King & Wood, P.A.

How Do I Include My Pet in My Estate Plan?

“Here are a few financial planning tips/topics, if you are considering a new pet or looking to ensure that yours is cared for should you predecease it.”

A recent survey of pet owners showed that nearly half (44%) of pet owners have prepared for the future care of their animals, in the event their pets outlive them. With traditional financial planning instruments like living trusts, life insurance, and annuities, pet owners can have peace of mind knowing their pets’ needs will be met.

Forbes’s article, “3 Financial Planning Tips For Pets Owners,” says that typically, “pet estate plans” should cover more than simply who will care for the pet, when you are no longer around. Expenses such as food, doggie day care, veterinarian bills and medication should also be considered.

20% of all respondents in the survey said they have financially planned for their pets' future care. About 38% said they added the pet's future caregiver as a beneficiary to a life insurance policy and 35% added more coverage to their life policies. 13% also recently purchased annuities naming the pet's caregiver as the beneficiary.

However, many pet owners forget about end-of-life planning. Consider an individual trust for your pet or donating funds to your local humane society or pet shelter.

One question many have before adding a new animal to the family, is whether they can afford it. The cost of an animal from a breeder can be high, so a more affordable option is to check out your local humane society or animal rescue group. Remember that the costs of food, vet bills and other supplies are just as important to think about, before making a pet a part of your family. Pets are too often returned to animal shelters, because pet parents were unable to afford to properly care for the pet.

Last, ask about pet insurance at your veterinarian. Many clinics offer plans and staff members will be able to talk to you about the right option based on the type of animal, breed, age and other criteria of your pet.

Simple steps like these will make certain your pets are cared for properly and affordably.

Reference: Forbes (January 27, 2019) “3 Financial Planning Tips For Pets Owners”

 

 

When Do I Need a Power of Attorney?

“A power of attorney, or POA, is a document that enables an individual to appoint a person or organization to manage his or her affairs, should this individual become unable to do so.”

Estate planning is important. Signing a power of attorney can be essential for those seeking to safeguard their financial resources and other assets.

The Tri-County Times explains in its article, “Power of attorney protects loved ones,” that a POA is granted to an "attorney-in-fact" or "agent." It gives that individual the legal authority to make decisions for an incapacitated "principal." The laws for creating a power of attorney vary based on the state.  However, there are some general similarities.

Many people think their families will be able to intercede, if an event occurs that leaves them incapacitated and unable to make decisions for themselves. That’s not always true. If a person isn’t named as an agent or granted legal access to financial, medica, and other information, family members may be left out. Further, the government may appoint someone to make certain decisions for an individual, if no POA is named.

Almost everyone can benefit from establishing a power of attorney.

A signed power of attorney will remove the legal obstacles that may arise in the event that a person is no longer physically or mentally capable of managing certain tasks.

A power of attorney is a broad term that covers a wide range of decision-making. The main types of POA are a general power of attorney, health care power of attorney, durable power of attorney and special power of attorney.

The responsibilities of some of these overlap, but there are some legal differences. For instance, a durable power of attorney relates to all the appointments involved in general, special and health care powers of attorney being made "durable"—meaning that the document will remain in effect or take effect if a person becomes mentally incompetent.

Certain powers of attorney may expire within a certain time period.

An agent appointed through POA may be able to handle many tasks, depending on what powers are granted in the document. They include banking transactions, filing tax returns, managing government-supplied benefits, deciding on medical treatments and executing advanced health care directives.

Although a power of attorney document can be completed on your own, sitting down with an experienced estate planning attorney is preferred to better understand the intricacies of this vital document and ensuring that it will be legally binding and properly prepared.

Reference: Tri-County (MI) Times (January 24, 2019) “Power of attorney protects loved ones”

How Can I Goof Up My Estate Plan?

“…even a small mistake can create huge problems during the settlement process, and in many cases, these errors are impossible for anyone to correct.”

There are several critical errors you can make that will render an estate plan invalid. Many of these can be easily avoided, by examining your plan periodically and keeping it up to date.

