Written by Robert T. Nickerson
It's now 2019. We like to see January 1 as the beginning of something good. This is the time to look into the clutter and figure out what needs to be cleaned up and up to date. One of those things should be your estate plan. Even if this is something that can't be done today or tomorrow, when is a good time to do this. Here are five easy things you can accomplish to have a better ease of mind for your estate plan.
1. Sign your Estate plan.
You'd be surprised by how often a lot of people put off something simple as using a pen to make the estate plan official. Perhaps now is a good time to give your attorney a call to get that out of the way. Let's give you a situation; someone close to you has just passed away. You'd probably get into contact with whoever did your estate plan to ensure that everything was good to go for their plan and yours. Any will and trust attorney will be able to meet, discuss, redraft, and finalize those ideas, get it down on paper, and be ready for you to dot the line. All you'd have to do then is sign and you could better in a better state of ease.
2. Call Your Attorney if you have nothing planned
Now is the best time to look through your local directory or even Google search to figure out how to serve your needs the best. Yes, getting around to making these decisions can be difficult, but it's better to tackle the stuff now rather then face a flood of problem in the long run.
3. Be sure your have the right successors on paper
If you do have something prepared, you may want to get them out the check and see if the people set to run your estate are still the people you want. This also includes personal representatives, doctors, lawyers, and anyone else you see playing a key figure. You want the right people making the right decisions if something should happen to you.
4. Think about your beneficiaries
Did you name your spouse as a beneficiary? What about your brother or your sister? Your children maybe? Just somebody that you want to receive something? Now is the time to look into your bank and retirement accounts to see who is a confirmed beneficiary as what you have down on an estate plan may not be in sync with your financial department. Make sure that your institution is aware of who you want as a beneficiary.
5. Write a digital asset instruction letter
Law offices typically have this form and your attorney can help write one with you. In this day and age, people use Facebook, Instagram, Snapchat, and a variety of types of social media, along with the login information for other useful websites like banking, health care providers, online shopping, and more. If your one of these people who like to stay connected, then you should let the people you want to have a way to gather that information of usernames and passwords once your gone. You'll have to decide that if you have an Instagram account whether you want it closed or not once your gone. If you figure this stuff out in advance, your family and friends will know what their supposed to do.
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Written by Robert T. Nickerson
How may of you recall the famous Elmo & Patsy Christmas novelty song "Grandma Got Run Over by a Reindeer"? The one where a drunken grandmother abruptly leaves a Christmas Eve party, gets run over by reindeer belonging to Santa Claus and the family still tries to go on with their annual holiday festivities. A good question would arise; what would be the legal consequences from this odd tragedy?
Here's some other details not in the song. Grandma is taken to the hospital where she is unconscious, has shattered ribs and a broken hip. The doctors declare grandma legally incompetent. So how would the family go about with her estate plan in this Christmas Eve? Here are a few options.
The first option would be that grandma never had a health care plan ready to go. This means either the issue was never addressed in a will, or one was never drafted. Grandpa is told that he cannot bring his wife home as he has no legal authority to make any decisions for her. He instead would have to go to probate court to make his case about being her power of attorney. This will make the process time consuming and very complicated. Even if an emergency temporary guardianship was made, there would be no way for grandma to come home in time for Christmas. It can take many months and thousands of dollars for grandpa to sign and finalize a guardianship. Since grandma never made a Durable Power of Attorney, grandpa wouldn't be able to take money out of her account to pay for her care. Grandpa would have to go back to probate court to file to become a legal conservator, file again for a financial plan on how to spend grandma's money and even permission to be protected from a Medicaid lein. So with the thousands of dollars putting financial stress on the family, what would grandpa do? Sue Santa Claus of course. But even with a potential settlement, grandma would have still needed to put it into a trust. You wouldn't be able to image the estate taxes needed to play without a shelter. What a Christmas, huh?
The second option is that grandma got a health care proxy so that grandpa is able to make legal medical decisions. With some smart choices, grandma is able to come home for Christmas. She'll need some care, but she'll still be there with the family. At the same time, an ambulance chaser is tying to persuade grandpa to make a big lawsuit against Santa. Grandpa doesn't want to sue Santa, but the medical bills are high and isn't sure that he'll be able to pay for them. Though he considers going through with the lawsuit, he finds something better. Using grandma's power of attorney, grandpa is able to take money out of grandma's account in order to pay for those bills. He's also able to use that money to hire a proper attorney to protect their assets and still use their medical coverage. Grandpa ultimately never sues Santa. He and grandma had an estate plan and will have a happy holiday even if she did get run over by a reindeer.
Be sure that your family is protected.
Santa Claus is coming to town and Christmas is in full swing. A time for joy, a time for holly, and of course, a time for family and getting together with them. There are a lot of things to bring up with them. Perhaps it's time to take the opportunity to build a new or update an estate plan and talk to the family about it. According to a recent CBS article, "Our Families: The Important Papers", in the event of an unfortunate event, the best gift you can give is an ease of mind by making sure your financial and legal affairs are prepared for the ones you love the most.
