King & Wood, P.A.

What Happens When There’s No Will?

“Dying intestate can have unintended consequences for pretty much every family type. However, it is especially painful if there are unmarried partners or stepchildren, who are left out under the law in almost every scenario.”

According to a recent article, “The Confusing Fallout of Dying Without a Will,” from The Wall Street Journal, despite the consequences for their heirs and loved ones, millions of Americans still don't have a will. The total wealth of American households has tripled over the past thirty years, according to the Congressional Budget Office. Still, more than half of Americans polled by Gallup said they didn’t have a will in 2021. Another survey showed that one in five Americans with investible assets of $1 million or more don’t have a will.

Dying without a will means the laws of your state will determine who gets your assets. In some cases, loved ones could end up with nothing. They could be evicted from the family home and even hit with massive tax bills.

This is especially problematic for unmarried couples. One example—after 18 years of living together, a couple had an appointment with an estate lawyer to create wills. However, the woman died in a horseback riding accident just before the appointment. Therefore, her partner had to get the woman’s sons, who lived overseas, to sign off, so he could be appointed her executor. The couple had agreed between themselves to let him have the home and SUV they’d purchased together. However, state law gave her sons her 50% interest. Therefore, he had to buy out her son’s interest to keep his home and car.

Dying without a will, or “intestate,” means you can’t name an executor to administer your estate, name a guardian for minor children, or distribute the property as you want.

Here’s what you need to know about having—or not having—a will:

State law governs property distribution. In some states, where there is a surviving spouse and children, the surviving spouse gets 100% of the estate, and the children get nothing. The surviving spouse gets 50% in other states, and the children divide the estate balance. For example, in Pennsylvania, if there are no children but there is a surviving parent, the surviving spouse gets the first $30,000, and the balance is split 50/50 with the parent. In Tennessee, a surviving spouse with two or more children receives a third of the estate, with the rest split between the children.

Check on all assets for beneficiary designations. Retirement accounts and life insurance policies typically pass to whoever is listed as the beneficiary. However, if you never named a beneficiary, the state’s laws will determine who receives the asset.

If you don’t have a will and want to be sure a partner gets these assets, you’ll need to speak with an experienced estate planning attorney to explore your options. For example, you might be able to use a transfer on death deed or a payable on death account. However, there may be better ways to accomplish this goal.

Reference: The Wall Street Journal (May 2, 2023) “The Confusing Fallout of Dying Without a Will”

How Estate Planning Protects Unmarried Couples

“It is very important for unmarried couples to execute estate planning documents to make their wishes clear concerning the rights and responsibilities of their significant other.”

Many couples make the choice not to wed, even after being together for decades, for personal or financial reasons. For example, some clients don’t marry so as not to impact their children’s inheritance, while others would rather not bother with the legalities, says a recent article, “Estate Planning for Unmarried Couples” from My Prime Time News. In some cases, marriage would cause the couple to lose pension or Social Security benefits, if they remarried.

However, unmarried couples must take extra care to have estate planning documents in place to make their wishes clear and to protect each other in case of incapacity, serious illness and, ultimately, death.

From any statutory priority, a significant other does not have the legal rights granted to a spouse to serve as a personal representative or executor for their loved one’s estate. In addition, there is no statutory right to inherit property, including any family allowance or exempt property allowance.

The significant other also has no rights regarding acting as guardian or conservator for their partner and no ability to make medical decisions, if they become incapacitated or disabled.

All of these issues, however, can be resolved with the help of an estate planning attorney. Both partners should execute a will, health care power of attorney, general power of attorney and a living will to protect each other.

The last will and testament designates a personal representative or executor who will be in charge of the decedent’s estate and inherit the person’s assets. With no will, a partner will inherit no assets, unless they are owned jointly or the partner is a named beneficiary.

Having a health care power of attorney and a financial power of attorney gives a partner the power to make decisions if their loved one becomes incapacitated. In addition, these power of attorney documents are necessary for adult children to have priority in making these decisions, and guardianship proceedings will be required if there are no children or family members.

Disputes between the adult children of unmarried couples are common if a comprehensive estate plan still needs to be completed. For example, imagine a partner of many decades becoming too ill to communicate their end-of-life wishes. Even after a lifetime together, the adult children will have the legal upper hand, regardless of what the couple has discussed as their wishes for this situation.

It may be challenging for unmarried couples to discuss their living arrangements and family dynamics. However, the experienced estate planning attorney has met with and helped families of all kinds and will have the knowledge to prepare an estate plan to address all family dynamics.

