King & Wood, P.A.

How to Prepare for Cognitive Changes in Your Life

Plan for the possibility of cognitive decline and the future of your household's financial affairs.

Planning for the cognitive decline that often accompanies aging can prevent expensive mistakes, says a recent article from U.S. News & World Report, “How to Minimize 4 Financial Management Disasters That Come With Aging.” Planning for cognitive decline can make our later years less stressful.

Age and Vulnerability to Financial Elder Abuse. Simple tasks like paying bills can become problematic as our cognitive abilities diminish. This also leaves people more susceptible to fraud and scammers—today’s thieves’ prey on the elderly through telephone, online, mail and in-person schemes. Add a layer of protection by having a trusted person or family member oversee accounts. A professional fiduciary or a bill-pay service could be used if no family member is available or trustworthy enough.

Freezing a senior’s credit with major credit bureaus can make it harder for thieves to steal their identity, take out loans, or open credit cards under their names.

Financial documents should be organized, and their location should be shared with loved ones. Your estate planning attorney, financial advisor and CPA should have the contact info of a trusted person who can step in to manage your affairs, if necessary. Your estate planning attorney can create a Financial Power of Attorney, so they can act on your behalf.

You can appoint a representative payee with the Social Security Administration, so another person can help you with Social Security matters.

The Death or Disability of the Family’s Financial Person. One person in the household very often runs the business side of life, paying bills, balancing checkbooks and keeping an eye on investments. If that person dies or becomes disabled, the spouse needs to be able to take over finances. To do this, they’ll need to know more than the usernames and passwords on accounts—although they’ll need to know this information as well. Regular check-ins on financial matters with a spouse and a trusted adult is a good practice.

Planning for Long-Term Care Expenses. Failing to prepare for the cost of long-term care or to protect a couple’s assets with Medicaid planning can be financially catastrophic. Medicaid can help with the cost of nursing home care. However, if the family has assets, they must be used up before the person is eligible for care. Medicaid also has a five-year lookback period, meaning any transfers or sales of assets taking place five years from the date of application will delay eligibility. An estate planning attorney can help with the use of irrevocable trusts, often referred to as Medicaid Asset Protection Trusts. There are also trusts designed to protect assets for the healthy spouse. A consultation with an estate planning attorney long before long-term care is needed is critical to avoiding this mistake.

Outliving Your Money. Experts believe nearly two-thirds of Americans nearing retirement age are unprepared for two, three, or even four decades of retirement. The past year’s skyrocketing costs of living have prevented many from adding to their savings during the end of their working lives, and many don’t even have emergency savings. Having a financial plan and an estate plan is important at every age and stage of life.

Cognitive changes don’t happen to everyone as they age. However, it is still wise to have your estate planning done long before any changes occur. Having a will and any necessary trusts created and executed while you are at full capacity allows you to be the one making these decisions.

Reference: U.S. News & World Report (June 26, 2024) “How to Minimize 4 Financial Management Disasters That Come With Aging”

Should You Consider Planned Giving?

“Givers are optimistic by nature—they believe that through donations and other charitable activities, they will beget change, even if the result is not immediate or tangible.”

Estate planning presents many opportunities for philanthropically minded people, and you don’t have to be a millionaire to be a philanthropist. One way to ensure that your assets are given to causes you care about is addressed in the article “What Is Planned Giving?” in Financial Advisor.

Planned giving means donating assets to a nonprofit in a structured way during your lifetime or as part of an estate plan. The assets can be cash, securities, real estate, life insurance proceeds, funds from retirement accounts, or assets held in trusts.

Why make a planned gift? Planned giving is a means to create a legacy, ensuring something you value continues after you are gone. This can be a large donation to fund building construction, a student scholarship, or an endowed program. It can also take the form of an annual gift to the organization.

The benefit of a planned gift is it allows you to structure assets to accomplish other things, like providing for beneficiaries. Certain charitable trusts can provide income to spouses, children, or grandchildren over decades or in a lump-sum payment.