Investopedia’s article, “5 Ways to Mess Up Estate Planning” gives us a list of these common issues.

Not Updating Beneficiary Designations. Be certain those to whom you intend to leave your assets are clearly named on the proper forms. Whenever there’s a life change, update your financial, retirement, and insurance accounts and policies, as well as your estate planning documents.

Forgetting Key Legal Documents. Revocable living trusts are the primary vehicle used to keep some assets from probate. However, having only trusts without a will can be a mistake—the will is the document where you designate the guardian of your minor children, if something should happen to you and/or your spouse.

Bad Recordkeeping. Leaving a mess is a headache. Your family won’t like having to spend time and effort finding, organizing and locating your assets. Draft a letter of instruction that tells your executor where everything is located, the names and contact information of your banker, broker, insurance agent, financial planner, attorney etc.. Make a list of the financial websites you use with their login information, so your accounts can be accessed.

Faulty Communication. Telling your heirs about your plans can be made easier with a simple letter of explanation that states your intentions, or even tells them why you changed your mind about something. This could help give them some closure or peace of mind, even though it has no legal authority.

Not Creating a Plan. This last one is one of the most common. There are plenty of stories of extremely wealthy people who lose most, if not all, of their estate to court fees and legal costs, because they didn’t have an estate plan.

These are just a few of the common estate planning errors that happen. For more information on how to be certain your assets will be dispersed according to your wishes, talk with a qualified estate planning attorney.

Reference: Investopedia (September 30, 2018) “5 Ways to Mess Up Estate Planning”

How Can a Trust Keep My Family From An Undesirable Lifestyle?

 

“A trust a ctually can prevent your descendants from following such an undesirable lifestyle.”

Some people are hesitant to use trusts in their estate planning. Some have the notion that if you leave money in trust, it will make “trust fund babies” of your children or grandchildren.

You may be afraid that they’ll become spoiled brats, who do nothing but spend money they haven’t earned or invest foolishly.

FEDWeek’s recent story, “Using a Trust as an Incentive for Your Heirs” explains that trust distributions can be limited to modest amounts or left to the discretion of the trustee, who’ll manage the trust assets.

The article suggests that if you do leave money in trust, you should avoid the common practice of providing for distributions at the ages 25 and 30.

That’s because at those ages, most people are better off finishing their education and establishing their careers. Giving them a bagful of money at that age, might decrease their drive to pursue a meaningful career.

One way to do this is what’s called an “incentive” trust. This type of trust offers rewards to trust beneficiaries who accomplish specific goals.

With an incentive trust, the beneficiaries might get a particular amount of money for getting higher education degrees, attaining certain levels of earned income or volunteering at a church or in the community. For instance, your trust could be drafted by your estate planning attorney to state that the trustee will distribute to each of your grandchildren a certain percentage (such as 25%) of earnings each year, up to a certain amount. This could be tied to a requirement that you make.

Another way to go about this trust, is to leave the distributions to the discretion of the trustee. The trust might detail the types of activities that will be rewarded, then permit the trustee to make appropriate distributions.

When you’re going to depend so much on the judgment of the trustee, for this type of arrangement to work, it’s critical to choose a highly-qualified trustee.

The trustee could be a relative, friend, or professional advisor. He or she must be able to empathize with your beneficiaries but still make prudent decisions about distributions. In addition, add a plan for trustee succession, in case your first choice becomes unable or cannot serve.

Reference: FEDWeek (January 17, 2019) “Using a Trust as an Incentive for Your Heirs”

Why is a Will Such an Important Document?

 

“Depending on your age, you may or may not have considered a will an important document to have.”

It’s not uncommon for people to put estate planning off, since it deals with something most of us don’t like to think about: our imminent death. However, the old saying is true: we can avoid many things, except death and taxes.

The Lebanon Democrat’s recent article, “End-of-life planning beneficial no matter your age,” reports that two out of every five people older than 45 don’t have a prepared will—and they haven’t even thought about estate planning. However, even a little bit of simple planning can help make life for your family much easier when you die.

