; and perhaps
  • A living trust.

You also need an experienced estate planning attorney who understands the possible strategies that are available to you for your family.

Angry judge with gavel makes verdict for law

There are many significant benefits to establishing an effective estate plan, including deciding who will inherit specific assets, possessions, or valuables; and designating guardians for minor children; and avoid or minimizing taxes.

Without an estate plan, heirs must go through a very stressful probate process, which can take years. It can also be expensive. With a will, you can protect your young children and ensure that they

are cared for by designating a guardian. Without a will, the court decides who will care for your children.

You can also stop fights before they start with an estate plan. One sibling—for whatever reason—may think he or she deserves more than the others. Such disagreements can easily wind up in court, with family members fighting each other and costing thousands in legal fees.

With an effective estate plan, you can make certain your assets are handled the way you intended if you were to become mentally incapacitated or pass away. You can choose who will be in charge of your medical affairs, financial affairs, and even specific assets such as a small business. If a business owner doesn’t have an estate plan, state law would determine who would be in control of the business.

A big question for a small business owner is who will oversee the business if he or she becomes incapacitated or dies. A key is determining the best strategy after the death of the owner. A business succession plan is critical.

Reference: Digital Journal (Sep. 2, 2021) “What is an Estate Plan and What are its Benefits?”

What is the Difference between a Trust and a Will?

Trusts and wills are two different ways to distribute and control your assets after your death. They have some key differences. Family trusts and wills are both worthwhile estate planning tools that can make sure your assets are protected and will pass to heirs the way you intended, says MSN’s recent article entitled “Family Trusts vs. Wills: What Are the Differences Between These Estate-Planning Options?”

This article tells you what you need to know about the differences between family trusts and wills to help you avoid estate planning mistakes.

Remember that without a will, the state probate laws will determine what happens to your assets. It may or may not be what you want. In contrast, a will lets you state to whom you want to distribute your assets.

Note that a trust permits the grantor (the person making the trust) to do what he or she wants with the assets. A trust also avoids probate.

A family trust is a wise choice for those who want to provide for the management of their assets if they become incapacitated, people interested in keeping information about their assets and who inherits those assets private and those who have a significant number of assets or a large estate. Here are some other situations in which a family trust would be appropriate to use:

  • Asset protection from creditors and divorce
  • For disabled beneficiaries who need to qualify for government benefits
  • For tax-planning; and
  • For cost and time efficiency over a lengthy probate process.

Everyone should have a will. It’s a way to leave bequests, nominate guardians for a minor child and an executor.

If you have a family trust, you still need a will. There may be some assets not owned by the trust, such as vehicles and other personal property. There may also be payments due you at your death. Those assets must go through probate, if not arranged to avoid probate.

Once that process is complete, the assets are distributed to the family trust and are governed by its provisions. This is what is known as a “pour-over will” because the assets “pour over” to the family trust.

Contact an experienced estate planning attorney to discuss the estate planning options available for you and your situation.

Reference: MSN (Aug. 27, 2021) “Family Trusts vs. Wills: What Are the Differences Between These Estate-Planning Options?”

What Happens If You Inherit a House with a Mortgage?

Nice one-family house with a porch

Nothing in life is certain, except death and taxes, says the old adage. The same could be said about mortgages. Did you know that the word “mortgage” is taken from a French term meaning “death pledge?” A recent article titled “What happens to your mortgage when you die?” from bankrate.com explains the options for homeowners who wonder what might happen to their home, mortgage and loved ones, after they die.

When a homeowner dies, their mortgage lives on. The mortgage lender still needs to be repaid, or the lender could foreclose on the home when payments stop, regardless of the reason. The same is true if there are outstanding home equity loans or lines of credit attached to the property.

If there is a co-borrower or co-signer, the other person must continue making payments on the mortgage. If there is no co-signer, the executor of the estate is responsible for making mortgage payments from estate assets.

If the home is left to an heir through a will, it’s up to the heir to decide what to do with the home and the mortgage. If the lender and the terms of the mortgage allow it, the heir can assume the mortgage and make payments. The heir might also arrange for the property to be sold.

A sole heir should reach out to the mortgage company and discuss their options, after conferring with the family’s estate planning attorney. To assume the loan, the mortgage must be transferred to the heir. If the property is sold, proceeds from the sale are used to pay off the loan.

Heirs do not need to requalify for the mortgage on a loan they inherited. This can be a good opportunity for someone with bad credit to repair that credit, if they can stay current on the mortgage. If the heir wants to change the terms of the mortgage, they will need to qualify for a new loan and meet all of the lending institution’s eligibility requirements.

Proof that a person is the rightful inheritor of the property or executor of the estate may be required. The mortgage lender will typically have a process to specify what documents are needed. If the lender is not cooperative or balks at any requests, the estate planning attorney will be able to help.

If you own a home, it is very important to plan for the future and that includes making decisions about what you want to happen to your home, if you are too ill to manage your affairs or for when you die. You’ll need to document your wishes through estate planning.  Our firm is qualified and ready to assist you, contact us to get started.

Reference: Bankrate.com (July 9, 2021) “What happens to your mortgage when you die?”