Creating a planned giving program should align with your overall estate plan to achieve optimal results in growing wealth and minimizing tax liabilities. Doing so requires discussing your charitable intent with your estate planning attorney, determining the best way to do this and then drafting wills, trusts and any other instruments to work together.

The development office of any nonprofit organization will be familiar with planned giving and may even have someone on their team who focuses on planned gifts. They are usually happy to receive donations this way and will also know about different types of gifts and tax-efficient strategies.

Planned giving can also be used with a tax-advantaged vehicle like a donor-advised fund, which owns assets specifically for use by a charity.

Consider why you want to make a charitable gift and what you hope to accomplish. You and your estate planning attorney can then map out a strategy to benefit you, your loved ones and the nonprofits of your choice, demonstrating your priorities and creating a legacy.

Reference: Financial Advisor (June 1, 2024) “What Is Planned Giving?”

What Happens When Executors Keep Beneficiaries in the Dark?

“Is it unusual that named beneficiaries would not be given copies of or, at the very least, be allowed to view the will?”

A couple who never had children created a will, leaving their six nieces and nephews equal shares of their estate upon their deaths. When the uncle died, the aunt remarried years later but never changed the will, except for giving her second husband a life tenancy in the family home. A recent article from Market Watch asks if what happened next is right: “My late aunt gave her husband a life tenancy in her home—but her attorney won’t even let us see the will. Is this a bad sign?”

The problems began when the aunt’s attorney told the nieces and nephews that they were responsible for the taxes and property insurance while the life tenant lived in the home. The nieces and nephews had never seen a copy of the will, so they are unsure of their responsibilities as remaindermen. Nothing in the estate needed to go through probate, so the aunt’s will was not available to beneficiaries through the county court.

This case illustrates several important estate planning points. First, an executor of a will (or an administrator of an estate) is required to keep beneficiaries “reasonably informed” of the will’s contents after probate. It seems reasonable for the nieces and nephews to be able to see the will.

In most cases, the person given the life tenancy is responsible for paying taxes and property insurance and for the general upkeep of the residence. Any other arrangement is unusual, so the nieces and nephews are right to want to see the will.

The life tenant has rights, including the ability to rent out the property. However, they can’t do anything to decrease the house's value. It’s important to know that elderly people may be unable to apply for Medicaid because they live in the house this way.

If it has been months since the person died and there hasn’t been any communication from the executor, a few different scenarios are possible. It may be that the executor doesn’t know they are required to keep beneficiaries informed. However, it’s also possible that the executor is engaging in illegal behavior.

In most states, the executor is responsible for providing beneficiaries with a complete inventory and appraisal of all the estate's assets. Depending on the state, probating an estate may take more than six months, and creditors have a certain number of months to file a claim.

Suppose the beneficiaries wish to replace the executor. In that case, they can do so by speaking with an estate planning attorney and being prepared to go to court and prove the executor is either self-dealing, incompetent or has a conflict of interest.

However, once the will is probated, it will become part of the public record and must be filed in probate court. Depending on the jurisdiction, the court will give the beneficiaries the right to access the will.

The best option for the nieces and nephews is to consult an estate planning attorney to explore their options. If they live in a different state, a local estate planning attorney can recommend someone in their aunt’s jurisdiction to help.

Reference: Market Watch (April 28, 2024) “My late aunt gave her husband a life tenancy in her home—but her attorney won’t even let us see the will. Is this a bad sign?”

Why You Shouldn’t Leave Your Home to Your Children

“The home represents a large portion of the estate of many Americans. You, therefore, may intend to leave your family home to your children, as it is an asset that should retain its value over time.”

For financial and sentimental reasons, many people want to leave their homes to their children.  However, there are many reasons making this a bad idea, says the article “Generational Wealth: 7 Reasons to NOT Leave the Family Home to Your Children” from yahoo! finance.

Homes are transferred to children in several ways. However, each has drawbacks, from tax liabilities to the risk of losing the family home entirely. Here are how homes are typically transferred:

• Trusts
• Gifts
• Inheritances
• Transfer on death deed
• Sales

A Probate Hold Up. If the home is left to the children in your will, it could get tangled up in the probate process. Probate could hold up the transfer of the home by months or even years. If the house is tied up in probate, who will take on the tasks of paying the mortgage, if there is one, maintaining the home and paying bills? Who will protect the house from vandalism, squatters, or thefts if it is vacant?