If you need assistance or have questions, we are here to help. Call us at (951)-200-4921
So what needs to be done?
The first and most important thing to do is to gather all your personal and important documents. They need to be placed in a secure place (a safe or a locked file cabinet) Along with them should be a list of people and contact information. This should include close family, physicians, and attorneys. And of course, you should create a set of instructions on where this stuff can be found and distribute it to those you want with that information. Having someone else that can get to this will make it easier should something happen.
Ensure Your Wishes will be followed & are up to Date
If you don’t create a Will or a guardianship for your children, the state has a plan, but a complicated one. The family will end up with a lot of red tape and bureaucracy. If something should happen to you or you become incapable of making decisions, you don't want your children to be placed in custody of relatives you don't trust or the wrong people in general. Think about people who you think could be good backup parents. You may want to check your will and estate plan to be sure the people you have on paper are still the same you want with that responsibility. If it's been more then three years, you may want to check with your attorney.
Plan Your Legacy
If your children are very little, their already going to want to know a lot from you and about you. Memorializing your legacy will play a big part of a will or estate plan. Think outside the box of a traditional setup and give a present of a legacy video or letter. Your own words and passion will be something that your family can cherish forever.
No one can love your family like you can, so be sure that your wishes are reflected and can be legally enforced. Contact a professional that you know can handle an important matter.
For more information, give our office a call and we can help you plan your legacy.
Written by Robert T. Nickerson
No one ever said that the process of divorce was going to be easy. It require an amount of time to pick up the pace, but for woman, they can be targeted as the most affected financially. As said in a report by the UBS Global Wealth Management, about 56% of married women rely on their significant others to deal with financial arrangements and investments. Because of this, it's easy for many women to feel overwhelmed during a divorce.
Emotion will cloud a lot of more rational decisions that need to be made. It's important to stay focused on maintaining certain issues. This includes making financial choices, especially if you still have children, regardless of age.
There are a lot of other problems that will arise, such as custody and property distribution that'll require immediate attention. The future and your plans for it are just as important and also need to be looked into. It's never too early to approach to deal with this task that's often pushed aside (do it for your children). So here are some good pitfalls to avoid that many divorcing people do.
1. Not Reassessing Their Current Will
Now that your no longer married, you'll have to look at your old will to see what needs to be changed. This applies to assets and an update will reflect that. If your significant other was a beneficiary, then that will need to be changed to avoid trouble in the long run.
2. Not Looking Again at Your Children's Guardianship Plan
None of us like the idea of seeing someone else raising our children. However, this is crucial in order to plan for the worst. If a guardian is not selected, it's hard to tell which person, even if their close, would acquire custody of the kids of you were to die. If your husband had made a guardianship plan before, it may be a good time to rethink that. The previously chosen guardian may be a former spouse's family member or a close friend.; someone that your no longer confortable with. Your now in a position where only you can make that decision. This is something that needs to be decided on before something should happen to you. If you don't want that person to be a former spouse, you need to find someone else immediately.
3. Not Planning for All Assets
Chances are, you may be awarded a portion of your former spouses deferred savings, like a 401, IRA, or some other savings plan. Many divorced woman are not aware with how many assets they had when they were married.
Once you have a better look at your fair share, it's needed in order to plan the exact amounts for your beneficiaries for those assets, which is already a crucial part of your estate plan.
4. Failing to Incorporate Trusts Into Their Estate Plan
You never know what's going to happen and trusts can help prepare your assets in various situations, especially if you have adult children. For example, your adult children may have credit issues or their own divorces. Having a trust ready can guarantee that your cash will still go to whomever you want it to go. Trusts can even be used for other things like postponing distribution until your children are eighteen.
5. Failing to Plan at All
The single biggest mistake someone can make is having nothing planned at all. According to a 2016 Gallup poll, Nearly 60% of Americans don't have a will or an estate plan in place. There's a lot of people that believe that their assets will automatically go to their next of kin, which is untrue. Unless if something is set up, the assets will go into probate, which is a timely and costly process. This will set up your children into spending a lot of money in order to see any of those assets. All this will do is cause more pain. While various states have their own probate laws, most are left to either receiving little or no assets at all. It's always important to have an estate plan in place, even if that’s not on you mind.
6. Not Seeking Help from a Professional
A lot of woman who are unfamiliar assume they can do it by themselves. A financial advisor who understands estate planning can be valuable during this time. It's also advised that you seek out an experienced lawyer who specializes in estate planning. Avvo and Justia are good places to begin looking and can even narrow your search based on your location and needs. Without a professional, this could make you overlook area you could benefit from.
Stan Lee, the creator of Marvel Comics and several superheroes like Captain America, Iron Man, Hulk, and Spider-Man died with a lot of problems left behind. Not even Spider-Man can untangle this web.
