Estate planning is never a once and done process and nothing highlights this more than someone who has failed to update their materials after a major change in their life. Your estate plan should always be reevaluated with any significant life changes such as divorce, a new marriage, births or other developments. Updating your will should always be a priority.
All of your documents including your life insurance policies and your wills should be evaluated carefully after these major events. If you fail to do this, for example, after a divorce, your spouse still could maintain the legal ability to make decisions on your behalf or may even inherit assets you did not intend for them to have.
Estate planning is your set of legal documents that spells out who gets your assets when you die as well as who is responsible for making critical medical decisions and financial decisions on your behalf if you are unable to do so.
Ideally, your estate plan will make things easier for your heirs if you suddenly pass away but your contingent beneficiaries on life insurance policies, retirement benefits and more, all need to be updated when you have big changes in your life, especially if your current spouse passes away. Divorce and the birth of a child are other major life events that should prompt you to update your estate planning materials with a lawyer.
A recent study completed by Accenture estimates that between $1 trillion and $3 trillion will be transferred to beneficiaries each year through 2050. Many people, however, may not be equipped with the appropriate way to handle such an inheritance. People may be questioning what they should do next after their life has been significantly changed.
There are emotional considerations to factor in as well since this is different from a winning lottery ticket and that the gift has been handed to you by someone who is no longer around. Many families have conflicts about how the money should be spent. Fights with siblings can lead to future problems. To avoid family conflicts, intergenerational meetings can be held prior to someone passing away in which a parent articulates their final wishes. This allows advisors to be the person intervening in family strife and minimizing conflicts after the fact.
There are four primary categories that should be considered by anyone who may be inheriting a significant amount of money. These include:
• Safety, such as insurance, personal transportation, medical expenses and home repair.
• Fun, like dinners and vacations.
• Future, such as money that will be untouched for a minimum of five years in investments.
• Cushion or cash for true emergencies.
Another optional category for some people may include gifting to charity. Talk to an estate planning lawyer to figure out what’s right for you.
Far too many families avoid talking about the process of estate planning and many people don’t even have a basic will. Problems may emerge when people are suddenly thrust into a position of managing someone’s care or organization of documents after an incapacitating event or death. Far too many people don’t realize that they are anticipated to be the primary caregiver for their aging parents.
Taking care of parents in old age can be an unexpected surprise that interrupts your savings. A recent study completed by Bay Alarm Medical showed that 55% of parents anticipate that their children will be the ones caring for them. This could lead parents to avoid taking on critical planning opportunities such as purchasing long term care insurance, relying on children instead.
But an adult child who does not know that he or she is going to be asked to step into this role will have significant disruptions in their life. These parents anticipate that their adult children will take care of them financially and physically. In certain areas of the United States, adult children were less likely to realize that they were the ones responsible to step in in this role.
For example, in the Midwest, only 36% of adult children anticipated that they would be the ones caring for their aging parents. Sitting down and talking through these difficult topics with your loved ones can make it much easier to navigate problematic situations as they emerge.
An estate planning lawyer can help you accomplish your own estate planning and see what options are available for helping your aging parents.
As many people approach the subject of estate planning, they put together critical documents to pass on their assets after they pass away.
However, they may neglect the necessary planning tools and insurance policies that could be used for long term care planning. Considering the possible need for long term care is something that everyone in the United States could benefit from. However, for many people, Medicaid may be their only source of payment.
Medicaid qualification is required, which means that many or most of the person’s assets will be lost during life or after death if they don’t take advance planning opportunities. Decisions must be made early regarding the transfer of your assets in order to avoid triggering the Medicaid look-back provision.
Decisions regarding asset transfers are never easy and should always be discussed directly with an experienced estate planning lawyer. Many people can anticipate experiencing some form of mental or physical decline and needing assistance in the form of long term care.
Right now, 40 million individuals are over age 65 and one-quarter of those are expected to live beyond 90. 10% are anticipated to live beyond 95. This makes the importance of estate planning and long-term care planning something that everyone should carefully consider.
James Brown passed away on Christmas Day in 2006 and yet disputes surrounding the settlement of his estate are still winding their way through the courts. Numerous different individuals have come forward to file disputes ranging from whether or not his widow may have truly been his wife and whether any copyrights for his songs were included in what some allege are illegal backroom agreements.
Several suits have also been brought forward by people who can test the will and won by a person who thought they should have been appointed as the estate’s trustee. James Brown’s will had $2 million set aside to underwrite scholarships for his grandchildren and to distribute his household effects and costumes to the six children he recognized before he passed away. However, after the will was challenged, the initial attorney recommended a settlement that was ultimately overturned by the Supreme Court. In that proposed settlement, the grandchildren and children would have received a quarter of the estate and the widower would receive another quarter.
The Supreme Court however, felt that this involved a dismemberment of the estate plan that James Brown put together. The value of the estate itself is also currently in contention. Some believe that it is less than $5 million but others have given estimates that all of the materials included in the estate and his assets articulated clearly in the will could be worth more than $100 million. The bulk of the value comes from the copyrights that he owned as the songwriter. If you would like to avoid challenges in your estate and give your family a clear plan for how to protect your assets in the future, set up a consultation with an experienced estate planning lawyer.
