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Burkhardt Law

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The SECURE Act: Your Retirement and Estate Plan

One of the major places many of my clients save is in retirement accounts.  This may be in a 401k, IRA, 401a, or 403b, among others.  Unless set up as a Roth account, when money is taken out of these accounts, income tax will have to be paid.  Because this is one of the largest tax implications my clients will see in their estate plans, it’s an important subject.

I’m writing about this now because the Setting Every Community Up for Retirement Enhancement Act of 2019, otherwise known as the SECURE ACT, went into effect January 1, 2020.  This act brings many changes for retirement plans and if you have a significant amount of money in retirement accounts, it will affect your estate plan.

If you inherited a retirement account prior to January 1, 2020, you were able to rollover the inherited money into your own Inherited IRA.  However, every year the IRS requires you to take out a small amount of money from the account which you would pay taxes on.  The benefit here is that it is based on your age and could be taken over your lifetime.  Thus “stretching” the money and taking out a smaller amount each year, and ultimately paying less on taxes.

However, under the new law, retirement accounts inherited after January 1, 2020 will now have to distribute entire account within 10 years of the year of death of the owner of the account.  There are some exceptions to this new rule, but the important aspect of this law is that it is a major tax change.  Because it is such a large change, we sent out letters to our clients letting them know about this change.

Even before this law went into effect, we often recommended clients keep retirement money away from trusts, which are taxed at higher rates.  Every client we see gets a personalized recommendation on how to list beneficiaries on retirement accounts.  Now, with this tax change, we are recommending all our trust clients to review how their retirement account beneficiaries are listed.  In addition, for our clients that list their trust as the beneficiary on retirement accounts, we are recommending updating their trusts to account for these changes.

So, do you know how you have your beneficiaries listed on your retirement accounts?

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Estate Planning for your Graduate/Adult Child

If you have a recent high school graduate, likely they recently turned 18 and are now legally an adult.  Unfortunately, due to the pandemic the end of high school may not have turned out as planned as many proms, graduations, and other end of school year events were cancelled.  Pandemic reminded us all just how unexpected life can be.  Many people began thinking about estate planning.  Did you know that once your child turns 18, parents can’t access medical and financial information for their child?  As you spend the summer helping your now adult child prepare for the transition to college and help them with shopping for school supplies, furniture, and clothes for this next chapter in their life, you should add to the to do list, estate planning.

Due to the privacy rules of HIPAA, parents have no legal right to their adult child’s medical records or other health care related information.  If your child is involved in an emergency you don’t want delays in getting information or assisting in making medical decisions.  Your recent graduate  should execute a medical power of attorney and health care directive.  This will allow your child to determine who should make medical decisions if they are unable to make them for themselves.  It would also be good to execute a HIPPA authorization that would allow the child’s health information to be disclosed.  It is also a good idea for your now adult child to execute a financial power of attorney as well giving someone the authority to deal with financial decisions and sign legal documents on their behalf.  You may also have them execute a FERPA release.  The Family Education Rights and Privacy Act can protect your child’s educational records.  Having your child sign a FERPA release could allow for a parent to access information and educational records if needed.

As you begin making summer plans, don’t forget to add a consultation with an estate planning attorney to your agenda for your recent graduate!

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Medical Decisions – the Medical Power of Attorney and Healthcare Directive

It is a good idea to have a Medical Power of Attorney and Healthcare Directive in place for when the time comes that you are unable to make your own medical decisions.
A Medical Power of Attorney allows you to select a person of your choosing to make medical decisions on your behalf when you are not capable. You may hear this person referred to as an agent. You may even select back up agents in case the person you choose in unable or unwilling to act as your agent when the time comes. In addition to other powers, your agent can be given power to consent to, prohibit or withdraw medical treatment. It is important to choose someone that you trust to follow your instructions even if they would not make the same decisions themselves. This document goes hand in hand with a Healthcare Directive where you can make your wishes clear to the person you have chosen to make decisions for you.
In a Healthcare Directive you can make the job of your agent easier because they will know what your wishes are. It may even help reduce conflict between family members when they can see that the other family member was acting on your wishes and not on their own. If there was no reasonable expectation of recovery from a serious illness or condition would you want life-prolonging procedures to be withdrawn? If so, you can make those wishes known through your Healthcare Directive. If a doctor believes that life-prolonging procedure may lead to a significant recovery would you want your doctor to try the treatment for a period of time but withdraw it if does not improve your condition? Again, these wishes can be placed in the Healthcare Directive so that your agent will know how to proceed in such circumstances. Would you want to be given treatment for pain? Do you wish to donate your organs upon your death? These wishes can also be written into your Healthcare Directive.