The 95-year-old former publisher and chairman had a lot of problems, wren with his surviving 68 year old daughter J.C. Lee. His wife of 70 years died in July 2017, was accused of sexually harassing his home staff and nurses, and around 1.4 million dollars when missing from his accounts. He accused that some of the money, around $850,000, was misappropriated to buy a condo.
During this time, he had developed relationships with business advisors and attorneys and broken up with them. To quote from an interview with the Dailey Beast, "I learned later on in life, you need advisors if your making any money at all", adding that he did little money management in the beginning of his career. He also said, "But then, a little money stared coming in, and I realized that I needed help. And I needed people I could trust. And I had made some mistakes. And my first bunch of people were people that I shouldn't have trusted.
Estate Planning can be a hard, nerve wrecking process with a lot of emotional decisions needed to me made. Whether he had a will or trust in place in uncertain. Several late celebrities such as Prince and Aretha Franklin failed to plan, forcing their families or beneficiaries to deal with the complicated court system. This alone can take years to figure out a solution.
For most normal people, estate planning is uncomplicated. There are some rules that everyone planning their will or trust should understand. This includes disability or incapacity, re-considering beneficiaries, and composing defining documents (like a power of attorney).
Making a plan is one thing. Keeping up with it and making sure it's updated as the person in question can be more difficult, as natural decline in cognitive happens, or at least someone in the family or business world accuses them of so. Unfortunately for Stan Lee, the Marvel Comic creator had been a victim of similar accusations. Back in February, he signed a document that said his adult daughter spent too much money, had been yelled at and made acquaintances with three men who had every notion to take advantage of him, the Hollywood Reporter said. Once the document was notarized, Lee vetoed the piece of paper. It's best to communicate with the whole family so that a similar situation doesn't happen with yours. Seniors become less self-reliant, and it becomes easier to get inspiration from people that may have other intentions. It's much easier to set up a plan for the long run.
It's likely that Stan Lee's family will have to deal with the numerous documents flying from several places, thanks to his years of relationships and business enterprises he originated. This could result in many people coming forward to claim "I'm supposed to be here for this" or "I was promised this thing from Stan Lee".
Even if your not a millionaire or made a bunch of superheroes should be willing to prepare for tomorrow. When working with financial advisors, money managers, and attorneys, here are some questions to consider asking;
With the baby boomer generation about to transfer most wealth into Generation X and Millennials, many are figuring out how to initiate the movement of their original property to their children and any other trustees.
While some assets like money, bonds and stocks are common and rarely a problem, physical property like homes, art, and gold can be more complicated. As people don't usually keep track on record about their assets, it's worth is either dated or not even known. Family members often have different ideas on what next steps to take. They don't even know how to have a sit down to figure it all out.
Because of this notion, these physical effects are overseen, even with it's potential worth. Like with stock and bonds, certain assets require a plan that starts with decision makers, advisors, and possible outside sources. In order to figure out the course of action, here are some questions to answer.
How Much is it Worth?
You need to come across a market value of a piece of property, no matter if you want to pass down the asset itself or profit some the sale of it. This is the root for a lot of plans, because it attaches a locked number for something that could have changed in value over time.
For example, lets say a collection of gold coins was worth around $20,000 when it was appraised. Calculate an additional thirty years of time, making it somewhere around $90,000 once its owner is ready to retire. Not only is it important to get an idea of its current worth for insurance purposes, but also with estate planning, ensuring accurate details that won't become a problem in the long run.
When the time is right, check your local listings for a professional appraiser, especially for material like art or anything can be seen as collectable. Believe it or not, there is a financial risk to setting values that could evolve into something bigger. Do simply go to Wikipedia or a free online guide written by a college-aged troll who may not understand apprising, due to misinformation.
It is essential to find an appraiser who is certified by accredited organizations, such as the International Society of Appraisers or The Appraisers Association of America. It's more important for a large accumulation; the price of an appraiser is worth it in the long run to understand value and how that could impact an estate plan.
Who Wants It?
Going further then property value, we have to consider it's emotional or nostalgia value. Consider something like a vacation home that may have a strong attachment to you, it may have a bigger connection your children who had a lifetime of memories there.
In the case of multiple beneficiaries are going for the same asset, you'll need to think about how it can be split up. If an agreement cannot be made, then you'll have to figure out how to divide your other property to make up for it. In a lot of cases, it may be easier to organize a buyout situation that would legally transfer ownership to the trustees what desire it.
Remember that markets for physical assets can be periodical, so time is also a factor for the marketability of a sale. Going back to the summer home, let's imagine that the beneficiary was given the home by his grandparents. The one who designed the home may have been a friend and though the grandson know it was valuable, but had no idea of it's worth. It's possible that the designer was popular and it's appraiser knew it was more worthy then expected. In this case, the grandson was able to sell it in a good market and generate a higher number of liquid assets.
How Can it be Passed on?
You have a number of options to pass on physical property. It's usually the better choice to allow a beneficiary to inherit the asset. That asset will receive a boost in cost that can help with the capital gains tax burden, even if its sold. It's also doable to put the property into a trust, a family partnership or an LLC and set the ownership of it in an efficient way for taxes, saving more in later estate taxes. In the worst case, if you don't feel like you can trust your heirs to take on that responsibility, then you can sell it yourself, pay the tax, and hand it over as a liquid asset.
