Orlando Estate & Elder Law

The Right Documents for Estate Planning

Having a properly prepared estate plan that includes all the important documents, including a will and power of attorney, is one of the most important ways to protect your family and yourself. Despite this fact, many adults still neglect to take care of this important task, reports Consumer Reports in its article “8 Essential Steps for Estate Planning.”

A survey from Caring.com showed that as many as 60% of adults don’t have estate planning documents. When they asked families with young children, fewer than one in ten have even designated a guardian to take care of their children, if both parents should die.

What happens when there’s no planning in place? Even the simplest things become more complicated and complicated things become financial and legal nightmares. When there’s an emergency and decisions need to be made, the entire family is subjected to more stress and costs than would otherwise be necessary.

Here are the eight steps you need to take, right now, to protect your family:

1. Get the professional help you need. The change to the tax law may or may not impact your family and your estate plan, but you won’t know until you sit down with an estate planning attorney. Trying to do this online may seem like a simpler way but you will not have the same peace of mind as when you sit down with an experienced attorney—and one who knows your state’s laws.
2. Create a will. This is a legal document that explains how you want your assets to be distributed after you die. It names an executor to carry out your instructions. If you have minor children, this is an especially important document since it is used to name their guardian. If you have no will when you die (called dying “intestate”), then the laws of your state determine how your assets are distributed and who rears your children. Depending on where you live, your spouse might not automatically inherit everything.
3. Discuss whether you need a Revocable Living Trust. In most states, when you pass away, your estate goes through a process called “probate.” The courts basically review your estate plan and determine whether everything looks right. The problem is that your will becomes a public document—and so does information about your assets. Some people prefer to keep their lives private by transferring assets to a revocable living trust, which distributes assets according to your instructions at your death. Titles to the assets must be changed so they are “owned” by the trust. This is known as “funding” the trust. You still retain complete control of your assets since you are the trustee. However, if you fail to retitle assets, the estate goes through probate. You will also still need a will to protect your minor children.
4. Review your beneficiaries. Whether you remember it or not, when you open many different kinds of accounts—banking, investment—you assign a beneficiary to receive the assets upon your death. Your will does not override the beneficiary designation. Therefore, if you haven’t changed your life insurance beneficiary, for instance, and your ex-wife is still named on the document, she’ll get the entire proceeds of the life insurance policy when you die. This is a very important task.
5. Have a Durable Power of Attorney (DPOA) created. This is something that protects you while you are living. If you should become incapacitated, having a durable power of attorney in place will allow that person to manage your financial affairs. Make sure the institutions that have your accounts accept your attorneys’ POA form; you may need to get the one that the institution uses.
6. Don’t forget the Advance Directive. This is also known as a Living Will. It explains your wishes for medical procedures, if you are unable to communicate and explains what you want for end-of-life care. Make sure that your family members know that you have such a document and keep it accessible in case of an emergency.
7. Pick a Healthcare Surrogate. The Healthcare Surrogate, also known as the Durable Power of Attorney for Healthcare, names someone to convey your healthcare wishes. It should include a HIPAA release clause. This allows medical personnel to release your medical records and speak with the named person about your care.
8. Get it all organized. Think of this step as creating a user’s manual for yourself. All these plans won’t do any good unless your loved ones know they exist and know where to locate them. Don’t put your estate planning documents and records in a bank safe deposit box in case it is sealed on death. Your attorney will likely have an original and you should have your original in a fire-proof safe in a secure location in your home.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Consumer Reports (Oct. 24, 2018) “8 Essential Steps for Estate Planning”

Here’s a New Idea: A Funeral Representative

If you live in Michigan, your next of kin gets to decide what happens to your remains even if it’s not what you had wanted. However, a fairly new state law is working to let you have the final say, even after you have died, by appointing a funeral representative who will be in charge of your funeral arrangements, including your final resting place.

This makes sense, says the Detroit Free Press in the article titled “Law helps ensure your family follows your funeral wishes in Michigan.” For one thing, it eliminates the family bickering during a very sensitive time.

One example of this is the family battle going on with a Michigan funeral home that is trying, unsuccessfully, to return the cremated remains to family members of the decedent. Some family members say they would have claimed the remains earlier but they were not next of kin.

Another big issue that this would solve: family battles over where loved ones are ultimately buried.

In this example, a man wanted to be buried next to his deceased wife. However, the second spouse wanted him to be buried in another cemetery. When the second wife’s wishes prevailed, the family and the children from the first marriage were not happy.

This law which actually took effect in 2016, gives a representative the authority to make decisions about your funeral and resting place and can sort out confusion and minimize the unpleasantness among surviving family members.