Capital Gains Taxes. If the house is left to the children and they decide to sell it, they may have to pay a capital gains tax if the home has appreciated since the owner’s death. If the home is gifted to the children before you die and they sell it at a future date, they’ll have to pay capital gains taxes based on the market value of the house when they received it and the sale price. Where will the money for these taxes come from?

More Taxes to Consider. If you place the home in a living trust and instruct it to be transferred to the children upon your death, you have not shielded it from estate taxes. If you do this to reduce assets to qualify for Medicaid, the living trust is still a countable asset in most states. Your estate planning attorney will know how this might impact your estate and your Medicaid accountability.

What if Your Children Lose the House? Gifting the home to your children, adding them to the deed while you are living, or even selling the home to them exposes the house to risk. The home may face foreclosure if any person on the deed has financial difficulties and can’t make the mortgage payments. If they go through a divorce, the house will be considered a marital asset. Your years of paying the mortgage and caring for the home will evaporate.

Do They Want the House? Parents who feel generous may assume their children want their home when they might not. They will see it as yet another piece of unfinished business left for them to manage when their own lives might be very busy with their own children and careers. If they grew up in the home and have fond memories of it, this will make selling it even harder.

Can They Afford the House? Not every child enjoys financial success. If they can’t afford a mortgage, property taxes, utility bills and the inevitable costs of home ownership, like replacing a roof, etc., home ownership may become a huge burden. If “forced” into possession via inheritance, they may have to sell it at a lower cost to get out from under the bills.

Will They Fight Over the House? Families experiencing grief are not in the best place to make big decisions and are vulnerable to spats that rise to legal disputes. If one child is living in the house and wants to keep it, will they be able to buy out the other’s shares of ownership? A discussion of what you all want to happen with the house and what is realistic needs to occur. This should be followed by a conversation with your estate planning attorney to have the plan made, whether it’s part of your will or another type of agreement.

Reference: yahoo! finance (Dec. 11, 2023) “Generational Wealth: 7 Reasons to NOT Leave the Family Home to Your Children”

Can I Prevent Children from Fighting over my Estate?

“Parents typically do not want their surviving children to fight over their inheritances after the parents die. Careful planning may reduce the risk of foreseeable in-family conflicts.”

Even the best of sibling relationships can become strained after the death of a parent. This is especially true if the estate includes real estate, like a family or vacation home. More than one adult child often wishes to inherit the asset for sentimental and financial reasons, according to the recent article “Estate Planning: Reducing risk of family in-fighting” from Lake County News.

Sometimes, a family discussion between parents and children about the planned property division can reach an agreement, becoming part of the parent’s estate plan. However, there are times when this isn’t possible.

When the family is a late-in-life blended family, gaining consensus among the siblings may be more difficult, especially if the two sets of children were never close or never got along.

Some children may expect their biological parents to leave the assets brought into the second marriage to their biological children. Stepparents need to take steps to ensure that their separate property goes to their own children. Their stepchildren don’t have to approve of the gift. However, it is crucial for proper estate planning to be done in advance.

If the parent wishes to give each child an equal share of their inheritance and the inheritance includes real property, it may be best to use cash gifts to equalize their shares. The monetary gifts might be funded through life insurance proceeds or by having the successor trustee borrow against the real estate.

This may mean the child who inherits the real property will take it subject to the loan, which they will pay off, or refinance the debt upon distribution.

Families who own businesses require special consideration because some children may be actively involved while others are not. Succession planning will need to be done, including placing the business in a partnership or a corporation. The children involved in the business may be made general partners or executive officers in the corporation. In contrast, the children not involved in the business could be made passive partners or given ownership interests without an active participation role.

Suppose the estate includes valuable heirlooms or items with great sentimental value. Conversations about the individual items should occur while parents live. In that case, the wishes should be incorporated into the will.