Because of the emotional stress of deciding physical assets, families will often put off this conversation until it's too late. But ignoring these things can create problems in the long run. Talking about these plans can make the process easier once the time comes.
No one likes to think about the possibility of their own disability or the disability of a loved one. However, as the statistics below demonstrate, we should all plan for at least a temporary disability. This issue of The ElderCounselorTMexamines the eye-opening statistics surrounding disability and some of the common disability planning options. Disability planning is one area where we can give each and every person and family we work with great comfort in knowing that, if they or a loved one becomes disabled, they will be prepared.
Most Individuals Will Face At Least a Temporary Disability
Study after study confirms that nearly everyone will face at least a temporary disability sometime during their lifetime. More specifically, one in three Americans will face at least a 90-day disability before reaching age 65 and, according to the definitive study in this area, depending upon their ages, up to 44% of Americans will face a disability of up to 4.7 years. On the whole, Americans are up to 3.5 times more likely to become disabled than die in any given year.
In raw numbers, over 37 million Americans, or roughly 12% of the total population, are classified as disabled according to the 2010 census. Perhaps surprisingly, more than 50% of those disabled Americans are in their working years, from 18-64. For example, in December 2012, according to the Social Security Administration more than 2.5 million disabled workers in their 20s, 30s, and 40s received SSDI (i.e., disability) benefits.
Many Persons Will Face a Long Term Disability
Unfortunately, for many Americans the disability will not be short-lived. According to the 2007 National Home and Hospice Care Survey, conducted by the Centers for Disease Control's National Center for Health Statistics, over 1.46 million Americans received long term home health care services at any given time in 2007 (the most recent year this information is available). Three-fourths of these patients received skilled care, the highest level of in-home care, and 51% needed help with at least one "activity of daily living" (such as eating, bathing, getting dressed, or the kind of care needed for a severe cognitive impairment like Alzheimer's disease). The average length of service was more than 300 days, and 69% of in-home patients were 65 years of age or older. Patient age is particularly important as more Americans live past age 65. The U.S. Department of Health and Human Services Administration on Aging tells us that Americans over 65 are increasing at an impressive rate:
The Department of Health and Human Services also estimates that 9 million Americans over age 65 will need long term care this year. That number is expected to increase to 12 million by 2020. The Department also estimates that 70% of all persons age 65 or older will need some type of long term care services during their lifetime.
The Council for Disability Awareness provides startling examples of how disability is likely to impact “typical” Americans.
“A typical female, age 35, 5’4", 125 pounds, non-smoker, who works mostly an office job, with some outdoor physical responsibilities, and who leads a healthy lifestyle has the following risks:
“A typical male, age 35, 5’10", 170 pounds, non-smoker, who works an office job, with some outdoor physical responsibilities, and who leads a healthy lifestyle has the following risks:
The Alzheimer's Factor
Alzheimer's is growing at an alarming rate. Alzheimer's increased by 46.1% as a cause of death between 2000 and 2006, while causes of death from prostate cancer, breast cancer, heart disease and HIV all declined during that same time period.
The 2015 Alzheimer's Association annual report titled, “Alzheimer's Disease Facts and Figures” explores different types of dementia, causes and risk factors, and the cost involved in providing health care, among other areas. This report contains some eye-opening statistics:
Caregivers are at risk of developing health problems. There were approximately 10.9 million unpaid caregivers (family members and friends) providing care to persons with Alzheimer's or dementia in 2009. According to the Alzheimer's Association, those persons are at high risk of developing health problems, or worsening existing health issues. For example, family and other unpaid caregivers of people with Alzheimer's or another dementia are more likely than non-caregivers to have high levels of stress hormones, reduced immune function, slow wound healing, new hypertension and new coronary heart disease.
Spouses who are caregivers for the other spouse with Alzheimer's or other dementia are at greater risk for emergency room visits due to their health deteriorating as the result of providing care. A study mentioned in the 2010 Alzheimer's Association report found that caregivers of spouses who were hospitalized for dementia were more likely than caregivers of spouses who were hospitalized for other diseases to die in the following year.
Receiving care. According to the National Nursing Home Survey 2004 Study, the most recent of its kind, the national average length of stay for nursing home residents is 835 days, with over 56% of nursing home residents staying at least one year. Significantly, only 19% are discharged in less than three months. Those residents who were married or living with a partner at the time of admission had a significantly shorter average stay than those who were widowed, divorced or never married. Likewise, those who lived with a family member prior to admission also had a shorter average stay than those who lived alone prior to admission.
While a relatively small number (1.56 million) and percentage (4.5%) of the 65+ population lived in nursing homes in 2000, the percentage increased dramatically with age, ranging from 1.1% for persons 65-74 years to 4.7% for persons 75-84 years and 18.2% for persons 85+. According to the U.S. Census Bureau, 68% of nursing home residents were women, and only 16% of all residents were under the age of 65. The median age of residents was 83 years.