Once this work is done, the couple can rest easy, knowing they have protected each other in the best and worst circumstances.

Reference: My Prime Time News (May 1, 2023) “Estate Planning for Unmarried Couples”

How Estate Planning Protects Unmarried Couples

“It is very important for unmarried couples to execute estate planning documents to make their wishes clear concerning the rights and responsibilities of their significant other.”

Many couples make the choice not to wed, even after being together for decades, for personal or financial reasons. For example, some clients don’t marry so as not to impact their children’s inheritance, while others would rather not bother with the legalities, says a recent article, “Estate Planning for Unmarried Couples” from My Prime Time News. In some cases, marriage would cause the couple to lose pension or Social Security benefits, if they remarried.

However, unmarried couples must take extra care to have estate planning documents in place to make their wishes clear and to protect each other in case of incapacity, serious illness and, ultimately, death.

From any statutory priority, a significant other does not have the legal rights granted to a spouse to serve as a personal representative or executor for their loved one’s estate. In addition, there is no statutory right to inherit property, including any family allowance or exempt property allowance.

The significant other also has no rights regarding acting as guardian or conservator for their partner and no ability to make medical decisions, if they become incapacitated or disabled.

All of these issues, however, can be resolved with the help of an estate planning attorney. Both partners should execute a will, health care power of attorney, general power of attorney and a living will to protect each other.

The last will and testament designates a personal representative or executor who will be in charge of the decedent’s estate and inherit the person’s assets. With no will, a partner will inherit no assets, unless they are owned jointly or the partner is a named beneficiary.

Having a health care power of attorney and a financial power of attorney gives a partner the power to make decisions if their loved one becomes incapacitated. In addition, these power of attorney documents are necessary for adult children to have priority in making these decisions, and guardianship proceedings will be required if there are no children or family members.

Disputes between the adult children of unmarried couples are common if a comprehensive estate plan still needs to be completed. For example, imagine a partner of many decades becoming too ill to communicate their end-of-life wishes. Even after a lifetime together, the adult children will have the legal upper hand, regardless of what the couple has discussed as their wishes for this situation.

It may be challenging for unmarried couples to discuss their living arrangements and family dynamics. However, the experienced estate planning attorney has met with and helped families of all kinds and will have the knowledge to prepare an estate plan to address all family dynamics.

Once this work is done, the couple can rest easy, knowing they have protected each other in the best and worst circumstances.

Reference: My Prime Time News (May 1, 2023) “Estate Planning for Unmarried Couples”

Why Everyone Needs a Will and an Estate Plan

“Estate planning is the process of anticipating and arranging for the management and disposal of a person's estate during the person's life in preparation for a person's future incapacity or death.”

Some still hold onto the old-school idea of estate planning being needed only by people living on an estate, owning a business, or having inherited significant wealth. This isn’t true, as explained in the article “Everyone needs a will—and here’s why” from JOLT News.

Times change, and so do laws and possibilities. Estate planning is vital for everyone. It includes planning for incapacity, which can happen to anyone at any age and stage of life. A durable power of attorney is one of the most important estate planning tools. If you become incapacitated, it allows you to name another person to manage your financial and legal affairs.

Without a durable power of attorney, your family will need to go to court and be named your guardian to be able to pay your bills and tackle other everyday tasks we usually don’t think twice about. Unfortunately, obtaining guardianship is a lengthy and expensive process. Having an experienced estate planning attorney create a power of attorney customized to your particular situation is a far better option.

When the last will and testament is needed, a power of attorney expires upon death. This is the foundation of distributing your assets. An estate planning attorney will review your situation thoroughly to make the best plan for you and your family.

A common mistake occurs when people think they can circumvent estate planning by adding another person to their bank and investment accounts. This unfortunately makes the accounts vulnerable to a number of bad outcomes. For example, if the person you name has any problems with debt, their creditors can come after your assets.

Upon the original owner’s death, the assets in the jointly owned accounts will be distributed directly to the joint owner, which may or may not have been the intention. As a result, heirs will have no ability to recover those assets.

For those living in community property states, some assets automatically transfer to the surviving spouse. However, some will require an administrative process to transfer assets to the surviving spouse formally. A meeting with an estate planning attorney will clarify and document the couple’s wishes.

The will is the most common planning tool. It must be signed by the person making the will, known as the testator, in the presence of witnesses. In some states, one witness is required, but two are required in other states. Your estate planning attorney will know the policies and requirements of your state.

Your will is the document used to name an executor, who will administer the estate and distribute assets. If you have minor children, you’ll name a primary and secondary guardian to raise the children in the event of your passing.

