estate planning attorney

Serving Southwest Florida

Helping clients plan for their family's future, by creating an efficient, thoughtful and comprehensive estate plan that preserves their legacy and gives them peace of mind.

Estate Planning in the Pandemic

The pandemic has made many people focus on depressing things, like death. It should also make us focus on estate planning in the pandemic.  Many of us are worth more dead than alive.

Federal News Network’s recent article entitled “It’s your estate, but who gets it?” says that lack of control is one of the frustrating things about this already terrifying pandemic. We can wear masks, keep our distance and avoid crowds, but then what?

There are some very important and valuable things that are still under your control. One of these is estate planning in the pandemic.

Any number of things could have occurred in 2020 that are off your radar because you’re still adjusting to the many changes the pandemic has brought to our everyday lives.

Many people see their estate plan as one of life’s necessary chores. Once it’s signed, they simply file it away and forget about it. However, an estate plan should be reviewed regularly to be certain that it continues to meet your needs. Here are just a few of the life events that make it essential for you to review and possibly revise your estate plan with an experienced estate planning attorney:

  • The birth or adoption of a child
  • You are contemplating divorce
  • You have recently divorced
  • Your child gets married
  • Your child develops substance abuse problems or has issues with managing finances
  • Those you’ve named as personal representative, trustee, or agents under a power of attorney have died, moved away, or are no longer able to fulfil these obligations
  • Your child faces financial challenges
  • Your minor children reach the age of majority
  • There has been a change in the law that impacts your estate plan
  • You get a sizeable inheritance or other windfall.
  • You have an estate plan but can’t locate it
  • You acquire property; or
  • You move to another state.

If any of these events occur, talk to your estate planning attorney to see if it is necessary to revise your estate plan to address these issues.  Let us help you with your estate planning in the pandemic.

Reference: Federal News Network (Nov. 4, 2020) “It’s your estate, but who gets it?”

Suggested Key Terms: Estate Planning Lawyer, Wills, Inheritance, Will Changes, Executor, Trustee, Power of Attorney, Probate Attorney, Divorce

The Importance of a Will

This year is the time to reflect on the importance of a will.  Even during a pandemic, few people want to spend time thinking about death. However, having an estate plan means having some of the most important documents you’ll ever create. Having a will is a gift that alleviates the burden placed on loved ones after we are gone, says this recent article “Why it’s important for every adult to get a will” from Bankrate. In a time of sorrow, the family and friends will be spared the stress that makes grieving more complicated when there is no will, no guidance and no path forward.

What is a will?

In its most simple form, a will is a legal document that serves to transfer property at your death to the people you choose. It is revocable, which means you have the legal ability to make changes to it, as long as you are alive and have the mental capacity to do so. However, wills do more than distribute property. The will is your chance to state your wishes for who will care for your children, what happens to your physical remains and who will take care of your pets.

Are Wills Pretty Much the Same?

There’s a good reason why the best wills are those created with an estate planning attorney: they are created to suit your specific needs. Just as every person is different, everyone’s will must reflect their life. Some people want to name a recipient for every single asset they have, while others prefer simply to give their entire estate to a spouse, their children, a trust, or a charity. However, there are also different kinds of wills which contribute to the importance of a will.

A Testamentary Will is a will signed in the presence of witnesses. It is the best choice to protect your family.

A Holographic Will is a handwritten will, which is not acceptable in Florida and many other states and could lead your family into all kinds of expensive and stressful battles, in and out of court.

An Oral Will is a verbal will that is declared in front of witnesses, but don’t count on anything you say being considered a legally valid will.

A Mutual Will is also known as a “I love you Will,” when partners create a joint will leaving everything to each other. There can be some tricky things about these wills, since when one person dies, the other is still legally bound to the terms of this will. If the surviving spouse remarries, it can become complicated.

A Pour Over Will is the ideal choice, when your plan is to pour assets into an established trust at your death.

What does a will do and not do?

Wills are used to determine guardianship for minor children and distribute assets and real property. Despite the importance of a will, it doesn’t control jointly owned assets, or contracts, like life insurance policies and retirement accounts. These are controlled by beneficiary designation forms. It won’t matter if your will says that your current spouse should inherit your retirement account and you never changed the beneficiary from your first spouse. This is why estate planning attorneys always tell clients to check on beneficiary designations when large life events, like divorce and remarriage, occur.

What happens if there is no will?

This is when your loved ones realize the importance of a will.  Without a will, the state’s intestate succession laws will determine what happens and your wishes don’t count. That includes who inherits your property, and even who raises your minor children. The court will make all of these decisions. The stress that this creates cannot be underestimated. When there is no will, the chances of litigation between family members and trouble from distant relatives seeking a claim against your estate rises.  Let us help you create an estate plan to provide for your needs.

