Will

Parental Warning: If You Own Your Property This Way, You May Accidentally Disinherit Your Own Children

Owning property as Joint Tenants with Right of Survivorship is easy, common, and often disastrous. Sadly, children – both minor and adult – are often disinherited.

While there are several forms of joint ownership, the one most people use (and the one considered in this discussion) is called “Joint Ownership with Right of Survivorship.” When one owner dies, the jointly owned asset automatically, by operation of law, transfers to the surviving owner.

Joint ownership is a very common way for married people to own their assets.
Joint ownership is also commonly used by aging parents and their adult children.

Joint Ownership Just Postpones Probate

In most cases, joint ownership merely postpones probate; it doesn’t totally avoid it. If the surviving owner does not add a new joint owner (or place the asset in trust) before she dies, the asset will have to go through probate before it can go to the heirs. Or, if the owners die at the same time, probate is required immediately.

Joint Ownership Can Cause You to Unintentionally Disinherit Your Beloved Children

Surprising to most parents, assets titled as “Joint Tenants with Right of Survivorship” are NOT controlled by their Will or Trust. In fact, if you are the first owner to die, you can’t control what happens to that asset.

If you add a spouse who is not the parent of all of your children as a joint owner, you will disinherit your children from a previous relationship.
If you add one child as a joint owner, you will disinherit your other children.

The transfer of ownership takes place immediately upon your death. Even if your Will or Trust directs that you want someone in particular to receive your share of a jointly owned asset, it will still go to the surviving owner. The surviving owner can then do whatever he or she wants with the entire asset.

Here’s an example:

After Robert died, Joan owned their vacation home outright. She remarried a few years later, and she added her new spouse’s name to the title. When Joan died, her children were shocked to learn that the new husband now owned the property, even though their father had always promised it would stay in the family and go to the three of them.

Other Risks of Joint Ownership

While it’s easy to add a co-owner’s name to a title, taking someone’s name off a title can be difficult. If the person does not agree, you could end up in court.
Your assets are exposed to the other owner’s debt and obligations. For example, if you add your adult son on the title of your home and he is successfully sued, you could be forced to sell your home.
There could be serious gift and/or income tax consequences.
If you add a minor as a joint owner, the only way to sell or refinance the asset is through a court guardianship.
If you need to sell or refinance and your co-owner is incapacitated and unable to conduct business, you’ll have to ask the court to appoint someone to sign for your co-owner (even if that co-owner is your spouse). Once the court gets involved, it usually stays involved to protect the incapacitated owner’s interest until the incapacity ends or the person dies.

Actions to Consider

To avoid both inconvenience and tragedy, call our office immediately to set up an appointment and have your asset ownership reviewed.
We will review your asset ownership and explain what will happen to your assets if you become disabled and when you die.
We will show you how to own your assets to best ensure your estate plan works, meaning it does what you think it’s going to do.

Joint ownership with a sibling, life partner, business partner, child, spouse, or anyone else, puts your assets and your children’s inheritance at risk. It may cause significant and unnecessary taxes and cause your estate plan to fail. To avoid both inconvenience and tragedy, you are invited to call our office right now.

What Estate Planning Awareness Means For You

The third week of October is National Estate Planning Awareness Week (Oct. 15-21, 2018). Estate planning is important for everyone regardless of wealth or family status because if you become incapacity or pass away without an estate plan, you are leaving the distribution of your assets subject to state law – and the results may not be what you want or expect.

Estate Planning Explained

Estate planning includes the growth, protection, and transfer of a person’s wealth through the creation and maintenance of an estate plan. The concept of estate planning is important and twofold: (1) to have a strategy that will maintain your financial security during your lifetime, and (2) to ensure that your intended transfer of property and assets occurs upon your death. Both of these issues are analyzed through the lens of the unique situation of the family and the possible expense of different methods used in the estate plan.