Reference: JOLT News (April 19, 2023) “Everyone needs a will—and here’s why”

Singles Need Estate Planning to Protect During Lifetime

“You’re single, and you don’t have an estate plan or even a will. Perhaps you think you don’t need either because you’re not wealthy and don’t have children.”

Estate planning is even more critical for singles than married couples—and it has nothing to do with whom you’ll leave assets to when you die. A recent article from AARP, “6 Estate Planning Tips for Singles,” explains how estate planning addresses support during challenging life events.

Estate planning addresses medical and financial decisions for an incapacitated person. For singles, these may be more complex questions to answer.

Whether someone has never married or is divorced or widowed, these are challenging questions to answer. However, they must be documented. In addition, singles with minor children need to nominate a trusted person who can care for their children if they cannot. Estate planning addresses all of these issues.

To be sure you complete this process, start with a conversation with an experienced estate planning attorney. This will help with accountability, ensuring that you start and finish the process.

Here are some pointers for singles who keep putting this vital task off:

What would happen if you don’t leave clear instructions about who will make medical decisions in case of incapacity? A doctor who doesn’t know your wishes will decide for you. If you don’t want to be placed on a ventilator for artificial breathing or fed by a stomach tube while in a coma, the decision will be made regardless of your wishes.

Dying without a will is known as dying “intestate.” All of your assets will be distributed according to the intestate succession laws in your state. If no relatives come forward to claim your property, the state receives your assets. This is not what most people want.

Part of your estate plan includes naming a personal representative—an executor—who will oversee your affairs after your death. You’ll want to designate someone who is organized, has good judgment and can handle financial matters. You should also name a backup, so that if the first person cannot or does not wish to serve, there will be someone else to take control. Otherwise, the court will name someone who doesn’t even know you to take on this task. It's better to designate someone than leave this to the state.

Your estate plan includes the following:

Last will and testament. This is where you nominate your executor, heirs and how your assets will be distributed. You can also appoint a guardian for minor children. Note that anyone named as a beneficiary on a retirement, insurance policy, or investment account supersedes any instructions in your will, so be sure to update those and check on them every few years to be sure they are still aligned with your wishes.

Living trust. This is a legal entity owning assets to be given to beneficiaries, managed by a trustee of your choosing, and avoids the delays and costs of probate.

Financial Power of Attorney (FPOA). This document authorizes someone you name to act as your agent and make financial decisions if you cannot. An FPOA can prevent delays in accessing bank and investment accounts and paying your bills. The FPOA ends upon your death.

Living will, durable medical power of attorney, or advance health care directive. These documents allow you to designate someone to communicate your health care wishes when you cannot. For example, you can include instructions on pain management, organ donation and your wishes for life support measures.

Health care power of attorney (HPOA). Like the living will, which is more associated with end-of-life care, the HPOA lets someone make medical treatment decisions on their behalf.

Be sure to communicate your wishes with family and friends. Tell your executor where your documents may be found and provide them with the information they’ll need so they may act on your behalf.

Reference: AARP (April 7, 2023) “6 Estate Planning Tips for Singles”

Protect Cryptocurrency in Your Estate Plan

“Cryptocurrency has become a new wrinkle in the development of an estate plan.”

The very nature of cryptocurrency as a secure digital asset is the result of the complete absence of any identifiable information associated with an individual crypto account. These types of assets are also not easily identifiable to executors or heirs, says a recent article, “Today’s Business: Cryptocurrency and estate planning” from CT Insider.

The only way an heir or designated fiduciary (like an executor) may gain access to crypto accounts after the owner’s death is to have the password or “private key.” Without it, there is no way to gain access.As a result, the cryptocurrency is worthless. Therefore, safeguarding the passwords, especially the crypto “seed” phrases, is critical.

The “key” to a person’s cryptocurrency must never exist only in the owner’s mind. The owner must never be the only person who knows where the passwords are printed, whether on a piece of paper, in an encrypted file on a thumb drive or laptop, or an online password manager.

At the same time, this critical information must be secure. How do you accomplish both?

Start by telling your estate planning attorney that you own cryptocurrency. Just as they wouldn’t be able to help protect a traditional asset if they didn’t know it existed, they will need to know you own cryptocurrency, so they can incorporate it into your estate plan.

To safeguard seed phrases and other passwords for estate planning purposes, consider these options:

A straightforward way of storing passwords and seed phrases is to write them down (legibly) on a piece of paper and store the paper in a secure location, such as a personal safe or safe deposit box.