If it seems as if the family can anticipate disputes over possessions or assets, an experienced estate planning attorney can prepare an estate plan designed to withstand challenges. This type of protection varies depending on the circumstances and the anticipated nature of the challenges.

One common scenario is a disgruntled child pressuring the parents to change their will to favor the child. If a no-contest clause is used, where anyone who disputes the will and loses the lawsuit will also lose what they would have otherwise inherited from the estate, other siblings may lose out entirely. Preparing a will for challenges requires a lot of strategy and planning .

In some states, it is possible to petition the court to confirm the terms of the trust while the grantor is living. This forces any contest to occur while the parent is still living and can testify to their intentions. In some high-value estates, this is a pre-emptive strategy to be considered.

Reference: Lake County News (Dec. 9, 2023) “Estate Planning: Reducing risk of family in-fighting”

How Does a Pour-Over Will Work?

“For those who want to avoid the court-controlled process that takes place after a person’s death (known as “probate”)—using a Revocable Living Trust is typically the best way to do so.”

A Revocable Living Trust allows a married couple or a single person to direct what they wish to happen to their possessions after death. It also indicates who will be in charge of carrying out their instructions without the involvement of a probate court, explains a recent article from Coeur d’Alene/Post Falls Press, “If you have a living trust, you also need a pour-over will.”

It should be noted that the Revocable Living Trust instructions only apply to assets placed into the Trust, referred to as “funding the trust.” This crucial step must occur as soon as the trust is created. Your estate planning attorney can help you get your assets into the trust. However, if you acquire any new assets over time, they, too, must be placed into the trust.

If you don’t remember to put them into the trust, they become part of your probate estate unless you take steps to prevent this from happening.

If you don’t have a will and assets are not included in your Revocable Living Trust, your assets will be distributed according to your state’s laws. This is probably not what you thought when you created the Revocable Living Trust.

However, this is a problem with a solution. Your estate planning attorney needs to create what is referred to as a “Pour-Over Will.” This type of will differs from a traditional one because it includes specific instructions to place any assets not already in your trust into your trust as soon as possible.

This type of will must go through the probate process. However, probate will only apply to assets left out of the trust. Having most of your assets inside the Revocable Living Trust will help probate to be less arduous for all concerned.

The goal of using a Revocable Living Trust is to avoid probate altogether. Therefore, combining the Revocable Living Trust with a Pour-Over Will adds another layer of protection all trust users should have in place.

If you are a parent with minor children, you should have had a will created by an experienced estate planning attorney as soon as your children were born. The will is used to name the person or people who you want to serve as guardians for your minor child or children if both of the child’s parents are deceased or unavailable to act as parents.

Without this provision in your will, a court will determine who will raise your child. Will it be the person you would have chosen? There’s no way to know unless you put this information into your will.

These details in estate planning go a long way in protecting your family and ensuring that your wishes are carried out.

Reference: Coeur d’Alene/Post Falls Press (Nov. 29, 2023) “If you have a living trust, you also need a pour-over will”

Estate Planning for Millennials and Gen Zers

“Millennials and Gen Zers are taking their estate planning seriously. These tips can help make the process seem less daunting.”

Estate planning is increasingly on the mind of younger adults, far from the stereotype of being only of interest to older, affluent couples nearing retirement or dealing with health concerns. These younger generations have unique attributes, including pragmatic financial views and humanitarian concerns, according to a recent article, “Six Estate Planning Tips for Younger Generations,” from Kiplinger. Here are tips to make this process easier for any generation.

Start with a basic will, which guides how assets and possessions are distributed after one’s passing. Prepared by an experienced estate planning attorney, the will should minimize potential disputes, include a clear delineation of assets and beneficiaries and name an executor to manage the estate and guardianship for any surviving dependents.

Appoint a power of attorney and draft medical directives. Power of Attorney and Medical Directives are basic documents that state your preferences during incapacity. A POA grants a named individual the legal authority to act on your behalf for legal and financial matters, if you cannot do so. Medical directives establish your wishes regarding medical treatment and end-of-life care. While taking care of these matters, you may also want to consider becoming an organ donor.

