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Better Late Than Never… Especially Estate Planning

Hopefully, you noticed my blog didn’t appear at the beginning of the month. Life happened… clients called, an amazing new nephew was born, and of course a three month old just needed his mom. Time flies away and we don’t know where it goes. I’m sure it happens to us all, but I am guilty of it this month. I kept intending to take the hour to sit down and write, but it just kept getting moved to the bottom of the list. I hear this on a regular basis about estate planning.

Everyone knows estate planning in some form is important. But it’s not often urgent, so it gets put behind the things that are. The unfortunately thing is that once it becomes urgent, it’s often too late.

I’ve received several phone calls over the last few years when a loved one goes into the hospital. The person hospitalized never took the time and then the family is frantically trying to get assets titled so probate won’t be necessary. Often it’s just not possible.

Even if you’ve formed your estate plan, is it up to date? Have you funded your trust? Accurately listed your beneficiaries?

So, consider this your reminder. Don’t make your loved ones rush around when they don’t have the time. Make the time now and put it at the top of your priority list. In the grand scheme, it doesn’t take long and once done is just another thing you can cross off your list.

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Do You Need a Will?

Many times a potential client calls asking about a will and when we sit down for a consultation, they’re shocked to find out a will doesn’t accomplish what they want. Because this happens on such a regular basis, I thought I would go over what a will does and doesn’t do and when you might need a will or when you might need something more.

First, a will does not avoid probate. In order for a will to be effective, the court must verify the will and give all potential heirs an opportunity to contest the will. As such, assets passing through a will must go through court and may take months to years before they can be accessed. If your goals are to avoid court and hassle, then a will alone will not do this and you want to consider non-probate transfers.

But, maybe most importantly, if you have minor children you need a will. This is because a will is the only place to tell the court who you want to be guardians for your minor children.

However, even if you do not have minor children, I often recommend a will for a few different reasons. While the will may not be your main device to leave money to your beneficiaries, it is a very important back up. If you forget to put a beneficiary on an asset or put an asset in a trust, it will go through probate and a will can make that process easier a few different ways. First, if your beneficiaries differ from intestate law, if will ensure your assets go where you wish. Secondly, no matter whom your beneficiaries are, it can allow probate to proceed more quickly by allowing independent administration and waiving a bond. A will also allows you to choose who is in charge of handling your assets and acting for your beneficiaries as the personal representative or executor.

So while there are a few situations where you need a will, there are many more where you may not need one, but it would be beneficial.

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A New Perspective to Estate Planning – Parenthood

My husband and I just welcomed our first child into the world on June 16th. As I was thinking of what to discuss this month, I thought I’d simply share how my new parenthood has made me reconsider our estate plan and the documents I create for my clients on a regular basis.

The first thing that occurred to me is how important a medical power of attorney really is. This was my first experience being hospitalized; while I did not have to use my power of attorney, it was extremely comforting to me to know my husband would be able to make medical decisions if I was unable.

It also made me re-evaluate our trust and trustees. We completed our trust years ago and with the birth of our first born, my husband and I have set aside some time to review our trust and make sure the decisions we made then still are applicable to our new family.

But the most important thing I have realized is how hard it is to choose a guardian. I have always helped my clients sort through the options and generally act as a third party perspective with objective reasons why someone may or may not be a good fit. Well, I now understand on a very personal level why it is so hard. It’s so difficult to find someone who will raise your child the way you want to raise him. Everyone we’ve considered has positive and negative characteristics and it’s so easy to rule someone out because they’re not perfect. As I’ve told my clients in the past, no one can replace them, they’re only able to choose the best option in the worst circumstance.

Parenthood has given me a new perspective and while I’m proud of that third party, objective view, I hope it’s given me an opportunity to better understand the families I work with and the difficult decisions they must face when forming an estate plan.

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Who Has the Power: Attorneys-in-Fact, Personal Representatives, Guardians, and Trustees

Estate planning can be complicated. In addition to different ways to structure a plan, multiple people can be involved. Most of the time, the people making decisions within the different documents are the same person. However, they don’t have to be. As such, it’s important to understand what the different positions and documents require.