Reference: Bankrate (Nov. 6, 2020) “Why it’s important for every adult to get a will”

 

Estate Planning With Trusts

Many people create their estate planning with trusts. A trust is a legal agreement that has at least three parties. The same person(a) can be in more than one of these roles at the same time. The terms of the trust usually are embodied in a legal document called a trust agreement. Forbes’s recent article entitled “Here’s What You Need To Know About The Most-Popular Estate Planning Trusts” explains that the first party is the person who creates the trust, known as a trustor, grantor, settlor, or creator.

The trustee is the second party to the agreement. This person has legal title to the property in the trust and manages the property, according to the instructions in the trust and state law. The third party is the beneficiary who benefits from the trust. There can be multiple beneficiaries at the same time, and there also can be different beneficiaries over time.

The trustee is a fiduciary who must manage the trust property only for the interests of the beneficiaries and consistent with the trust agreement and the law. Although a trust is created when the trust agreement is signed and executed, it isn’t really operational until it’s funded by transferring property to it.

A living trust, also called an inter vivos trust, is a trust that’s created during the trustor’s lifetime. A testamentary trust is created in the trustor’s last will and testament. A trust can be revocable, which means that the trustor can revoke it or modify the terms at any time. An irrevocable trust can’t be changed or revoked.

Assets that are owned by a trust avoid the cost, delay and publicity of probate. However, there are no tax benefits to a revocable living trust. The settlors-trustees are taxed as though they still own the assets. The trust assets are also included in their estates under the federal estate tax.

Another form of estate planning with trusts is the irrevocable trust typically created to reduce income and/or estate taxes. This type of trust can also protect assets from creditors. When assets are transferred to an irrevocable trust, the income and gains are taxed to the trust when they are retained by the trust and taxed to the beneficiaries when distributed to them.

Under the federal estate tax and most state estate taxes, assets that are retitled to an irrevocable trust aren’t part of the grantor’s estate. Transfers to the trust are gifts to the beneficiaries. The grantor’s gift tax annual exclusion and lifetime exemption can be used to avoid gift taxes, until gifts exceed the exclusion and exemption limit.

A grantor trust is an income tax term that describes a trust where the grantor is taxed on the income. That’s because he or she retained rights to or benefits of the property. The revocable living trust is an example of a grantor trust.

A trust can be discretionary or nondiscretionary. A trustee of a discretionary trust has the power to make or withhold distributions to beneficiaries as the trustee deems appropriate or in their best interests. In a nondiscretionary trust, the trustee makes distributions according to the directions in the trust agreement.

Another type of estate planning using a trust is the spendthrift trust. This is an irrevocable trust that can be either living or testamentary. The key term restricts limits the beneficiary’s access to the trust principal, and the beneficiary and the beneficiary’s creditors can’t force distributions. The spendthrift provision is used when the settlor is worried that a beneficiary might waste the money or have trouble with creditors. Many states permit spendthrift trusts, but some limit the amount of principal that can be protected, and some do not recognize spendthrift provisions.

Finally, a special needs trust can be used to provide for a person who needs assistance for life. In many cases, it’s a child or sibling of the trust settlor. It can be either living or testamentary. Critical to a special needs trust is it has provisions that make certain the beneficiary can receive financial support from the trust, without being disqualified from federal and state support programs for those with special needs.

For more about trusts and how one may fit into your estate planning, contact our office.

Reference: Forbes (Oct. 26, 2020) “Here’s What You Need To Know About The Most-Popular Estate Planning Trusts”

 

Joint Ownership vs Beneficiary Designations

Two of the most popular ways of avoiding probate are joint ownership and beneficiary designations.  Most people think a will is the most important tool in the estate planning toolbox, but in many instances, it is not even used. Assets in the will go through probate, and wills control assets in your name only. If you don’t have a will, your state laws will provide one under its law of Intestate Succession. Instead of making a will, some people just name their spouses or children on joint accounts or as beneficiary designations, says the article “Protecting Your Assets: Joint Accounts and Beneficiary Designations” from The Street. however, that can lead to big problems.

Let’s look at a typical family. They own a home, an IRA, life insurance and some bank and investment accounts. They have wills that leave everything to each other, and equally to their children upon their deaths. If a child predeceases them, they want the child’s share to go to the child’s children (their grandchildren). This is called per stirpes, meaning it goes to the next generation. The husband and wife have also listed each other as joint owners and beneficiaries and then listed their children as contingent beneficiaries on all financial accounts.