Determine who you want to be your children’s guardian. Naming a guardian of your minor children isn’t pleasant. However, it ensures that you and your partner make this decision, not the court.

Consider a living trust. Living trusts offer a strategic means of managing assets and helping to ensure that your surviving loved ones maintain control of your assets after you have passed. The trust, established with the help of an estate planning attorney, grants ownership of certain assets or properties into the trust, which becomes their owner. A trustee is named to manage and distribute these assets in accordance with your wishes. In some instances, it makes sense to hire a professional trustee, especially if the trust will need to be managed for decades.

By taking assets out of your estate and placing them into a trust, these assets won’t go through the probate process. Probate involves your executor filing your will with a court after you die. The court reviews the will to validate it and grants the named executor the power to execute your final instructions. Probate can be lengthy, expensive and emotionally charged for the family. Your will is entered into the public record, so anyone who wants to can see your will and know your final wishes.

Don’t forget your digital assets. Younger generations are more aware of the value and footprint of their digital assets. They often name a specific digital executor in their estate plans to ensure that their many accounts and digital assets are managed after their passing.

Seek professional advice and update documents. Despite a plethora of online sites and apps, estate planning documents require the skillful handling of an experienced estate planning attorney. Estate laws are state-specific, so wills and trust documents must be created with local laws in mind. Your estate plan documents, from wills to insurance policies, should be reviewed every three to five years. Every time there’s a significant change in your life, like getting married, buying a home, having a child, or getting divorced, this should also be done.

Reference: Kiplinger (Dec. 3, 2023) “Six Estate Planning Tips for Younger Generations”

How Does Estate Planning Protect Young Children?

“To make sure that your children are taken care of if something happens to you, it’s important to appoint a guardian, establish a trust and ensure there’ll be financial support.”

Once you have a child, you’ve got a bundle of joy—and a lifelong commitment to caring for the child, sometimes even after they reach adulthood. What would happen if something happened to you and your partner? To be sure your child or children are taken care of, you’ll need to take these estate planning steps, as explained in a recent article from Kiplinger, “To Protect Your Kids, Consider These Estate Planning Steps.”

Appointing a guardian. Planning for the absence of parents from a physical and financial perspective needs to be done. Parents need to establish a guardian and have the person named in their will. It may be a good idea to name a secondary guardian if something happens and the primary guardian is unwilling or unable to serve in this role.

Create a trust. Parents should consider creating a trust for their children to ensure that there is money to provide for their care if both parents die. A child under the age of 18 is a minor and, as such, may not legally hold title to property. A trust is used to hold assets for the child’s benefit. The language of the trust would have instructions to provide for the children’s education, health and support.

There are two basic trusts to consider. A revocable trust is created during a person’s lifetime and can be changed anytime by the trustmaker. A testamentary trust is created as part of a will. Neither trust needs to be funded until the person passes away, at which time the property of the decedent is placed in a trust if the will contains the correct instructions. An estate planning attorney will be able to structure this plan.

Assign a trustee. This person manages the trust assets for the children's benefit. They need to be financially responsible people who can manage the funds for the children. The trustee can be a family member but should not be the same person chosen as the guardian. Keeping these roles separate ensures that the guardian will not misuse funds. Another option is to hire a professional to serve as the trustee. Professional trustees, including banks or financial advisors, usually charge a percentage of assets. In some cases, estate planning attorneys serve as trustees for minor children.

Establish terms of distribution. It’s up to the parents to decide how their children should receive trust assets. They can mandate principal distributions at certain ages, like a certain percentage at age 20, another at 30 and the balance at 40. While the parent dictates the terms of distribution while the children are minors, the trustee will be the one to decide on distributions for food, health, education, or extracurricular activities.

How do you be sure there will be money for your children? Parents should purchase life insurance, since most young parents don’t have a lot of liquidity. Term policies are the least expensive and can be for ten, twenty, or thirty years, during which the policy is guaranteed if the premium is paid. Whole life insurance is another option. However, it is more expensive.

Start a 529 college savings fund. These accounts can be funded through automatic withdrawals from a checking account, or family members can be encouraged to make gifts to these accounts. In some states, there are state income tax benefits for residents. The growth is tax-free if the funds are used for qualifying educational expenses.