Benefits of Estate Planning

There are several benefits to having an estate plan. At a minimum, an estate plan provides clear written guidance to your loved ones on what to do with your assets when you are deceased. But perhaps the most important reason is to be in control of how your family is provided for in the event of your death or incapacity. Estate planning can address several issues including:

Who will raise your minor children,
Who will inherit your assets and how they will be distributed,
Who will care for loved ones who are unable to care for themselves,
Who will care for your pets, and
Who will receive your life insurance and other insurance proceeds.

Finally, good estate planning can ease the time-consuming, administrative strain placed on your family during an already difficult time.

Estate Planning Statistics

According to studies^[1], 6 in 10 adults have not put a will in place. And, while many have likely heard that it is wise to avoid probate – the legal process by which the assets of a deceased are disposed of under court supervision – many do not understand why probate should be avoided. Three main issues with probate include: (1) the tying up of the decedent’s assets for months or even years while the probate is open, (2) the cost, sometimes as much as 5 percent of the estate’s value is spent on attorney and court fees alone, and (3) the loss of privacy in the probate process when it comes to the decedent’s financial information.

There are many financial and legal tools that may be used in the estate planning process. Contact us today to discuss your situation and learn about your specific options.

^[1] https://www.aarp.org/money/investing/info-2017/half-of-adults-do-not-have-wills.html

Did You Include Your Grandkids in Your Will?

Did you include your grandkids in your will?

5 Tips to Avoid Common Problems

As we build wealth, we naturally desire to pass that financial stability to our offspring. With the grandkids, especially, we often share a special bond that makes us want to provide well for their future. However, that bond can actually turn into a weakness if proper precautions aren’t set in place. If you’re planning to include the grandchildren in your will, here are five potential dangers to watch for, and ways you can avoid them.

1. Including no age stipulation.

We have no idea how old the grandchildren will be when we pass on. If they are under 18, or if they are financially immature when you die, they could receive a large inheritance before they know how to handle it, and it could be easily wasted.

Avoiding this pitfall: Create a long-term trust for your grandchildren that provides continued management of assets regardless of their age when you pass away.

2. Too much, too soon.

Even if your grandkids are legally old enough to receive an inheritance when you pass on, if they haven’t learned enough about handling large sums of money properly, the inheritance could still be quickly squandered.

Avoiding this pitfall: Outright or lump-sum distributions are usually not advisable. Luckily, there are many options available, from staggered distributions to leaving their inheritance in a lifetime, “beneficiary-controlled” trust. An experienced estate planning attorney can help you decide the best way to leave your assets.

3. Not communicating how you’d like them to use the inheritance.

You might trust your grandchildren implicitly to handle their inheritance, but if you have specific intentions for what you want that inheritance to do for them (e.g., put them through college, buy them a house, help them start a business, or something else entirely), you can’t expect it to happen if you don’t communicate it to them in your will or trust.

Avoiding this pitfall: Stipulate specific things or activities that the money should be used for in your estate plan. Clarify your intentions and wishes.

4. Being ambiguous in your language.

Money can make people act in unusual ways. If there is any ambiguity in your will or trust as to how much you’re leaving each grandchild, and in what capacity, the door could be opened for greedy relatives to contest your plan.

Avoiding this pitfall: Be crystal clear in every detail concerning your grandchildren’s inheritance. An experienced estate planning attorney can help you clarify any ambiguous points in your will or trust.

5. Touching your retirement.

Many misguided grandparents make the mistake of forfeiting some or all of their retirement money to the kids or grandkids, especially when a family member is going through some sort of financial crisis. Trying to get the money back when you need might be difficult to impossible.

Avoiding this pitfall: Resist the temptation to jeopardize your future by trying to “fix it” for your grandchildren. If you want to help them now, consider giving them part of their inheritance in advance, or setting up a trust for them. But, always make sure any lifetime giving you make doesn’t leave you high and dry.

If you’re planning to put your grandchildren in your will or trust, we’re here to help with every detail you need to consider. Contact us to explore your options and protect your family.

Why a Spendthrift Trust Can Be a Great Solution for Your Heirs

There are many tools that can be used when putting together your estate plan. One such tool is a trust.