See Vol. 4 Issue 5 of the Elder Counselor, The Affordable Care Act: How It Impacts Our Senior Population, for a discussion of the Affordable Care Act’s Impact on information regarding nursing homes.
Long Term Care Costs Can Be Staggering
Not only will many individuals and families face prolonged long term care, in-home care and nursing home costs continue to rise. According to the Genworth 2015 Cost of Care Survey, Assisted Living, Adult Day Services, and Home Care Costs national averages for long term care costs are as follows:
Most Americans Underestimate the Risk
Perhaps most importantly, despite overwhelming and compelling statistics; most Americans grossly underestimate the risk of disability to themselves and to their loved ones. According to the Council on Disability Awareness 2010 survey:
Given the high costs of care, this underestimation often leaves Americans ill prepared to pay for the costs of long term care.
Long Term Care Insurance May Cover These Costs
If a parent, their spouse, or family member needs long term care, the cost could easily deplete and/or extinguish the family's hard-earned assets. Alternatively, seniors (or their families) can pay for long term care completely or in part through long term care insurance.
Most long term care insurance plans let the individual choose the amount of the coverage she wants, as well as how and where she can use her benefits. A comprehensive plan includes benefits for all levels of care, custodial to skilled. Clients can receive care in a variety of settings, including the person's home, assisted living facilities, adult day care centers or hospice facilities.
Planning in the Event Long Term Care Insurance is Unavailable or Insufficient
Unfortunately, many older Americans will either be medically ineligible for long term care insurance or unable to afford the premiums. In that event, more aggressive planning should be considered as early as possible to make sure life savings are not depleted as a result of having to pay out-of-pocket for care. With the help of an elder law attorney, a plan can be created that will protect much of the assets of an individual or couple that would otherwise be at risk of being depleted.
All Planning Should Thoroughly Address Disability
When a person becomes disabled; he or she is often unable to make personal and/or financial decisions. If the disabled person cannot make these decisions, someone must have the legal authority to do so. Otherwise, the family must apply to the court for appointment of a guardian over the person or property, or both. Those who are old enough to remember the public guardianship proceedings for Groucho Marx recognize the need to avoid a guardianship proceeding if at all possible.
At a minimum, seniors need broad powers of attorney that will allow agents to handle all of their property upon disability, as well as the appointment of a decision-maker for health care decisions (the name of the legal document varies by state, but all accomplish the same thing). Alternatively, a fully funded revocable trust can ensure that the senior's person and property will be cared for as desired, pursuant to the highest duty under the law - that of a trustee.
The above discussion outlines the minimum planning everyone, including seniors and their loved ones, should consider in preparation for a possible disability. It is imperative that families work with a team of professional advisors (legal, medical and financial) to ensure that, in light of their unique goals and objectives, their planning addresses all aspects of a potential disability. Our firm is dedicated to helping seniors and their loved ones work through these issues and implement sound legal planning to address them. If we can help in any way, please don’t hesitate to contact our office.
Article written by Liz Farr
Tale #1: The Attorney and his Grief-Stricken Widow
“Patrick” was a successful attorney, whose family came from upper crust Chicago and San Francisco society. He and his wife Danielle lived a comfortable and pampered life, and their grown son and his family lived in an equally grand home just two houses down on their exclusive street. A daughter and her family lived in a nearby state.
Patrick had begun the process of creating a trust that would provide for Danielle’s needs. He also wanted to make sure that his children received some of the wealth he had received from his family. But his children feared that Danielle wouldn’t honor those wishes, and that they would end up with nothing.
Unfortunately, Patrick’s health took a dramatic and abrupt turn for the worse, and he found himself in hospice. His cognitive skills were failing, but he wanted to make sure that each of his children received a modest sum from the investments he’d inherited from his parents. So, he summoned another attorney, who helped him draft an updated will and trust documents. With a shaky hand, he signed everything days before he passed away.
Danielle was overcome with grief at his passing and was equally bewildered at the financial decisions she now had to make. She’d always left all of that to Patrick and now suddenly, those fat investment accounts didn’t look so big to her.
With no previous experience handling money, she had no context to judge whether it would be enough. Patrick’s final arrangements included a complex series of bequests and the disclaiming of those bequests.
Filled with grief, Danielle raged at her children, her attorney and the partner working with her accusing accused them all of wanting to see her in the poor house. She adamantly refused to sign anything, disclaim or share her considerable wealth with her children.
At last check, over a decade after his passing, Patrick’s estate was still open and bets in the office were that it wouldn’t likely be settled until Danielle’s death.
Tale #2: The Oil Baroness and the Trust that No One Could Decipher
First we have Julie, daughter of a Texas oil man. Through considerable business acumen, her father created a magnificent oil and gas empire, which spun off royalties in the mid-seven-figures each year. At his passing, Julie and her brother Richard became equal owners in the oil business.