When the child becomes a legal adult. Once a child celebrates their 18^th birthday, they are legal adults, and parents lose their rights. New adults should have a healthcare proxy so someone can make medical decisions for them in case of incapacity. They should also execute a HIPAA disclosure form so healthcare professionals can discuss their medical care with parents.

If a child has special needs. An estate planning attorney will create a Special Needs Trust to hold assets and name a trustee to manage the funds. This trust allows a child with special needs who may be eligible for government benefits to continue to receive benefits in addition to distributions from the trust.

Reference: Kiplinger (Nov. 19, 2023) “To Protect Your Kids, Consider These Estate Planning Steps”

Florida Guardianship Case Raises Red Flag for Estate Planning

“Many older people are one medical emergency away from a court-appointed guardian taking control of their lives.”

No one likes to think of themselves as being older and vulnerable. However, for one Florida man, a medical crisis and the lack of family nearby led to a terrible series of events. The article's title, from The Washington Post, sums it up: “The retired pilot went to the hospital. Then his life went into a tailspin.”

The former pilot pulled his Ford Mustang convertible into a gas station and appeared so distressed that someone called 911. He was taken to a nearby hospital, where doctors said he had a stroke. He lived alone, as three out of five Americans in their 80s now do. There didn’t seem to be any family members to call. The hospital went to court and argued that the pilot needed a guardian. The judge agreed.

This is not an unusual situation. More than one million Americans are under guardianship, which has been widely criticized for inviting abuse and theft. As Americans age, there is more focus on this arrangement, but few solutions. This man was like many seniors who relocate far from family, and when they show up alone in emergency rooms, they are at risk of falling into the guardianship system.

The court-appointed guardian sold his home for a very low price to a neighbor who was a realtor. An inspector general’s investigation later found “probable cause” for the exploitation of an elderly person and a scheme to defraud. However, the guardian denied any wrongdoing, and there was no criminal investigation.

As it turned out, the pilot, who never married or had children of his own, did have a family. In the past, he had regularly visited his sister, her spouse and a niece and nephew in the Philadelphia area. The visits stopped when his sister developed dementia and died in 2018. His niece said he became harder to reach but eventually would respond to calls and emails until he entered the hospital and no one heard from him.

After the stroke, he was unable to tell anyone to call his family. It’s not clear how hard the hospital tried to reach any relatives.

Like most senior patients, the pilot was covered by Medicare, which pays the hospital by diagnosis, not by length of stay. Generally, in this part of Florida, Medicare pays $23,000 for an elderly stroke patient, assuming a five-day stay. After that, the hospital begins to lose money. Putting a new patient in the same bed would bring in thousands of dollars a day.

The guardian began liquidating his possessions, selling his cars, gun collection, camera equipment and more at an estate sale. She then sold his home before it even went on the market with a private arrangement with a husband and wife real estate team who lived in her community. She sold it to them for at least $100,000 under market value.

While this was happening, a woman who had become an unpaid citizen watchdog after her own father’s horrible guardianship experience uncovered the case, finding court papers about the sale of the house and seeing the undervalued sale. She filed a complaint with the office regulating guardians, hoping it would draw scrutiny to the situation.

At the same time, the pilot’s niece and nephew were searching for their uncle, including writing a letter to the court. However, months went by without a response. Their letter to the court finally got to someone, and the guardian called the nephew. They were happy to establish contact with their uncle, talking with him on FaceTime calls, but had questions the guardian did not answer.

In July 2022, the inspector general’s office issued a critical report stating the guardian had used a “deficient, deceptive and fraudulent” market analysis submitted by the real estate agent. The home was “undervalued and not publicly advertised.” The inspector general’s office urged law enforcement to look into the handling of this home and two other homes the guardian had sold with the same real estate agents. Sadly, the pilot died two days after the state declined to pursue a criminal investigation.

To protect yourself and your family, speak with an estate planning attorney about the documents you need during life: Power of Attorney, Health Care Proxy, trusts, a will and, equally importantly, creating a plan for contact with family members, no matter the status of your relationships.