A trust is a fiduciary arrangement, established by a grantor or trustmaker, which gives a third party (known as a trustee) the authority to manage assets on behalf of one or more persons (known as a beneficiaries). Since every situation is different, there are different types of trusts to ensure the best outcome for each beneficiary. One type of trust, known as a spendthrift trust, is commonly used to protect a beneficiary’s interest from creditors, a soon-to-be ex-spouse, or his or her own poor management of money. Generally, these trusts are created for the benefit of individuals who are not good with money, might easily fall into debt, may be easily defrauded or deceived, or have an addiction that may result in squandering of funds.

Spendthrift Trust Basics

Put simply, a spendthrift trust is for the benefit of someone who needs additional assistance managing or protecting his or her money.

The spendthrift trust gives an independent trustee complete control and authority to make decisions on how the funds in the trust may be spent and what payments to or for the benefit of the beneficiary are necessary according to the trust document. Under a spendthrift trust, the beneficiary is prohibited from spending the money before he or she actually receives distributions. These restrictions prevent the beneficiary from squandering their entire interest or having it garnished by the beneficiary’s creditors. The trustee controls the assets in the trust, including managing and investing the funds, once the trust is made irrevocable. Most trusts become irrevocable after the grantor has passed, but some are irrevocable from the start.

Creating a Spendthrift Trust

A spendthrift trust is created essentially in the exact same manner as any other trust. However, the vital difference of a spendthrift trust is that the trust instrument must contain the right language to invoke the law’s protection. A knowledgeable estate planning attorney can provide guidance on how to best structure this provision, so it meets your family’s needs.

Like any trust, the benefits of a spendthrift trust can help avoid the delay and expense of probate as well as provide tax benefits and peace of mind. Of note, there are several states that limit a grantor from naming his or herself as a beneficiary under a spendthrift trust for the purposes of avoiding creditors.

Estate Planning Help

Creating a spendthrift trust is invaluable because it can give you peace of mind that your loved ones will be taken care of after your passing. If you are considering creating a spendthrift trust, or have any other estate planning questions, call or contact us today to explore your options.

Planning for the Future Without a Crystal Ball

Planning for the Future (Without a Crystal Ball)

Creating a will, trust, or any type of estate plan has always involved dealing with an uncertain future. Consider that just 20 years ago in 1997, the estate tax had an astonishing 55% rate with only a $600,000 exemption. Back then, tax-driven estate planning was a mathematical necessity for a large segment of the population.

Fast forward to 2017. Not only do we now have a generous $5.49 million exemption and a lower 40% rate, we also have renewed emphasis and action from the President and Congress on repealing the estate tax, as evidenced by the September 27, 2017 Unified Framework for Fixing Our Broken Tax Code. So what does this mean for you, as you’re planning for the future?

Estate Tax Repeal Means No Need to Plan… Right?

Nothing could be further from the truth! Although there was a lot of tax-driven planning in the past, in recent years estate planning has largely focused on preserving family unity, protecting assets, ensuring privacy, and effectively passing along financial and emotional legacies.

And, for those with high net worth, it’s also worth mentioning that estate tax repeal isn’t a foregone conclusion at this point either. The Unified Framework still must be crafted into legislation that must pass both houses of Congress and then be signed by the President. Given the political division the country faces (and the likely stiff opposition to the President’s tax proposal from Congressional Democrats), this will be no small feat.

While we wait for Congress to act on the Unified Framework, it’s also worth noting that the estate tax was already effectively repealed for more than 99% of American estates when the exemption was raised to $5 million (and indexed for inflation) in 2010. The vast majority of estates fall below this threshold and need no special planning to avoid the estate tax. But don’t think you’re out of the woods because you have less than $5 million.

Today, the focus of estate planning has shifted away from death taxes to other concerns that affect most families. Estate planners, like us, can now work with you to protect you and your family against costly, public probate, guardianship, or conservatorship court proceedings and also further your legacy goals.