Julie also had a son in his late 20s, who had struggled with mental illness, substance abuse and stints in jail. She had supported him through various attempts at college, vocational training, rehab, self-employment and full-time jobs. Nothing stuck.
At one point, Julie nearly wrote him out of her will, until he and his girlfriend had a son. Now that she was a grandmother, Julie was committed to the welfare of this young child.
However, shortly before the child’s second birthday, Julie’s health took a sudden nosedive. She was in end-stage renal failure, brought on by diabetes. For reasons that were never clear to me, she refused dialysis and she went into hospice care.
Julie summoned the best attorney in her small, rural town to her hospital bed and explained that she wanted to put her oil and gas interests in a trust. She feared that giving her son outright ownership of her business interests would have been a disaster and she wanted to be sure that her grandson was financially taken care of.
Since her son received SSI, her lawyer, who had never written a trust document, recommended a qualified disability trust and a will. At least, that’s what she thought she signed during the last days of her life.
She designated Miriam, her best friend from childhood, as the trustee. Miriam was a struggling professional photographer and had zero experience with financial matters. Oddly, she hired a graphic designer to help her with the accounting of the income and expenses for the trust.
They were both in way over their heads. When Miriam came to our office for assistance in setting up her QuickBooks and to do the tax return, we asked an attorney who specialized in qualified disability trusts to take a look at the trust document and the will.
Besides Julie’s son, several other people were named in the trust document as beneficiaries, but it wasn’t clear exactly what they were to receive. Some people got bequests in the will and were also mentioned in the trust document as being eligible for some kind of financial support.
In addition, it was equally unclear what sort of assistance Julie’s son and his girlfriend were to receive. The instructions in the trust were vague and also conflicted with the instructions Miriam had received at Julie’s deathbed.
Miriam followed her conscience and dispensed odd forms of support to Julie’s son and to some of the people named in the trust. These included car payments and new cars, rent payments, groceries, plane tickets and checks to various people.
Miriam had made multiple trips to Midland, Texas to confer with Julie’s brother Richard, who was now her business partner of sorts in the oil and gas empire. She was also paying herself a generous salary to oversee the trust.
The attorney we consulted called it “a lawsuit waiting to happen.” Even he wasn’t really sure what was supposed to happen with the flood of oil and gas royalty payments that came in every month, but there were way too many problems with it to really call it a qualified disability trust. He recommended going back to court to resolve the issues.
In the meantime, Miriam and her graphic-designer-turned-bookkeeper made a complete muddle of her QuickBooks files. They refused to work with anyone in our office to straighten it out, preferring instead to hire a succession of cut-rate bookkeepers, who each made it worse.
It seemed that each time I looked at her QuickBooks file it was as though someone had taken a giant spoon and scrambled the numbers and accounts. Of course, since we had helped with the initial set up, everything was our fault.
We struggled to get the tax return for the trust done. We kept getting conflicting answers about who had received benefits from the trust and who had received bequests.
It was also hard to figure out how much the son had received and the trust document was no help. Moreover, reconciling the statements from the oil and gas empire with the transactions in QuickBooks was nearly impossible.
Eventually, Miriam fired us and everyone in the office who had dealt with her breathed a sigh of relief. So, what are the lessons for your clients from these two chilling tales?
Article by A.J. Fudge, JD
As estate planning attorneys, we strive to provide our clients with excellent service and a comprehensive estate plan that will protect all of their interests. We conduct extensive interviews to get to know our clients, and take the time to truly understand their needs and the nuances of their particular situation. The good estate planning attorney truly leaves no stone unturned; no loose ends.
It’s gratifying to uncover an issue or identify a solution that our client hasn’t thought of yet, and you see the relief expressed on their face that silently says, “I’m so glad you thought of that.” It is these moments when your client truly begins to appreciate the value that you add for them. When you spot something other attorneys have not, it gives your client a lot of confidence that they made the right choice in working with you.
Planning for Animals
One easy and meaningful way for you to do this is by addressing one of the most commonly overlooked aspects of an estate plan, and one that is essential for many clients: continuing care for their animals. Most estate planning attorneys pay little or no attention to their clients’ animals, and this omission can have heartbreaking consequences for clients. If your client has animals, those animals are a part of the family in some way or another. Sensitive planning for the client’s needs requires that the plan provide for those animals and protect and provide for them in their estate plans.
The first step is to spot the issue, which is easy to do by adding an “Animals” section to your intake worksheet. If you use the Intake Worksheet in Wealth Docx®, it’s easy to add a space under the “children” section to add a space for “pets.” As you gather data, it is important to get the animal’s name, age, breed, and a short description. When you see that a client has listed an animal on their worksheet, be ready to include this in your discussion at the initial meeting.
Once you have had a chance to get to know the client and address their immediate concerns, let them know that you would like to include their animal in their estate plan as well. Most clients have a moment of thankful surprise along the lines of “Oh my gosh! I can’t believe I never thought of that. Thank you!” Your clients will be impressed, and it will show them that you really care. (One valuable side effect: when you build that kind of relationship with your clients you can count on great word-of-mouth and lots of referrals!)