Attorneys-in-Fact – This person can also be called an Agent, but it’s the person acting through a Power of Attorney. Their power either begins immediately or when a person is no longer able to make decisions for themselves. However, this power ends with the person creating the document (also known as the principal) dies. The attorney-in-fact can have many different responsibilities, but I generally divide it into two categories. The first being responsibility over the principal’s assets which remain in the principal’s name and legal decisions. The best example of this is generally making decisions over insurance policies or retirement accounts. They must use these assets for the principal’s benefits. The second category is medical decisions. The attorney-in-fact has the power of what treatments the principal should receive, may sign off on medical waivers, and will make the final decision on end of life treatment.

Personal Representative – Previously called an executor or executrix, this is the person acting under an individual’s will. When acting as a personal representative (or PR), that person will have to locate the will and deliver it to the probate court. They will then be responsible to the court to determine what assets must pass through probate with an inventory and accounting of those assets. The PR will have to determine what to do with assets, pay any creditor claims, and is responsible for all filings submitted to the court. At the end of the probate matter, the PR will also be the one who divides the estate to any beneficiaries.

Guardians – For many families, this is the most important role. This is specified in the will and is vital for determining who is responsible for minor or incompetent children. The court has the final decision on who a guardian will be, but a parent’s will and wishes are often respected.

Trustees – A trustee is the person responsible for enforcing the terms of the trust.   Essentially this means that when the principal is no longer able to make decisions (or chooses not to), the trustee will take control of any assets held in the trust’s name. At that point they will use the assets for the person who created the trust. When the principal passes, the trustee will be responsible for either distributing the remaining assets to the beneficiaries or managing the assets for the beneficiaries. This position can last for multiple years and generations.

All of these roles require a person to act in the best interests of the principal or the beneficiaries, but there can be very little oversight. A lot of responsibility and power comes with attorneys-in-fact, personal representatives, guardians, and trustees and there is definitely the ability to abuse the power. As such, it’s extremely important to choose the right person for each role and most importantly choose someone who can be trusted.

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Questions to Ask Your Estate Planning Attorney

This week I had the benefit of sitting through four hours of information regarding the taxation of IRAs. I call it a benefit very intentionally. It’s a benefit for me and a benefit for my clients. Now, I am not a tax attorney or a CPA, but taxes and knowing IRS law and regulations directly affect how I draft documents and advise my clients to list their beneficiaries. Those decisions are extremely individualized and often is a discussion with the client and their tax or financial advisor, so unfortunately, you’ll never see a discussion of those issues here. However, it made me ask what the estate planning attorney you are working should know. As such, here are some questions to ask your estate planning attorney before working with her:

  • How do you charge? What other fees should I expect?
  • Will you work with my other financial professional? Are there additional fees for doing so?
  • Do you fund a trust for me or help me change beneficiaries?
    • I always send my clients away with homework, whether there is a trust involved or a just a will, my clients often will need to update a title or beneficiary. Some attorneys will do this for their clients (generally for an additional fee). If you know you will not do these things, I strongly recommend finding an attorney who will do this. However, if you are cost conscious, then an attorney who doesn’t do this may not be important.   No matter what, I would still recommend hiring an attorney who will advise you on titling and beneficiaries; as well as one who will follow up to ensure you have changed appropriate titles and beneficiaries.
  • How often will you contact me?
    • Tax laws (among others) change every year and you don’t want to be the one responsible for knowing if those laws change and if they affect your plan. I would recommend an attorney who will at least talk with you once a year to determine if an update to your plan is necessary.
  • How often and how many wills/trusts/estate plans do you complete a year? How do you stay current on tax law?
    • The number of plans an attorney completes a year directly relates to their incentive to stay current on law affecting those plans. So while an attorney may have done hundreds, if they only do a few year, are they really knowledgeable of the current law? I know many older attorneys who do not advise beneficiary designations in the most advisable way because the law has changed since they last actively practiced.

You should be comfortable working with whomever you hire and this needs to include communication, knowledge level, and expectations. Know what you and your professional expect from one another at the beginning and your estate plan is much more likely to be what you expect and want. Hopefully, these have made you think of your own questions for any attorney or any financial professional you are looking to hire. In the end, remember, the decision is your and you are the client.

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But I Already Have A Plan: When to Update Your Estate Plan

Unfortunately, you might have already formed an estate plan, but that doesn’t mean you’re done. At least once a year (often times more frequently), I check in with clients to make sure their plan has actually been implemented and that nothing needs to change. If you’ve already signed your estate planning documents here are a few times it might be worth calling your attorney to make sure nothing needs to be updated:

Assets – If you have had a large change in wealth or assets since you’ve first set up you estate plan, it’s probably time to review. A change in wealth could mean you need to re-evaluate your beneficiaries, trustees, distributions, along with any changing tax laws that may now apply. Even new assets may warrant a phone call to ensure they are planned for and, more importantly, titled properly.