You might be worried about some of these things happening to your family:

A financially irresponsible child or grandchild wasting their inheritance simply because they lack the financial maturity to handle wealth.
A divorcing spouse of one of your heirs taking advantage of family wealth.
Family discord lurking under the surface that tears your family apart, especially after the death of the patriarch or matriarch.
A lawsuit, judgment, or bankruptcy that causes your family to lose their inheritance.
Alzheimer’s or another cognitive impairment affecting you or someone else in your family.

Luckily, we have well-developed, flexible legal strategies (such as lifetime trusts, standby special needs trusts, and robust incapacity planning, to name a few) for overcoming these issues. Although estate planning can’t necessarily repair a damaged family relationship, proper planning can help make sure it does not get any worse. But these strategies only work when we have a chance to work with you to implement or refresh your will, trust, and estate plan.

So, there’s no crystal ball. Where should I go from here?

According to WealthCounsel’s 2016 Estate Planning Literacy Survey, about 74% of Americans find estate planning to be a confusing topic. So, you’re not alone if you’re unsure about your next steps. We’re here to help.

If you don’t yet have a will or trust, now is the time to explore getting one. If you have an “old” will or trust, now is the time to talk with us about whether you need an update. Modern families need modern estate planning solutions, and we are ready to help you create a flexible estate plan that works now, and will work in the future, even if the current tax laws change (even though no one has the proverbial crystal ball).

If You Die Without a Will, Does Your Spouse Inherit Your Entire Estate?

If you are married and you die without a Last Will and Testament, you may mistakenly believe that your spouse will still inherit your entire estate. Not so fast. Who will inherit your estate depends on several different factors:

1. How is your property titled? Is your property titled in your name alone, in joint names with your spouse, in joint names with a child or other relative, or does it have a beneficiary designated? Knowing how all of your property is titled is the real key to understanding who will inherit it after you die. For example, if your home is titled in joint names with rights of survivorship with your spouse, then your spouse will inherit the home. However, if it is titled in your name alone, then your spouse may or may not inherit the home as determined by applicable state laws. These laws are referred to in the U.S. as “intestacy laws” and are discussed below in item #3.

2. Did you and your spouse sign a prenuptial or postnuptial agreement? The right to inherit property from your spouse can be legally waived in a valid agreement signed before you get married (a prenuptial or premarital agreement), or after you get married (a postnuptial agreement). If you and your spouse entered into such an agreement, then the legal effect of a full waiver of inheritance rights is to treat your spouse as having predeceased you. You and your spouse may also agree to only waive certain inheritance rights, such as the right to inherit your IRA or 401(k).

3. What does your state’s intestacy laws say? You may be surprised to learn that the intestacy laws of many U.S. states do not require the entire estate of a deceased married person to be distributed to their surviving spouse. In some states the surviving spouse must divide the estate with the deceased spouse’s children, if any, otherwise with the deceased spouse’s parents or siblings. When real estate is involved, this may lead to a family feud. For example, the surviving spouse may want to sell the real estate and the children or parents may want to keep the real estate. Also, if you own real estate located outside of your home state, then the intestacy laws of the other state will govern who will inherit your real estate located there, while the laws of your home state will govern who will inherit everything else. This could result in different beneficiaries of your out-of-state real estate and the rest of your estate, leaving your family with quite a mess.

What Should You Do?

If you are married and you want your spouse to inherit all of your property, then the only way to be assured that this will happen is to consult with an attorney who is familiar with the inheritance laws in your state and any other state where you own real estate (yes, you may need to consult with two different attorneys). The attorney will be able to review how all of your assets are titled and then help you determine the options for making sure that your spouse will be the only beneficiary of your estate.

5 Things Every New Mother Needs to Know About Wills

As a new mother, you naturally want to ensure your new baby’s future in every way. For many new mothers, infancy is a time for celebrating new life, and making a will is the last thing on their minds. For others, the process of bringing new life into the world sparks intense feelings of wanting control and needing organization. Regardless of where you fall on that spectrum, you might be struggling to figure out what steps you need to take to protect your children’s future should the unthinkable happen. Here are five key things every new mother should know about wills.