Now that you’ve determined your client has an animal that you need to plan for, the next question is how to effectively plan for it? It’s easy! Planning for a client’s animal is actually very similar to planning for a client’s minor child. However, in most cases children grow up to be independent adults who can take care of themselves. That is not the case with animals, which is why planning is so critical.
Animal Care Trust
The central component of many clients’ estate plans is the revocable living trust, and planning for an animal will generally take the form of incorporating additional provisions for an Animal Care Trust. There are instances when it is appropriate to set up a separate, stand-alone Animal Care Trust, but these situations are not nearly as common.
You should never rely on a Will when planning for a client’s animal. First, animals do not have time for probate, their care needs to continue uninterrupted and without delay. Also, a Will does not protect the animal in the event of your client’s incapacity. Finally, because animals are considered property under the law, any conditions on their transfer via a Will are generally unenforceable. There are some State statutes that attempt to address this issue, but a revocable living trust is still the much more preferable option. If your client has an existing trust, it is very easy to amend the trust to add the Animal Care Trust provisions.
The Animal Care Trust provisions will be tailored to suit your client’s specific needs, but they generally name and describe the client’s animal, and the estate, or a certain portion thereof, is set aside to be used to for its care. A caretaker is appointed who is responsible for the day-to-day care of the animal; however, the trust itself legally owns the animal. The trustee oversees the money and the caretaker, and has the ability to remove and replace the caretaker. The money is available to compensate the caretaker, and when the animal passes away, the remaining money is distributed to the final beneficiaries of the trust. In most cases, planning for your client’s animal will be a very simple and straightforward process.
Identify Appropriate Caretakers
Your client must first decide who is going to take care of their animal in the event something happens to them. The caretaker will be responsible for the day-to-day care of the animal. Although the animal will be legally owned by the trust, for practical purposes, the caretaker will be the animal’s new family. It is important to select a caretaker who loves animals, and has experience taking care of them. Your client should name an initial caretaker and potentially two back-up caretakers to serve consecutively. Do not appoint more than one caretaker at a time because you may be unintentionally setting the stage for conflict over the animal. Your client should also select an organization of last resort, such as reputable rescue or no-kill shelter, to take the animal in the unlikely event that none of the individuals selected as caretaker are willing or able to take on the responsibility of caring for the animal.
Have your client confirm that the person selected as caretaker is up for the job. It should never be a surprise to someone that they have been named as an animal’s caretaker. Your client should discuss their plans with these individuals to confirm that this is something they would be willing and able to do. This also gives your client the opportunity to address any concerns the caretaker might have. It is better to address as many concerns as possible during the planning process and ensure that they do not cause problems in the future.
Your client should discuss their plans with their successor trustees as well. It is important to make sure these individuals understand your client’s desires and are comfortable administering an Animal Care Trust. While the trustee does not necessarily need to be a huge “animal person,” it is important that they at least like animals and are committed to carrying out your client’s wishes. Trustee abuse is always a concern no matter what type of trust we are talking about, but even more so when planning for an animal. Conflict and expensive lawsuits can cause serious interruptions in the animal’s care.
A trust protector can provide a bit of a safety net, creating a mechanism for dealing with an unresponsive or abusive trustee. Without a trust protector, an expensive, time-consuming, trust-exhausting lawsuit will be their only available tool, which leaves the animal’s future, and possibly even life, in jeopardy.
Once the trustees and caretaker are onboard, the client then needs to think about what kind of instructions they want to provide. Trustee instructions address matters such as how and when to apply trust funds, how much to compensate the caretaker, and what type of oversight is needed. Caretaker instructions address the type of care the animal is to receive, and any special information that the caretaker should know. These instructions may be as brief as a few paragraphs, or take the form of a separate Schedule that is incorporated and attached to the trust. The level of complexity and detail depends on your client and their planning objectives.
The amount of money to be set aside in the animal’s trust depends on the type of care your client wants to provide. Remind the client that the money does not have to be used, but will be available to use if the situation calls for it. In a typical situation where you are dealing with a dog or cat, I recommend clients set aside $10,000 per animal. If the animal has extraordinary medical needs or if the client want to provide a uniquely high level of care, then obviously the amount placed in trust should reflect that. Naturally, the more elaborate the care, the more expensive it is. Some clients choose to set aside the entire estate, including their home, so that the animal may continue to live there with the caretaker until the end of the animal’s life. In some cases clients purchase life insurance to provide funds to care for a pet after the client’s death.
These are the primary considerations when planning for an animal, and for the average client, that’s all there is to it. Pet trust provisions usually comprise only a few additional pages to the client’s revocable trust. The strategy is simple and straightforward, but it adds tremendous value to the client’s plan and makes it truly complete.
It is important to remember throughout the planning process that animals are a responsibility requiring love, time, attention, and money. The animal’s lifespan is also important to consider. Some animals have a very long life expectancy. Some species of birds live to be well over 60, and tortoises can live to be well over 100.