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Trusts: Do you need a Trust?

Often times people know someone who have a trust and so they think they need one too.  Not every estate plan needs to have a trust.  Every family has different circumstances, so just because your friend has a trust doesn’t necessarily mean that you need a trust.

There are some benefits of having a trust in addition to a will.  Assets held in trust avoid probate.  However, a trust is not the only way to avoid probate.  Proper beneficiary designations on all assets can also avoid probate. Therefore, if you’re only creating a trust because you think you need one to avoid probate, you might reconsider.

However, if you want to control your money after you’re gone, a trust is the easiest way to do so.  If you don’t want your child to receive a big inheritance all at once, a trust can be set up to distribute the inheritance over time, at ages that you decide.  You might choose to leave a certain amount upon the child’ s graduation from college, and then give a certain percentage of the inheritance when they are 25, or 30, or whatever age you feel appropriate.  If there are drug or alcohol abuse issues, a trust can help control how money is spent for a beneficiary.  A trust may help protect assets from a divorce. If you have a child with special needs, a trust is a good tool to provide for your child.

If you have young children a trust can help provide for them and can avoid probate for a conservatorship.  A minor can’t just be given all the assets, so by creating a trust, a trustee will be able to distribute money for the child until they are old enough to handle the money themselves.

It generally costs more to set up a trust.  If your circumstances warrant having a trust the extra cost shouldn’t deter you.  However, if there isn’t as much of a reason to control the assets, and you properly title all assets with beneficiaries, the cost maybe an unnecessary expense.

It is a good idea to speak with an attorney who can ask questions about your family circumstances to help you determine whether or not a trust would be needed to meet your needs and wishes.  They will be able to help you understand the pros and cons of implementing different estate planning tools.

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What Next? After Executing Your Estate Plan

Congratulations on getting your things in order.  The process of estate planning is often one many people avoid because they just don’t want to think about it.  You have been responsible and met with an attorney to prepare your estate plan and have signed and finalized all your documents.  You may think you’re done and not think about it again.  However, there are still some things you should consider after executing your documents.

If during the process of creating your estate plan, you didn’t speak with your family about your plan, now would be a good time.  If you speak to them now, there are less likely to be family disputes because everyone is aware of your intentions. It is also good for the family to know there is a plan, so they know to look for it if needed.

When you receive the original documents from your attorney, you should place them somewhere safe.  A good idea is a fire-safe if you have one.  Be sure that someone you know and trust knows how to get into that safe.  A will must be admitted to the Probate court within one year of death.  If no one knows you had an estate plan or where to access the will, it will be as if you never created a will and your assets could pass through intestate law.  This could mean the people you intended to inherit may not.

You have placed your documents somewhere safe and spoken to your family. What’s next? I would strongly recommend keeping track of how your assets are titled including any beneficiaries.  If you purchase a new car you will want to remember to add beneficiaries to your title using a transfer on death designation or TOD.  If you purchase a new home, open new bank accounts, get new life insurance, open a new retirement account, etc., you will want to remember to add beneficiaries to those assets so they can avoid going through probate.

If you have any major life changes, divorce, death, etc., it is always a good idea to review your plan with an attorney to make your sure documents don’t need any updates based on those changes.  It is always a good idea even without any of those major life changes to review your plan at least every five years.

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But Chances Are So Small – Estate Planning – Burkhardt Law Firm

The number one reason I hear for why people they don’t think they need an estate plan is: “Well, my spouse is named as a co-owner on everything I own or is a beneficiary on everything I own and the chances of us dying at the same time is small.”  Well, even if you are right and you and your spouse don’t pass at the same time and your beneficiary designations avoid probate, there are reasons why you still need an estate plan.