Using a password manager can work. This is software used to store all passwords in an encrypted format. It allows the storage of secret seed phrases, passwords and other sensitive information, accessible through a single password. Be careful to select only a high-rated password manager from a recognized company. You should also never store seed phrases or passwords with the cryptocurrency wallet address to minimize the chances of hackers accessing your digital wallet.

Because of the importance of securing information from physical and digital threats, you may want to invest in a fire and water-proof safe and give a trusted friend or relative a means of accessing the stored information. In addition, as the security landscape continues to change, it’s essential to regularly change passwords and seed phrases to ensure digital assets remain secure and loved ones can access them if you become incapacitated or pass away.

Properly securing seed phrases and other passwords is a part of today’s estate planning. You and your estate planning attorney need to plan for digital assets to ensure that they are properly managed and passed on to loved ones without compromising sensitive information in a last will and testament.

Reference: CT Insider (March 18, 2023) “Today’s Business: Cryptocurrency and estate planning”

Estate Planning Requires Clear Direct Language, or Does It?

“Contrary to what you might expect, using precatory language such as ‘I wish’ or ‘I hope’ can play an important part in three estate planning objectives.”

For the most part, there’s no room in an estate plan for vague language, says a recent article, “I Wish I May, I Wish I Might: Estate Planning’s Gentle Nudge” from Kiplinger. Using unclear language can lead to confusion, arguments between beneficiaries and a longer, more costly probate process, especially if court intervention is needed to help resolve disputes and clarify your intent.

With that said, it seems like the use of phrases like “I wish,” “I hope,” or “It would be my desire,” known as precatory language, would never belong in a will or a trust. However, there are three instances where this language, considered non-binding, is indeed useful for estate representatives and loved ones.

1. If you want your beneficiaries to work with your financial advisor or estate planning attorney. A recent survey says people expect to consult a financial advisor as part of the expected great wealth transfer as Baby Boomer wealth passes on to younger generations. The same study reports that people will consider working with current family advisors. If this would be your wish, you can communicate this message using precatory language in your last will and testament.
   
   The language could be as follows: “I desire my children consult with our family advisor, Samantha Smith, or another competent advisor of their choosing in managing their inheritance.”
   
   Dealing with the loss of a loved one and managing an inheritance at the same time can be overwhelming. Providing guidance regarding a financial advisor or a trusted estate planning attorney in the will can give family members the relief of knowing whom to turn to when they have questions and need help.
2. If you want co-trustees to collaborate in making decisions, even if the final decision-making process is ultimately not unanimous.
   
   Let’s say you’ve named all three of your children as co-trustees. They have an equal platform to express their wishes. However, a child their siblings regularly overrule is likely to feel like their childhood dynamic hasn’t changed even as an adult. Your gentle recommendation reminds them to treat each other fairly, hopefully preserving the bond between siblings and keeping the co-trustee relationship healthy and productive.
3. You’d like to encourage your trustee to consider certain guideposts when making distribution decisions. For example, an independent trustee has the authority to make distribution decisions according to the terms of the trust, which in some cases gives the trustee complete discretion. Unlike the common standard of HEMS—health, education, maintenance and support—discretion provides the trustee with the most flexibility to ensure that the beneficiaries’ needs are met. However, there may be factors you’d like the trustee to consider, such as if the beneficiary has their own wealth or if a need exists that you would have supported if you were still living, like buying a first home.
   
   You can guide your trustee with language like this “I encourage my trustee in the exercise of their discretion to consider requests related to educational pursuits” or the like. This will guide the trustee in making decisions while not tying their hands if they decide the beneficiary’s request is not in line with what you wanted.

Estate planning documents should be clear and direct as to where your property should go and who should manage it. However, there is also room to communicate essential guidance from you to your loved ones.

Reference: Kiplinger (March 23, 2023) “I Wish I May, I Wish I Might: Estate Planning’s Gentle Nudge”

What Is Probate?

“How this is handled now depends on the plans the deceased made when they were alive. For some people, that might mean probate.”

Unless they’ve experienced it themselves, most people don’t know what happens after the funeral is over and mourners return to their lives. A recent article from San Francisco Bay Times, “Probate in a Nutshell,” explains how the probate process works.

Probate is the legal process of administering the estate of a deceased person. It includes transferring assets of the decedent to their heirs, beneficiaries, or creditors. Probate is court-supervised and can be a lengthy, complex and often stressful experience, depending in part on the complexity of the estate and the jurisdiction.