Moving – This goes hand in hand with new assets, where a new home title should be reviewed to make sure it is done correctly and consistently within your plan. However, if changing states, an estate plan should also be review to make sure state laws don’t require different documents or in case a state estate tax might apply.

Time – Over the years, lives change and as they do it’s important to make sure an estate plan changes with them. If children grow up, distribution ages or events might need to be altered. Trustees or other people named in documents might not seem like a wise choice anymore.

Family Changes – Along the same lines, families change dramatically as well. Distribution ages, structures, amounts, etc. all need to be reviewed as family dynamics and life shifts over the years. Specifically, I would recommend a review for any of the following events.

Divorce – Unfortunately, this is a common family change. Provisions may need to be made or changed if a person needs to be removed from a plan or even if a new structure is necessary to prevent interference with a person’s wishes.

Death – Losing a loved one is often hard enough without thinking about the legal consequences, but eventually documents need to be updated to reflect the loss.

Births – While many documents provide for a later born child, I still recommend a review and an update when including new beneficiaries to avoid unnecessary complications later.

With that being said, my husband and I will be taking the time to review our own plan as we look forward to the birth of our first child in June. Have you recently looked at your documents or had a big life change? Take a moment to consider if you might need a review.

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Take Control Through Estate Planning

I recently had the pleasure of sitting down with Chris Finny from the Finney Law Office. As Chris was explaining how he helps individuals through difficult events in their lives (car accidents, getting hurt on the job, medical procedures gone wrong) I noticed a common theme. Yes, Chris’s clients have been injured in some form, but the bigger more lasting effect is that they have had control taken away from them. Maybe that’s control of their body, their ability to earn a living, or just the management of their finances. Unfortunately, as I learned from Chris, those who have gone through a personal injury case know how quickly they can lose the ability to make decisions. But through effective legal planning, some of that lose is preventable.

I want to suggest some basic documents everyone should think about, so that if you do experience an injury of that type, your wishes are still the ones that are being considered.

First is a medial power of attorney and health care directive. This allows you to set out your medical wishes if you aren’t able later to communicate or enforce them. It also gives you the power to choose who will help enforce those wishes.

There’s also another power of attorney to cover your financial and legal decisions. I truly consider this one of the most important documents of an estate plan and would highly recommend everyone of any age to have one. Again, in this document, you get to choose who handles your finances and makes decisions for you or your family if you’re not capable of making your own.

And of course, don’t forget about the will. While this is the document where you get to override state law and say where your possessions go, for parents it’s a lot more. This is the ONLY legal way to have a say in who will take care of your minor children.

But if you really want control, a trust really is the most effective and detailed way to do so. A trust gives you the ability to make detailed decisions over your finances and beneficiaries, even allowing you to make sure your beneficiaries cannot touch their inheritance until an age or event you decide.

Without these documents, those left to take care of you will have to go to court to earn those rights, and the court has the final say on who will be making decisions for you. So whether you’ve been involved in a personal injury case or just know it can happen to anyone, take some control now and consider your estate plan today.

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You Get Nothing… For Now: Ways to Plan with a Trust

The main reason my clients use trusts are to allow the beneficiary or beneficiaries to receive the use of the assets, but have someone else make the financial decisions. This may because they are minors or there are other circumstances why the beneficiary should not have access to money. The situation directly relates to how the trust document is written, whether the assets remain in trust forever or if they are given to the beneficiary upon some specific event.

If you have or are considering a trust I would consider the following things to determine when to give the beneficiary control of the assets:

  • Why is a trust necessary?
  • Is there ever a time or event that would ensure the beneficiary is responsible enough for the assets?
  • Do I care if the assets are used in a manner I would not approve?
  • Am I concerned about a spouse or future spouse potentially being involved with the assets?
  • Are there events in the beneficiary’s life that should be encouraged through a gift?
  • Are there events in the beneficiary’s life that I want to celebrate with a gift?