What to Do with Estate Plan when Loved One Dies

There are a few things a family needs to address immediately after a death, says Cleveland Jewish News’ recent article entitled “Funeral arrangements, estate planning take education.”

It is important that the decedent have a last will and testament to say to how their assets will be distributed. In addition, a trust in combination with a will can give the creator more control over how, when and where the assets go. A fully-funded revocable living trust does not go through probate, like a testamentary trust created under a will to administer the inheritance. A trust can help to avoid probate.

As for funeral arrangements, this can be challenging, if families have not started the planning process quickly. Trying to make decisions on a cemetery, a casket, a funeral home and a service can be daunting. There are a number of decisions to be made in a short amount of time.

As far as reviewing the documents and assets the decedent left behind, do this one at a time and organize as you go to avoid some stress. A family that is grieving can be overwhelmed very quickly.

When a family and loved ones have too much on their plates, nothing will get done because it is too much. Instead, look at one asset at a time, go through it and see how it is titled and if they think the beneficiary designation is appropriate.

Review each asset and make sure you have covered each one, especially if your goal is to avoid probate.

While still living, a person should make a list of where everything is located, details on their accounts and the account numbers and their estate planning attorney. This will ease the family’s burden when going through your assets and other documents, after you pass away.

Although it is not necessary that a parent disclose everything about his or her finances, a parent should have that information available somewhere. That way children will know where all the assets and important documents are located when needed.

Reference: Cleveland Jewish News (June 22, 2021) “Funeral arrangements, estate planning take education”

Should I Have an Advance Directive in the Pandemic?

Advance directive is a term that includes living wills and health care proxies or powers of attorney. These are legal documents we all should have. A living will allows you to tell your family and doctors the types of medical care you want at the end of your life. Health care proxies or powers of attorney let you name someone to make medical decisions for you, if you can’t communicate.

WTOP’s recent article entitled “Advance medical directives vital during COVID-19 pandemic” says that you need both because not all medical situations will trigger a living will. In fact, a livingDurable Power of Attorney will is only really applicable, if you have an end stage process, a persistent vegetative state, or a terminal illness. People often run into a situation where they have a health event, but it’s not something that’s going to end in their death.

An estate planning attorney can draw up advance directives, when they’re creating your estate plan.

When selecting the individual to grant the power to make decisions for you, consider who would be most capable of advocating for what you want, rather than what they, other family members or a medical provider might want. You should also name a backup in the event your first choice can’t serve and make sure these advocates understand your wishes. Give copies of the documents to them and go through what you want.

Your attorney will follow your state’s rules about how to make these documents valid, such as having witnesses sign or getting the paperwork notarized.

Next, keep the originals in a safe place at home, along with your will, and tell your family where to locate them. Your physician and attorney should also have copies.

Tell your doctor to add the forms in your electronic health record. That way, other medical providers can access it in an emergency. You should also carry a card in your wallet that has your health care agent’s name and contact information, as well as where you keep the originals and copies.

If your choices could cause stress for your family, consider including a note explaining your thinking. Even if they disagree with your decisions, it is more comforting to hear it directly from you, rather than the person you named to act on your behalf.

Reference: WTOP (June 1, 2020) “Advance medical directives vital during COVID-19 pandemic”

Is Your Covid-19 Essential Estate Planning ‘Go Package’ Ready?

When a person gets sick or dies, the family will frequently try to hunt for their estate planning documents, or the contact information of an attorney who might know about them.

corona virus newsForbes’ recent article entitled “The Covid-19 Essential Estate Planning ‘Go Package’” says that it’s a good idea to have all your estate planning documents complete and current. However, all that effort and expense doesn’t do much good, if your family doesn’t know about the documents or have access to them.

There can be horrible consequences, when the important components of the estate plan aren’t immediately known and accessible to your family, especially if you fall ill. Medical and financial decisions and actions will be delayed or won’t be made by the people you wanted.

To avoid this, especially during the pandemic, create a “go package” of essential estate plan items and have the package available. Be certain that your family is aware of it and where to find it. This go package must contain the primary estate planning documents: medical power of attorney/advance medical directive, financial power of attorney and will. The medical documents are the most fundamental in this package. Without these, the hospital and doctors won’t know your wishes for medical treatment or who should help make decisions.

In addition, put a copy of your insurance card and any related information in the package. This might include a Medicare card and information about any Medicare supplement and Part D prescription drug coverage you have. It will go much more smoothly at the hospital, if the medical insurance details are immediately available. Your important medical history should be included.

Adding a list of essential personal information also is important, including full legal name, Social Security number, birth date, emergency contacts and contact information for your doctors and other medical providers.

You can prepare your go package in a digital format, such as on a thumb drive or similar device that is on your key ring or kept near you. However, others must be aware of it for it to be used. Therefore, let your family and decision makers know where you keep the digital package and consider providing them with copies or keeping one clearly labeled near your door.

With a go package, you and others don’t need to hunt for all of this information. If you’re already at the hospital, ask someone to go retrieve it.

Reference: Forbes (May 27, 2020) “The Covid-19 Essential Estate Planning ‘Go Package’”

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