There will be less stress and fewer fights, and it can help survivors know what should be done and how to do it. However, if you die without a will, your property may be awarded to others based on the decisions of a judge and an appointed administrator—they could be complete strangers to you.

Get all of your wishes down in writing, so your family understands and can follow your instructions. This will make things much easier for your surviving family and/or beneficiaries. If you have a senior in your family, make certain that he or she has a will, especially while they are still legally competent.

Talk to an experienced estate planning attorney. You should arrive with some understanding of these basics:

• Name the individual, known as the executor, you want to administer your affairs.
• Decide who should take control of your possessions. Mapping out who gets what, can save a lot of time and anguish down the road.
• As you make out your will, also have your attorney prepare a living will—a legal document that states what actions should be taken for your health, if you’re no longer able to make decisions for yourself, due to illness or incapacity.
• Keep your original will in a safe place and be sure that others know where to find it, in case of an emergency.

Finally, be sure that you update your will as time goes by. Events such as the death of a spouse or other loved one, divorce, retirement, relocation or the addition of a family member may require changes to be made.

Reference: Lebanon Democrat (January 18, 2019) “End-of-life planning beneficial no matter your age”

How Do I Keep From Disinheriting My Kids When I Remarry?

 

“ For those who remarry and want to make sure certain assets get passed on to kids from a previous marriage, experts say it's important to do some estate planning—that is, figuring out how to legally ensure that when you die, your assets end up where you want them to.”

Roughly 17% of people remarry after the first marriage ends, and the rate of remarriage has decreased over time for all age groups except the 55-and-older group. That rate was 57% in 2013 compared to 42% in 1960. CNBC brings up some practical pointers in its recent article, “Remarried after having kids? Here are tips to avoid accidentally disinheriting them.” As the article notes, if you've remarried and want to pass on assets to your children from a previous marriage, don't overlook the importance of estate planning.

Many people don’t have even a basic will. The risk can be higher, if you have no estate planning when you remarry—your children could unintentionally be disinherited.

The older you are when you remarry, the more apt you are to be bringing assets into the marriage, such as retirement savings, life insurance, brokerage accounts, real property and family heirlooms. Estate planning helps to avoid family conflict.

If you die without a will (intestate), a judge will decide who gets what. Of course, everyone’s situation is different, and some can be more complex than others. However, here are some keys to consider, when thinking about how to make sure your heirs end up with the assets you want them to have.

Account beneficiaries. It’s easy to miss this when you remarry. Update the beneficiary designations on retirement accounts, life insurance policies and other accounts. This designation supersedes any intention stated in your will.

Your home. Remarriage frequently involves a jointly-owned home. Depending on state law and how the property is titled, your intention for your children to inherit your share of it could be thwarted.  If the house is deeded as "joint tenancy with right of survivorship" or "tenancy by the entirety," the property typically automatically belongs to the surviving spouse, regardless of what your will says. If you own the house in "tenancy in common," you can leave your share to a person other than your spouse, if you want.

Your personal property. If you want your children to get some particular items when you pass away, be as detailed as possible in your will, so there is no room for confusion.

Power of Attorney. Select someone to handle your finances, if you reach a stage where you can’t. A durable power of attorney for your finances allows that person to be in charge of paying bills and filing tax returns. A durable power of attorney over health care permits the named person important health-care decisions, if you are unable.

Living Will. This states your wishes if you’re placed on life support or suffer from a terminal condition. It helps guide your proxy's decision-making, and if you have no one named, your doctors must follow your wishes in that document.

Creating an estate plan can help ensure that your assets wind up where you want, and your wishes are carried out fully.

Reference: CNBC (January 17, 2019) “Remarried after having kids? Here are tips to avoid accidentally disinheriting them”

Do I Need A Prenuptial Agreement?

“Amazon CEO Jeff Bezos and his wife of 25 years, MacKenzie, announced in a tweet Wednesday that they are divorcing. The news started an ongoing conversation about the usefulness of a prenuptial agreement, since, TMZ reports, the couple did not have one.”