1. Naming a guardian could be the most important part of your will.

If you pass away while your child is a minor, the first issue to be addressed is who will assume responsibility for your child’s care. If you don’t name a guardian for your child in the will, the courts may decide this question for you, and the guardian might not be the person you would choose. Selecting a trusted guardian is in many ways more important at this stage than deciding about how to pass any assets you own.

2. Name an executor you trust.

To ensure your child does receive all that you have allocated when she comes of age, choose a trustworthy executor. Many people choose a family member, but it’s just as acceptable to appoint a trusted attorney to handle your estate. Typically, an attorney has no emotional attachment to the family, which might seem bad, but usually results in less potential conflict.

3. Named beneficiaries on your financial accounts may override the will.

Many accounts allow you to name a beneficiary. When you pass away, the funds go to the beneficiary named on the account, even if your will states otherwise. If you’re creating a will with your child in mind (or adding the child to an existing will), you should review your investment and bank accounts with your financial advisor to make sure there are no inconsistencies when naming beneficiaries. It’s also a good time to check retirement account and life insurance beneficiary designations with your financial advisor and your attorney.

4. A will is not always the right document for your goals.

When naming your child as a beneficiary, a will only goes into effect after you die. If your will leaves property outright to a minor child, the court will step in and hold the assets until your child turns 18. Most 18 year olds lack the maturity to handle even a modest estate, so we don’t recommend outright inheritance for minor children.

A trust, on the other hand, goes into effect when you create it and can provide structure to manage the assets you leave behind for the benefit of your child. An experienced estate planning attorney can advise you on the best option for your family and your circumstances.

5. In the absence of clearly stated intentions, the state steps in.

Think of a will, trust and other estate planning documents as an instruction manual for your executor and the courts to follow. You must be clear and consistent in your stated intentions regarding your child, as well as for others. If you’re not clear or if you don’t leave any instructions at all, the probate courts will step in and follow the government’s plan, which can lead to long delays and is probably not the plan you would have selected for your child and family.

Providing for your baby’s long-term welfare may start with just a simple will, but to be fully protected, you probably need more. That’s why it’s important to talk with a competent estate planning attorney to make sure you have the right plans in place to fulfill your goals. We’re here to help! Call or contact us today to talk about your options to protect your new baby.

If I Don’t Have an Estate, Do I Really Need an Estate Plan?

You don’t need to have a summer house in the Hamptons or a private art collection big enough to rival MOMA to consider yourself the owner of an estate. In fact, virtually anyone who owns anything has an “estate” in the eyes of the law. Although the term may conjure images of expansive country properties, expensive cars, or other symbols of high wealth, for the purposes of estate planning law, the term “estate” covers a whole lot more.

What constitutes as an estate

Ordinary possessions like homes, jewelry collections, bank accounts, cars, furniture — basically anything you can own — are also under the purview of your estate, meaning estate planning is something that profoundly impacts virtually everyone, not just the “country club” crowd.

So even if you wouldn’t ordinarily consider yourself the owner of an estate, it’s quite likely that you are. The answer to the question “I don’t have an estate. Do I really need an estate plan?” is, “Yes, virtually everyone who owns property could benefit from estate planning.” And estate planning covers more than just property, too: It’s also about ensuring someone you trust can make critical medical decisions for you if you’re unable to do so.

4 key advantages of estate planning

Estate planning may seem overwhelming. But you don’t have to go it alone. We know what it takes to create a comprehensive estate plan tailored to your exact needs. Here are the core tenets of what’s involved in estate planning and how you stand to benefit from the process:

It allows you to remain in complete control of your property while you’re still alive and well.
It helps you provide for yourself and your loved ones if you become incapacitated or disabled – without expensive and distracting court hearings.
It minimizes the impact of professional fees, court costs, and taxes.
It provides a framework so you can give what you have to whom you want, the way you want, when you want.

Are you ready to sit down with a qualified estate planning attorney to see how you can ensure a better future for yourself and your family? There’s no time to waste — the sooner you take stock of your estate and get critical documents like wills and trusts completed, the better. Call or contact us today to find out how we can keep your health and wealth in the right hands for good.