Reference: The Washington Post (Nov. 4, 2023) “The retired pilot went to the hospital. Then his life went into a tailspin”

Top Tips for Estate Planning

“There’s a lot to keep up with when estate planning. These tips could help, from updating beneficiaries after changing your plan to understanding will-substitute options, like transfer on death.”

Social media and in-person conferences are filled with “hacks” to improve lifestyles, finances and everything you can imagine. Taking a page from the world of “life hacks,” this article from Kiplinger, “14 Rapid-Fire Estate Planning Tips,” presents short and impactful info on estate planning.

Tip 1—Consider using a professional trustee in your estate plan for a more effective estate plan and more efficient administration.

Tip 2—For business owners, make sure that your estate planning attorney, CPA and financial advisors all understand your business. Invite them to your office or factory, so they can see how production or business practices are handled and the role of key employees, especially family members.

Tip 3—Discuss Transfer on Death (TOD) and Payable on Death (POD) options to see if they might be useful or detrimental to your estate plan. Many banks are pushing these arrangements, but they are not for everyone.

Tip 4—If you own a closely held company, have your estate planning attorney review any buy-sell provisions in the shareholder and operating agreements. Were these terms coordinated with the liquidity available to your trust or estate?

Tip 5—Do your trust documents include provisions regarding substance abuse powers and protections for beneficiaries? Give the trustee the power to deal with any substance abuse issues, including the power to pay costs directly to vendors and not directly to the beneficiary, require testing and treatment programs and pay for them with trust funds, and withhold mandatory distributions until the beneficiary meets certain testing and treatment standards.

Tip 6—Use an active voice in all forms, communications and agreements. Avoid ambiguity and provide clarity by using the active voice to identify the person who is or will exercise power or duty.

Tip 7—Be careful with personal information and documents. Your estate planning attorney and all other advisors should use encryption to protect emailed documents. Multifactor authentication should be used on any remote access. Don’t open attachments from anyone you don’t know or click on a link in an email from someone you think you know. Pick up the phone and call advisors before opening the email or link.

Tip 8—Ask your estate planning attorney to review the trust’s express standards of care, so you understand the duties and liabilities of the trustee. When a trust states a trust advisor is not a fiduciary and is not liable for actions taken in good faith, then any actions must be in good faith. This is a standard of care, and they are liable for actions taken in bad faith.

Tip 9—Ask your estate planning attorney about having your trust absolve successor trustees of all prior acts of the predecessor trustee. When a trustee is named successor trustee, they will look for this language absolving them of the predecessor trustee’s prior acts of omission or commission. If there’s no such provision in the document, the successor trustee will want all qualified beneficiaries to sign a release and indemnification.

Tip 10—Don’t rely on your memory regarding gift and estate tax returns filed in the past or your past use of lifetime estate tax exemptions, annual exclusion gifts, withdrawal notices and Generation-Skipping Transfer Tax (GSTT) allocations. Locate copies of these documents in your records to ensure that they match. Document your file with any notes or communications about gifting. As a taxpayer, you and your estate are responsible for maintaining records and have the burden of proof in any tax matters.

Tip 11—Anytime you review or update your estate plan, take the time to review any beneficiary designations immediately. Existing deeds, titles, account details and beneficiary designations should all be up to date, as your new estate plan may be ineffective at best (and, at worst, worthless) if those forms are not completed and updated.

Tip 12—If you are a beneficiary, you are allowed to review trust administration and ask questions of the trust officer. You are entitled to know how often you will receive statements or annual accounting, the standards the trustee must follow for making distributions and whether or not you have any control over the use of trust benefits during your lifetime or upon your death.

Tip 13—When updating your estate, ask your estate planning attorney about drafting trust restatements and new wills rather than trust amendments and codicils. Modern word processing makes it just as easy to prepare complete restatements rather than multiple amendments.

Tip 14—If you file personal tax returns and fiduciary tax returns for trusts, it may make sense to use the same accounting firm for both.

Reference: Kiplinger (Nov. 8, 2023) “14 Rapid-Fire Estate Planning Tips”