Do you need a prenup and how do you know if you do?

A prenuptial agreement is an agreement entered before marriage, that settles what will happen in the event that the marriage ends in divorce.

CNBC’s recent article, “Jeff and MacKenzie Bezos didn't get a prenup—do you need one? Here's what experts say,” explains that depending on how much you want to put into the agreement, it has the capacity to instruct how assets are going to be distributed upon divorce, how spousal support (alimony) is going to be distributed and it also will deal with the estate rights.

However, what a prenup doesn't address is anything to do with kids. It can’t address custody or child support.

You may not believe it, but prenups aren't just for the super-rich. They can be expensive. You should consider whether you have the level of assets to justify the cost.

If both spouses are bringing in about equal amounts to the marriage, a prenup may be less needed because it's more of an equal playing field between both spouses. Nonetheless, it’s still a good idea to discuss it with an attorney.

If there’s a big disparity in income or assets, a prenup makes sense. There are other reasons to consider getting a prenup, such as if you own a business, are inheriting family money, had a prior marriage or you actively manage your assets.

If you had $1 million in an investment account when you got married and the account grew to $1.3 million during the time that you were married, that’s $300,000 that would be considered marital property in New York—like estate laws, divorce laws vary by state. Depending on where you live, that money might end up being divided between the two of you, even though it was earned because you originally had a $1 million account.

Although the topic of a prenup can be uncomfortable to raise, remember that marriage is a contract, and it's a costly contract, if it doesn't work out.

If prenuptial agreement discussions are handled the right way, it really can give everybody a way to be able to learn how to have difficult conversations and talk about uncomfortable topics. A partnership for life needs to have that skillset.

Reference: CNBC (January 14, 2019) “Jeff and MacKenzie Bezos didn't get a prenup—do you need one? Here's what experts say” 

Why is Succession and Estate Planning a Process?

“Succession planning is a process. 10 years of time goes by very quickly, so the earlier you can start having these conversations, the better.”

If you hear of someone heading off to her attorney to do their succession planning, it’s really just one of several meetings that are necessary to draft a sound succession plan, says Dairy Herd in the article “Estate Planning Is A Process, Not An Event.”

In fact, succession planning is a process. Ten years of time can fly by very quickly, so the earlier you can start having these conversations with your attorney, the better.

The amount of time needed to draft a solid succession plan is different for every family. If things are fairly straightforward, it may take only six to nine months. However, it’s not uncommon for this process to take a year or more.

That’s especially true in the ag sector, because once the good weather arrives, this process slows down to a halt—good weather means that everyone is focused on crop production.

There’s no magic age to start the process, but again, sooner is better.

You can spend your entire career building your business. However, very few people have really spent  much time thinking about how they will effectively exit from it.

You may not be thinking of retiring or transitioning the farm operation for 15 or 20 years but having an idea of where you're trying to get, gives you a better track on which to run.

Succession planning should happen well before retirement, so that’s why the best plans are flexible and adaptable.

Every plan is unique to each family's particular farm operation and circumstances.

The best plans are dynamic and draw on the expertise of an entire team of professionals. That way you're seeing all of those issues and changes along the way.

Reference: Dairy Herd (January 15, 2019) “Estate Planning Is A Process, Not An Event”

Why Did A Massachusetts Court Give a Wife One-Third of Her Husband’s Estate, Even Though His Will Said Otherwise?

“Relying on a decades-old inheritance law, the state’s highest court has ruled that spouses are entitled to one-third of their deceased spouse’s estate—when they are not mentioned in the spouse’s will.”

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”

How Do I Find the Right Estate Planning Attorney?

“How do you go about finding an estate planning attorney that is right for you?”

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, 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. Find the attorney’s educational credentials online. 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 she respond in a timely manner?
• Did you understand the answers she 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.

5. Move ahead. If you felt good and liked the attorney’s approach, go ahead and move forward.
6. 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”