Probate starts with filing the last will and testament in the court and appointment of an executor. If there is no will, then the court appoints an administrator to handle the estate. The executor or administrator gathers the assets, pays debts, and taxes and distributes the remaining assets according to the terms of the will. If there is no will, the laws of the state determine, usually by kinship, how the assets are distributed.

The probate process can take months or years to complete. During this time, the executor or administrator must keep careful records of all transactions. They must also file tax returns for the last year of the person’s life and diligently track all expenses and income of the estate.

Once the probate process is completed, the executor or administrator must file a final report with the court. This report must include all financial transactions. The probate court then reviews the report and determines whether or not it approves all transactions. Only then can assets be distributed to beneficiaries.

Why is probate so complex and time-consuming? First, it takes time to complete an inventory of someone’s property, including real estate, bank accounts, investment accounts, artwork, vehicles, jewelry and tangible assets. The asset list also includes life insurance policies, pensions, annuities, and other assets the person owned.

A professional appraiser may be needed to determine the value of assets. The executor must also gather proof of ownership for all these assets, such as deeds or titles.

Any debts or liabilities must also be identified, including credit cards, loans, mortgages, liens, and outstanding debts. Finally, taxes must be reviewed: income tax, property tax, estate tax, or gift tax.

Finally, a complete list of all estate beneficiaries must be prepared, including family members, friends, or others who may be named in the will. Contact information will be required for all.

Many complications can arise during probate. This is why many people take the time to have an experienced estate planning attorney create an estate plan to remove assets from the probate estate through trusts, gifts and other estate planning strategies. Of course, estate administration still needs to take place after someone dies. However, having an estate plan can minimize the court’s involvement, cut down on delays and avoid unnecessary expenses.

Reference: San Francisco Bay Times (April 4, 2023) “Probate in a Nutshell”

You Can Avoid Unintended Consequences

“Although there is certainly no shortage of people with selfish or malevolent intent, a great number of estate plans that end in disaster are due to unintended consequences.”

The mistake can be as simple as signing a document without understanding its potential impact on property distribution, failing to have a last will and testament properly executed, or expecting a result different from what the will directs. Unfortunately, these unintended consequences are relatively common, says the article “Advice for avoiding unintended issues in estate planning” from The News-Enterprise.

The most common mistake that leads to unintended consequences is leaving everything to a spouse in a blended family. Even if children don’t have a close relationship with their stepparent, they’re willing to get along for the sake of their biological parent. However, when the first spouse dies, the decedent's beneficiaries are generally disinherited if the surviving spouse receives the entire estate.

If the family truly has blended and maintains close relationships, the surviving spouse may ensure that the decedent’s children receive a fair share of the estate. However, if the relationships are tenuous at best, and the surviving spouse changes their will so their biological children receive everything, the family is likely to fracture.

Using a revocable living trust as the primary planning tool is a safer option. An experienced estate planning attorney can create the trust to allow full flexibility during the lifetime of both spouses.  Upon the first spouse’s death, part of the estate is still protected for the decedent’s intended beneficiaries.

This way, the surviving spouse has full use of marital assets but can only change beneficiaries for his or her portion of the estate, protecting both the surviving spouse and the decedent’s intended beneficiaries.

Another common mistake occurs when married couples execute their last will and testaments with different beneficiaries. For example, if they’ve named each other as the primary beneficiary, only the survivor will have property to leave to loved ones.

An alternative is to decide what the couple wants to happen to the estate as a whole, then include fractional shares to all beneficiaries, not just the one spouse’s beneficiaries. This protects everyone.

Many people assume that if they die without a will, their spouse will inherit everything. Unfortunately, this is not always the case, and a local estate planning attorney will be able to explain how your state’s laws work when there is no will. Children or other family members are often entitled to a share of the estate. This may not be terrible if the family is close. However, if there are estranged relationships, it can lead to the wrong people inheriting more than you’d want.

Failing to plan in case an heir becomes disabled can cause life-altering problems. If an heir develops a disability and receives government benefits, an inheritance could make them ineligible. The problem is that we don’t know what state of health and abilities our heirs will be in when we die, and few will want their estate to be used to reimburse the state for the cost of care. A few extra provisions in a professionally prepared estate plan can result in significant savings for all concerned.

Estate planning is about more than signing off on a handful of documents. It requires thoughtful consideration of goals and potential consequences. Can every single outcome be anticipated? Not every single one, but certainly enough to be worth the effort.

Reference: The News-Enterprise (March 25, 2023) “Advice for avoiding unintended issues in estate planning”