Things can fall through the cracks, and you may forget to put a beneficiary designation on a new asset, or there may be other unforeseeable assets that don’t have a beneficiary designation and will therefore go through Probate.  A will is a good way in those circumstances to be able to tell the Probate court what to do with those assets.  A will can waive bond and ask for independent administration which can reduce the cost and time if assets have to go through Probate.

A good estate plan does not only plan for death, it is also a plan for when you are living but incapacitated.  An estate plan may include both a medical power of attorney/heath care directive and a financial power of attorney.  These documents are utilized while you are still alive.

If you have retirement accounts, your spouse cannot be an owner of your account.  They can be a beneficiary, but that beneficiary designation does not give them any rights to access your account or funds from the account until you have passed away. If you to need to access money from your retirement account and are not capable of making financial decisions the only way to do that is through a financial power of attorney.  A financial power of attorney will allow someone of your choosing to make financial decisions and access funds when you are not capable.  If you do no not have a financial power of attorney, there may be a delay and added cost if someone has to go through the court system for conservatorship in order to access the funds. This is just one of many reasons a financial power of attorney is an important document to make part of your estate plan.

The other document utilized as part of an estate plan during your life is the medical power of attorney/heath care directive.  If you are not capable of making medical decisions for yourself a medical power of attorney will allow a person of your choosing to make medical decisions on your behalf.  Do you have specific wishes for end of life? Would you want treatments like feeding tubes to be removed if the doctor did not believe you would have significant recovery?  It is important to make your wishes known and this can be done through a medical power of attorney/heath care directive.

Even if you are not concerned about assets passing through Probate, I strongly suggest considering an estate plan so that you can have access to funds when needed through a financial power of attorney and to make your end of life wishes known through a medical power of attorney/heath care directive.

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When Does a Power of Attorney Start? Springing POA vs. Non-Springing POA – Burkhardt Law Firm

People always have a lot of questions regarding powers of attorneys (POA).  It makes a lot of sense.  Powers of attorneys are so important because they give access to decisions when otherwise your loved ones may be stuck without access! One of the big questions we always get is the different types of powers of attorney.  Specifically, durable powers of attorney and springing powers of attorney.  Today we’re picking on springing powers of attorneys and why you may or may not want a power of attorney that’s springing.

To start with we’re talking about a financial POA.  This is just a POA that gives someone you choose the power to make financial decisions for you.  That power can be springing or non-springing.  If the power is non-springing, then the person you choose has the powers you grant them immediately upon the power of attorney document being signed.  This means that even if you are capable of signing for yourself the person you choose could sign for you immediately.

If the POA is springing, the person you choose to make financial decisions for you will act only if you become disabled or incapacitated.  A medical doctor would need to certify in writing your mental and/or physical condition is impaired to the extent that you can no longer personally make financial decisions for yourself.  Only after a doctor certifies you are no longer capable can the person you choose begin using the powers given in your financial POA.

Some people just aren’t comfortable with the idea of someone else signing for them when they are still capable and may prefer a springing POA.  However, if the power is springing, and then there is a need for your chosen agent to act, there could be a delay while they try to get a doctor to certify that you are no longer capable.  A non-springing power of attorney may be preferred by some people for convenience.  If your traveling or just otherwise busy, your agent could sign for you if they are given the power to act immediately.

Many married people will choose their spouse to act for them and are comfortable with their spouse signing for them immediately.  The thing to keep in mind if you choose a non-springing power of attorney is that if you choose a successor agent, someone to act for you if your first choice is unable or unwilling, and your spouse becomes unable or unwilling to act, then your successor agent will then have the power to act immediately as well.  Therefore, if you execute a non-springing POA, you need to be comfortable with all successor agents acting immediately and not just the first named agent. However, there is some protection in the fact that that a successor agent would have to prove that the prior named agent was unable to act before they could act on your behalf.  Regardless of whether you choose to execute a springing or a non-springing power of attorney, you should select an agent that you trust will act in your best interest.

Having a springing or non-springing power of attorney is a big choice and one we spend a lot of time discussing with our clients. So if you’re wondering which is best for you and your loved ones, the best idea is to contact an attorney and figure out your estate plan.