It’s a big responsibility and includes the responsibility of making sure that funeral expenses are paid. Here are some additional facts about being a funeral representative:

The funeral representative is designated to have the right and power to make decisions about funeral arrangements and handling, deposition or disinterment of a decedent’s body, including the right to possess the cremated remains.

Here’s the order in which a funeral representative is selected if no one is named: a person designed under federal law, usually if the person is serving in the military; the designated funeral representative; a surviving spouse; adult children; adult grandchildren; parent; grandparents and siblings.

You can name a funeral representative in Michigan in your will, by power of attorney, or a separate document that has two witnesses and is notarized.

Some people cannot serve as a funeral representative: a licensed health professional, an employee of a health or veterans’ facility that provided care, an officer or employee of a funeral home, crematory or cemetery providing services. Anyone who has been charged with murdering you may not serve.

The role of funeral representative can be revoked at any time, in the same manner that it is given, with a notarized written notice that has been witnessed by two people. The law also automatically revokes the power to a named ex-spouse.

Talk with your estate planning attorney about having a funeral representative, especially if you believe that there will be some controversy about your funeral and burial wishes even if you don’t live in Michigan. Each state will have a means of conveying your wishes and ensuring that they are carried out.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Detroit Free Press (Nov. 2, 2018) “Law helps ensure your family follows your funeral wishes in Michigan”

Make Estate Planning Simpler with a Checklist

Ask an average person to define estate planning, and chances are good they’ll start describing long meetings with a lot of paperwork and complicated forms. However, that doesn’t have to be the case, says this article from InsuranceNewsNet.com, “A simple way to simplify estate planning.” It focuses on the use of beneficiary designations on a number of accounts that can make an estate plan a much simpler experience in many situations.

Beneficiary designations are primarily used on the following types of accounts:

• Employer-sponsored retirement plans, like 401(k)s
• IRAs
• Life insurance policies
• Annuities
• Transfer on death investment accounts
• Pay-on-death bank accounts
• Stock options
• Executive deferred compensation plans

Making sure to keep track of the person who has been named the beneficiary and keeping that information up to date is extremely important. It’s not always done correctly. The consequences of having the wrong person named on the asset can be infuriating and, unfortunately, permanent.

The importance of the beneficiary designation means you’ll want to:

• Remember who you have named a beneficiary of what account. People usually name their spouse as a primary and a child as a contingent. If you only have a primary, consider a charity that has meaning to you as the contingent beneficiary.
• Update your beneficiary designations, as life events occur. That includes births, deaths, marriages, divorces, etc.
• Read the instructions on the beneficiary designation. Not all forms are alike.
• Don’t name your estate as a beneficiary.
• Understand the tax implications of naming the beneficiaries. Not every asset has the same tax treatment.

Speak with your estate planning attorney to ensure that your beneficiary designations align with your estate plan. Remember that beneficiary designations supersede any provisions in your will. You should also talk with your beneficiaries—you may learn that they don’t want to inherit your asset (i.e., a person who is considering a divorce may not want the additional complication of a large inheritance).

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: InsuranceNewsNet.com (Nov. 2, 2018) “A simple way to simplify estate planning”

Who Gets Aunt Lydia’s Emerald Ring?

One of the largest transfers of wealth in our nation’s history is now getting underway as boomers approach their later years and are starting to prepare to move their assets to the next generation, reports Kiplinger in the article “Estate Planning Answers for ‘Hard’ Assets Like Art, Heirlooms.”

It’s one thing to transfer stocks, bonds, cash and other assets that are generally considered “liquid.” However, it different when the assets are “hard,” like real estate, art, and jewelry. Most families don’t keep a comprehensive inventory of these assets, their value may be unknown and chances are good family members have different ideas regarding how they want to have them distributed.

If all of this is not enough, what about the difficulty of talking about what the current owner would like to see happen to the asset.

So, what happens? In many cases these hard assets end up being overlooked and sometimes undervalued.

A better solution would be to create a formal plan that begins with the owners, the family advisors and, depending on the nature of the asset, professional appraisers.

Here are three key questions to keep in mind:

What’s it worth? You need to establish any asset’s fair market value. That number needs to be appraised by an objective and properly credentialed appraiser who is knowledgeable in their area. For instance, a jewelry collection that has grown from its original value when first acquired, may have doubled in value over the decades. Select an appraiser who is certified by an accredited organization. The cost of the appraisal will be well worth the fees.

Who wants what? You may be emotionally vested in an heirloom that came to you from your great grandfather, but your kids may be more attached to the family home. If more than one sibling wants an asset, you’ll need to figure out a way to share it. If one child insists on keeping the family vacation home, for instance, but the other two aren’t interested, you might need to set up an equitable buyout solution.