As I’ve been drafting trusts I’ve come across many different times when a client wants to give the beneficiary control of the assets. These are a few of my favorites and the most common:

  • Graduation from school
  • Marriage or Holy Orders
  • Specific ages (25, 30, etc.)
  • No drug use for 5 years
  • No felonies
  • Employment

These are just a few of the clauses I’ve drafted and come across, but the list really is unlimited. What controls would you put in a trust for your beneficiaries?  Share at www.facebook.com/burkhardtlaw

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Do You Know What You Want? Preparing Your Estate Plan

This weekend I had the pleasure of my sister coming into visit and spending a lot of time with two of my youngest nieces. Watching my siblings and listening to them take care their children really reminded me why I got into estate planning. New parents plan for every need their children have and estate planning certainly falls into that range. As children grow, necessities change, but the need for estate planning doesn’t. This month I thought I’d share some of the considerations I suggest to my clients as we’re preparing their estate plan:

1 – How old are your beneficiaries? If minor children receive $15,000 or more, there must be an adult in charge of the assets for them. Who do you want that to be? Minor children need guardians. Have you thought about who you trust with the wellbeing of your children? If your beneficiaries aren’t minors, are they responsible enough with money to receive your entire estate at once?

2 – Do your beneficiaries get along? If they don’t, do you want one of them to make a decision? Would it be better to have a third party like a trust company make decisions? Even if they do get along, will one beneficiary be put in a tough position if they have to say no to another beneficiary?

3 – Is college or another life event important to you? Trusts allow you to give assets at different times in the beneficiary’s life. You can give a distribution earlier if they receive a degree, get married, or really any life event that you want to encourage.

4 – Is it likely they will contest your estate plan? If so, you can prevent them from receiving anything if they challenge the plan.

5 – Are there any other beneficiaries or charities you would like to include? I always set up a list of contingencies is an estate plan to ensure if something happens quickly or all at once, there is at least a backup plan in place. Think about what you would want to happen if your original beneficiaries aren’t able to accept your assets.

6 – Who do you want to make decisions for you? Powers can be divided, but generally I recommend one person being in charge of all the finances and possibly another for medical decisions. Location, age, and ability are all important considerations. Again, I recommend having a backup plan, with at least one, but often times, two contingencies.

There are plenty of other things to consider as well, but generally this gives you a good idea of where to start before talking to a professional. With these basic things in mind, it’s possible to determine what type of estate plan is right for you and your beneficiaries.

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Your Online Estate Plan

Recently, a friend and owner of an IT company (Michelle Herring of CMIT Solutions of St. Charles and Chesterfield), passed along a question she encountered. What do people do about their online accounts when estate planning?

First, I just have to say, I loved that she mentioned this. In a world where more and more of our world is online, it’s a real problem. Even for older families this presents a real issue. Mom now does all of her banking online and doesn’t receive paper billing. How do the kids know what bills are due and what’s already been paid? For those of younger generations constantly on Facebook or even LinkedIn, what happens to those accounts?

Unfortunately, this is the new frontier of estate planning, meaning the laws haven’t caught up with reality. Many (if not all) of the online accounts you use require you to accept a user agreement stating you will be the only person using the account. This means you’re technically violating your agreement with that company if you give another person your password.

Even more of an issue, many online entities have no set policy (and certainly not consistent across companies) of what happens after a user passes: Is a court order required? Can a trust access the account? Does a power of attorney give access?

Few websites truly plan for their user’s eventual (and guaranteed) non-use. There has been discussion that some online entities will or have settings that allow you to give another person access to your account if you don’t log in within a specific amount of time or other forms of estate planning within your online account. After some searching, I could not find these settings in a few of the bigger sites (feel free to share if you do).

So what do you do? There are a few options. Some practical and some not. First and probably the most “legal” (but also probably the least practical) is to keep a list of all your online accounts, so your estate can contact the company and follow the given procedures of that company (if there are any). But really, who has time to create a list and then the hassle of your estate trying to contact and comply with several (plus some) different companies.

Another option is to create a list of all of your accounts and passwords. Either written somewhere or in a document. Hopefully, you can figured out why I don’t recommend this. While it gives your estate access to your accounts, it may inadvertently give access to others as well.

The best solution I’ve seen so far (also recommended to me by CMIT Solutions… seriously, check them out) is to use a password storing cite such as LastPass or KeePass. These applications are secure mobile databases that allow you to store your passwords online on an encrypted site. Essentially, you only have to remember (or share) one password and you have a list of all your online accounts with the passwords. An added feature of LastPass (I installed it over the weekend) is that you don’t have to manually enter the list. As you visit the websites, LastPass will give you the option to save the site and the password.

All of these options have their downfall, but no matter how you plan for your online world, it’s important to consider and plan for as well.

Burkhardt Law Firm

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