Clients with long-lived animals, you’ll need to plan accordingly. You also need to be aware if your client has an exotic or special needs type animal, mainly because not everyone knows how to care for these types of animals. The client must select caretakers that are familiar with the type of care these unusual animals need.
If the client has horses, comprehensive planning is essential. Bear in mind also that not all horses require the same level of care. Recreational riding horses generally don’t require nearly the same level of care and expense that thoroughbreds or competitive show horses require. It is also not unusual to see horses that are a bit of both, depending on what stage of life they are in. Planning for horses adds layers of complexity.
The horse itself costs a lot of money, and feeding and caring for it does as well. If a client has a competitive show horse, those expenses increase exponentially. The client’s plan must include the money necessary to provide the expected level of care for the horse. Because of their intrinsic value, horses are at a higher risk of being sold for money, including to kill-buyers who send them to slaughter. Once the client understands that their horse may just look like dollar signs to some people, their plan can be drafted to protect against this.
Horses are also dangerous animals if for no other reason than their size, making it essential to choose the right caretakers. It is essential that they be experienced horse-people, who love and understand horses. It may also be appropriate to establish a team of professionals that are available to assist the caretaker with the day-to-day responsibilities of caring for the horse. This team would be overseen by the primary caretaker, and might include a trainer, rider, vet, farrier, chiropractor, etc. The idea is to create a plan that allows the horse’s regular care to continue uninterrupted, whatever care that might be.
Horses are also not generally accepted at most animal rescues. Thus, it is imperative for the client to select an organization of last resort where their horse can safely live for the rest of its life. Again, because of the expense, the client should be prepared to make a financial contribution to the organization selected. Too often old horses that have provided years of service find themselves being transported across the border for slaughter. For the client this would be a heartbreaking end, and it can easily be avoided. If the client has a horse, they really need a plan.
As estate planning attorneys, our clients rely on us to make sure everything will be provided for once they are gone. It is an honor to be trusted with the responsibility, and a duty that none of us takes lightly. Most clients would shudder at the thought of something happening to their beloved animals, but they need you to spot the issue for them and make sure they are protected.
We certainly would never design an estate plan that fails to provide for a client’s minor children. Nor would we fail to appoint guardians or include instructions for the children’s care. Many animal owners treat their animals like their children. It is up to us to help them understand their options and plan accordingly.
Whether or not you, yourself, are an animal lover, if you pride yourself on being a thorough and comprehensive estate planning attorney, then take this opportunity to help your clients plan for their animals. Show your clients that you truly care about taking care of them and protecting all of their interests, and you will make them proud to call you their attorney. That’s really what it’s all about, and it’s good for business.
By David H. Lenok
According to court documents obtained by The Blast, recently deceased star Burt Reynolds intentionally left his 30-year-old son, Quentin, out of his will and named his niece, Nancy Lee Brown Hess, executor of his estate.
Though it may be our first instinct to jump to conclusions about the nature of Reynolds’ relationship with the adopted son he shares with ex-wife Lonnie Anderson, that sort of family drama doesn’t appear to be the case here.
The relevant portion of the will, signed in 2011 and filed in Florida court on Monday, reads:
“I intentionally omit him from this, my Last Will and Testament, as I have provided for him during my lifetime in my Declaration of Trust,”
While Quentin is expressly omitted from Reynold’s will, it appears the Smokey and the Bandit star has provided for him in a trust. In fact, the will doesn’t appear to bequeath any assets at all. Everything looks to be part of the aforementioned trust, of which Hess is the trustee.
The reason that I’m using such wishy-washy language to talk about Reynold’s trust perfectly illustrates one of the main advantages of employing the technique—privacy. Wills have to be probated publicly (which is how news outlets got access to Reynolds’ so quickly), while the terms of a trust—what it holds, who it benefits, etc.—can be kept confidential from all but a select few. In fact, the existence of a trust, as well as Reynolds own words, imply that Quentin’s omission is not a disinheritance at all. He’s already being taken care of.
Trusts also offer estate tax advantages in that, structured correctly, they remove assets from the decedent’s estate. Reynolds’ net worth prior to his death was only estimated at around $5 million. That amount falls well within the currently over $11 million federal estate tax exemption, and Florida doesn’t levy state estate tax, so it’s unlikely that this was the star’s motivation.
Protection from creditors, however, may be a factor. Reynolds’ money troubles over the latter portion of his life were well documented, and it wouldn’t be too surprising to learn that he left behind significant debts. A properly constructed trust could shield his assets to ensure they go to loved ones instead of debt collectors, whereas, during will probate, creditors stand at the head of the line.
Ultimately, the secrecy of the trust prevents us from knowing exactly how much is in there and who's going to end up with it, so we’re unlikely to get answers to these questions. And that’s the whole point.
Jeffrey C. Nickerson - Estate Planning Attorney - My Passion is Special Needs Planning!