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Stop Waiting – Burkhardt Law Firm

I joined Burkhardt Law about 5 months ago, and since joining the firm I have had an opportunity to shadow Martha. I have learned a lot from her in these 5 months.  One of the things I have seen while shadowing her is people who wait until it is too late to create an estate plan.  Did you know that for a will to be valid you have to have mental capacity when signing?  In the time that I have been at Burkhardt Law I have seen Martha have to turn away potential clients because they no longer had mental capacity to execute an estate plan.

Has a loved one recently been diagnosed with an illness that may affect their mental capacity? Their illness may progress faster then you think and it could become too late to execute an estate plan.  If your loved one doesn’t have capacity to execute an estate plan and does not have a power of attorney, it may become difficult to access funds they need.  If a power of attorney is not in place, a loved one may only be able to access accounts by going to the court and petitioning for a conservatorship.  This can take time and there is the added issue of court costs.

I have also unfortunately seen clients come in when they are sick but still have mental capacity to sign, however, they have passed away before coming back in to sign and execute their documents. That is just heart breaking. Don’t wait until it is too late.  Benjamin Franklin once said, “Don’t put off until tomorrow what you can do today.” This is excellent advice especially when it comes to creating an estate plan. You never know what tomorrow will bring so be prepared today.

 

— Lisa Villareal

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One of the Most Important Documents – A Financial Power of Attorney

A lot of people have questions regarding wills and trusts.  Those documents do make up a part of a complete plan, but one of the most important documents is a financial power of attorney.

For families without minor children, my first priority is ensuring my clients are taken care of if they cannot take care of themselves.  Now, the medical power of attorney is important to make sure the correct person can make health care decisions.  However, often times, I find medical professionals will follow instructions even without a medical power of attorney.  Now, that may not always be true, so a medical power of attorney is necessary.

However, I can guarantee a bank or financial institution will not allow someone who is not listed on an account to sign.  This is a major concern for those who have the majority of their money in retirement accounts.  On retirement accounts, only one person is listed as an owner for tax purposes.  There may be beneficiary designations, but those don’t go into effect until death.  So, without a power of attorney, if the owner cannot sign, no one can.  This can present a huge problem for married couples who rely on each other’s retirement money.

The same would be true of a couple with a house in joint names.  If the home would need to be sold to provide for them or just to downsize, both would need to sign.  However, if one can’t, the home cannot be sold without court intervention.

A financial power of attorney is an easy solution.  By completing a power of attorney, you can decide who can access financial accounts for you and what powers they have.  So, tell me, who do you trust with your power of attorney?

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Free Advice – Estate Planning Consultation – Burkhardt Law Firm

As soon as someone hears I’m an attorney, I get a rush of legal questions. And I actually enjoy answering questions when I can. However, so many questions don’t have an easy solution or a quick answer.

Every legal question I’m asked creates a whole list of questions that I have to ask in return.  There’s rarely an easy yes or no. In fact, one of the favorite responses of an attorney is “well, it depends.” And it’s the truth.  So much depends on who, what, where, when, how. And for each response, I generally have yet another question!

My other favorite thing that goes hand-in-hand with this is “my neighbor said” or” I heard.” And that’s great.  Your neighbor might be exactly right. But more likely, your neighbor’s situation is just slightly different.  Which is enough that causes what your neighbor said to not apply to you.  Or what your neighbors said failed to mention a really important detail that completely changes everything.

So, when you have a generic legal question, and you’re asking for advice, or you heard something, it’s not that simple. I’m not going to have an answer.  It’s going to take a lot more. That’s the reason I do free consultations.  That’s the reason I want to sit down with people and talk.  Because each person’s situation is going to be slightly different. Each person is going to have a different concern. Each person is going have a different thing that’s important to them.  And that’s what I went to law school for; to ask the questions to find those things out.  It’s after I ask those questions and get the answers (which most people don’t know to ask and didn’t know were important) that I will have an answer.

So, do me a favor next time you have a legal question, or your neighbor told you something: just stop and ask an attorney.  Set up a time to do a consultation and to give specific answers to the questions that your question just brought up.

Burkhardt Law Firm

Phone: (314) 518-1581
Email: mburkhardt@burkhardtlaw.com
Address:
2333 Grissom Dr., Suite 107
St. Louis, MO 63146