If the asset is artwork or a collectible, remember that these items are often cyclical in popularity and so is their value. One individual who inherited a collection from his parents knew that the artist was a family friend, but had no idea of the value, if any, of the collection. His timing was sheer luck—he wanted to sell exactly when this artist was popular. Three years later he may not have been so well rewarded.

Can it be passed on to the next generation? An estate planning attorney will be able to assist you with the best way to pass on illiquid assets. They may be put into a trust, a family partnership or an LLC, and the transfer of ownership can be done in a tax-efficient way. If you really don’t think your heirs appreciate the asset, then you can sell it for a fair price, pay the necessary taxes and gift the tax.

Conversations about these kinds of assets can become emotional because the assets have sentimental value. However, don’t let that fact dissuade you from passing them along in a way that benefits everyone, addresses potential conflicts and lets you and your family prepare for the future.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Kiplinger (Nov. 5, 2018) “Estate Planning Answers for ‘Hard’ Assets Like Art, Heirlooms”

What Comes First: College Expenses or Your Retirement?

Here’s the biggest difference between retirement savings and college expenses: you can get a loan for college. No financial institution will give you a loan for retirement. Therefore, when it comes to finding money for college, financial planners and estate planning attorneys agree, as does this article from the Star Tribune: “Do your kids a favor: Pick retirement savings over tuition.”

The number of people who are making that decision are on the decline. The 2016 edition of that survey is down from 39%. It’s good that more parents are thinking twice about making this financial mistake.

Paying for college expenses from a tax-advantaged employer retirement account like a 401(k), can become very costly. Here’s why:

• How does a 10% tax penalty on early withdrawals, if you’re under 59½ sound? Not good.
• The money you withdraw is taxed as income.
• You’re losing the tax-free growth of your savings. Remember, these retirement accounts grow tax-free.
• You lose the benefit of compounding so your growth potential is losing ground.

The “least worst” option, say experts, is to fund a Roth IRA. Unlike qualifying contributions to a 401(k) or traditional IRA, the Roth IRA contributions are not tax-exempt. As a result, there are fewer restrictions on early withdrawals.

However, you’re still losing out in many ways. This includes when you get further along into your retirement years and you don’t have enough money to support yourself. Take a very long-term perspective on what will happen in the future.

Parents must understand that while it’s nice that they want to sacrifice to help their children through college, they may actually be generating far more stress for their children when the kids have to help Mom and Dad during retirement years. That’s likely when their kids are having children of their own, paying a mortgage and saving for their own children’s college expenses.

One last major consideration is: college aid. Your withdrawals from retirement funds will be counted by financial aid offices as ordinary income. If it pushes your total wages up too high, your college-bound student may not qualify for assistance.

Retirement accounts are not counted when considered if your student qualifies for financial aid. Therefore, your best bet is to continue funding retirement accounts. If you start cashing them out to pay for college expenses, everyone loses in the long run.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Star Tribune (Nov. 6, 2018) “Do your kids a favor: Pick retirement savings over tuition”

Will the 2019 Social Security COLA Make a Difference?

It may sound like a fair increase, but it won’t amount to much, since the COLA (Cost of Living) increase will quickly be gobbled up by an increase in health care costs. That’s according to Next Avenue’s recent article titled “The Truth About 2019’s Social Security Cost-of-Living Increase.”

Social Security beneficiaries should not expect to see much in the way of an increase in their monthly checks. That’s despite receiving the highest COLA in seven years. Why aren’t more people upset by this?

The Department of Health and Human Services, which oversees Medicare, could have held its 2019 Part B premiums at the same level they are today but that might have been seen as a political move.

There is a Social Security rule that says benefits may not decline from one year to the next, including the impact of increases of Part B premiums. In the past, annual COLAs were normally large enough for people to pay the higher Part B premium and still see an increase in their Social Security benefits. However, since 2009 there have been three years with a zero COLA and one year it was only 0.3%. In those years, the hold-harmless rule was invoked, and many people did not have to pay those Part B premiums.

Last year’s 2% COLA permitted Medicare to catch up. Many people saw most, if not all, of their 2% increase used to pay higher Part B premiums. Those with higher benefits were paying full Part B premiums last year. This year almost all of the COLA will go toward paying higher benefits. However, people with lower Social Security benefits who were paying below normal Part B premiums will now see a larger share of their COLA used to restore their Part B benefits to the level that most people pay.

What can be done to help this program which helps the most vulnerable elderly citizens?

The hope would be to make benefits more progressive helping workers with lower earnings at a higher rate than those with higher earnings. However, unless funds come from the higher earners, Social Security would become even more expensive than it is.

Social Security supporters have worried that any movement away from the system now in place toward something that would favor the neediest would undermine any existing support for Social Security.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Next Avenue (Oct. 24, 2018) “The Truth About 2019’s Social Security Cost-of-Living Increase.”