One of the ways to make the most of an inherited IRA is to use what’s known as a stretch-out approach. Some people make a common error of naming their own estate as the beneficiary of their individual retirement account.
This means that rather than going to a person who could benefit from accumulated wealth over time and reduce taxation, your estate puts this in the position of passing this on to your beneficiaries in as little as five years, which can become problematic for you as well as the beneficiaries if you are not careful about it.
A stretch-out approach is one thing to consider and contemplate as you go forward with your estate planning. This allows you to let your beneficiary stretch the length of time over which they will eligible to collect money from an IRA. This means that more growth can accrue overtime without income taxes chipping away at it.
When you use a retirement trust and other powerful estate planning tools, the result for your beneficiary can be a long term and big inheritance, even if you believe that your IRA only has a modest amount inside. Working with the right estate planning attorneys is critical for identifying an IRA approach that has your best interests and your loved ones’ best interests in mind.
Taking care of a loved one who has special needs is a primary concern for all of the immediate family members. Trusts and especially special needs trusts may be a powerful strategy used to ensure that your family member has the support he or she needs without being disqualified from critical government programs such as Medicaid.
Usually, the rules for a proper special needs trust mandate that trust assets cannot be used for anything that a government program could pay on behalf of the disabled beneficiary such as long-term care, shelter and food. Usually, the trustee of a special needs trust could pay for home furnishings, vacations, extraordinary therapy, recreation, vehicles and the like.
In order for a special needs trust to effectively accomplish this objective to avoid disqualification from supplemental security income or Medicaid, there must be clear and specific requirements and language outlined in the trust. Inclusion of a wrongly permitted use of funds could eliminate all of the protections on which the special needs trust was founded. This is why it’s always important to sit down and draft these documents directly with the help of an experienced estate planning attorney, who can walk you through every aspect of what the language means and how that is likely to be interpreted by the government.
Scheduling a consultation with an estate planning attorney who has a track record of thoroughly reviewing the individual situations of a special needs beneficiary in order to come up with the right tools is extremely important for the future of your family member.
Most people are aware that estate planning has benefits for everyone, but it is especially critical for seniors. Do you already have a power of attorney? What does it cover?
If your document is outdated or if you never created it, now is the time to revisit. You might be able to use a few different types of power of attorney, especially if you expect that your life plans may change and evolve in coming years. For financial and healthcare reasons, naming someone else may help you.
Although a basic estate planning might bring to mind a will, powers of attorneys should also be included in your plan. If your will was generated many years ago, there’s a high probability that things have changed. You might be missing current grandchildren, for example.
There are two different types of powers of attorneys that should be included in your basic estate plan.
The first is for healthcare decisions to allow someone else to step in and make medical choices on your behalf if you are unable to do so.
The other most common type of power of attorney is a financial one, that enables someone else to keep your family’s financial life moving forward and paying your bills if something happens to you.
You may wish to use other documentation and strategies as you put together your estate plan, but it is important to remember that these should all be created by an experienced and dedicated estate planning lawyer in Massachusetts.
Many people are interested in setting up a living trust and this can be a valuable estate planning tool. Many people are also curious about whether state and federal taxes would be due on earnings that are based on the assets inside the trust. Revocable living trusts are a powerful estate planning tool that are primarily used to avoid probate.
Probate is the court process that follows someone’s death. Unlike many other kinds of trusts, revocable living trusts do not initiate special tax treatment. The individual is still considered the owner of the assets so that person would be responsible for reporting income and earnings on the individual tax return just as they did previously. Revocable living trusts, therefore, do not receive particular or special tax treatment. Revocable living trusts are designed to avoid the headaches and expenses associated with probate, not of the estate tax system in and of itself.
Living trusts could have various provisions that could be used to minimize estate taxes such as language that initiates a bypass trust upon death but these are the same kinds of provisions that are often included in many different types of wills. To schedule a consultation with an estate planning attorney, take action today. There are many tools available to you to help you plan ahead for taxes.
Many times, people think very specifically about the physical objects or other items they intend to pass on to their loved ones but if you forget about intangible assets, you could be depriving your loved ones of something they cherish greatly.
Your values, wisdom, important family traditions, stories and beliefs can all be articulated in a letter to your loved ones. Your possessions are not the only representations of your life.
It’s hard to include everything in your overall asset list- it often takes people days and weeks to come up with a comprehensive one because they own so many things, and many of these intangible items haven’t been clearly outlined in a will.
Your intangibles might not have significant monetary value, but it’s impossible to assess a cash number for what these might mean to your loved ones. That’s why they are well worth protecting.
Whether you decide to take on a big project like producing an autobiographical documentary or writing a memoir, or keep your documentation process relatively simple with a short letter about your feelings and principles, this information can easily become a very valuable piece of your estate. Your loved ones wish to remember many different things about you. These representations of your heritage, life journey and your thoughts can be extremely important to family members working through the grief process. They can even become the foundation upon which your family members build their lives.
As you develop a plan for your more tangible assets in the process of estate planning, do not neglect your legacy and other items that you wish to pass on in the form of your thoughts, feelings and hopes for your loved ones. Talk to a Massachusetts estate planning lawyer to learn more.