When the husband dies, all his assets go to his wife. When she dies, she had named her living children as beneficiaries. If she signed a quit claim deed putting the children’s names on the house before she died, the will and probate may be bypassed altogether.

Sounds like a great plan, doesn’t it? Except like most things that sound too good to be true, this one is not a great plan. Here’s what can and very often does go wrong.

Let’s say a daughter inherits a bank account and is sued, files for bankruptcy or divorces. Her entire inheritance is vulnerable, with no protection at all.

What if you say in your will that you want everything to go equally to all three children when you die, but you only put one son as a beneficiary on your accounts? When you die, only one son inherits everything. The will does not supersede the beneficiary designation. If the son wants to keep all your assets, he can, no matter what he may have promised you and his siblings.

If the wife dies first and the husband remarries, he may want to leave everything to his new wife. He’s hoping that when she dies, she’ll distribute the assets from his first marriage to his children. He even has a will and changes the beneficiary designations on his investment accounts to make sure that happens. However, when he dies, because of the survivorship aspect of joint ownership and beneficiary designations, she owns the accounts and can name whoever she wants to inherit those accounts. She has the legal right to cut out anyone she wants. The husband may have avoided probate, but his children are left with no inheritance.

We all like to believe that our spouses and children will do the right thing upon our death, but the only way to ensure that this will happen is to have an estate plan created using trusts and other planning strategies. Avoiding probate may be a popular theme but making sure your assets go where you want to them to is far more important than avoiding probate. Meet with an estate planning attorney to ensure that your family is protected, the right way.

We can help you avoid probate efficiently.

Reference: The Street (Oct. 30, 2020) “Protecting Your Assets: Joint Accounts and Beneficiary Designations”

 

Estate Planning Terms

Knowing key estate planning terms can help you accomplish several objectives, including naming guardians for minor children, choosing healthcare agents to make decisions for you should you become ill, minimizing taxes so you can give more wealth to your heirs and saying how and to whom you would like to pass your estate at death.

Emmett Messenger Index’s recent article entitled “13 Estate Planning Terms You Need to Know” provides some important terms to understand as you consider your own estate plan.

Assets: This is anything a person owns. It can include a home and other real estate, bank accounts, life insurance, investments, furniture, jewelry, collectibles, art, and clothing.

Beneficiary: This is an individual or entity (like a charity) that gets a beneficial interest in an asset, such as an estate, trust, account, or insurance policy.

Distribution: A payment in cash or asset(s) to the beneficiary who’s designated to receive it.

Estate: All of the assets and debts left by a person at death.

Fiduciary: This estate planning term refers to an individual with a legal obligation or duty to act primarily for another person’s benefit, such as a trustee or agent under a power of attorney.

Funding: The process of transferring or retitling assets to a trust. Note that a living trust will only avoid probate at the Grantor’s death if it’s fully funded. A grantor also may be known as a settlor or trustor.

Incapacitated or Incompetent: The situation when a person is unable to manage her own affairs, either temporarily or permanently, and often involves a lack of mental capacity.

Inheritance: These are assets received from someone who has died.

Probate: This is the orderly court-supervised process of distributing the assets of a person who has died.

Trust: This key estate planning term is a fiduciary relationship where a  grantor gives a trustee the right to hold property or assets for the benefit of another party, known as the beneficiary. The trust is a written trust agreement that directs how the trust assets will be distributed to the beneficiary.

Will: A written document with directions for disposing of a person’s assets after their death. A will is enforced by a probate court. A will can provide for the nomination of a guardian for minor children.

Let us help you with your estate planning.

Reference: Emmett Messenger Index (Oct. 28, 2020) “13 Estate Planning Terms You Need to Know”

 

Digital Assets and Estate Planning

Today’s estate plan needs to expressly declare an “agent” or a “fiduciary” to gain access and control of “digital assets” in case of incapacity or death. If your estate plan has not been updated in the last four or five years, it’s likely that your digital assets are unprotected, advises the article “Properly addressing digital assets on your estate plan” from Southern Nevada Business Weekly.

Digital assets have value not only to owners, but to family members, beneficiaries and heirs. Some assets have sentimental value, like videos and photos, while others, like business records, URLs and gaming accounts, have financial value. Failing to address these issues in an estate plan could result in your executor and heirs being denied access and control of these assets during incapacity or death.

Here are some examples of digital assets:

  • Email accounts–contain communications and history, including information about other digital assets.
  • Social media accounts/apps: Facebook, Twitter, Pinterest, YouTube, TikTok, etc.
  • Photo Sharing Accounts: Instagram, Shutterfly, Snapfish, Flickr, etc.
  • Gaming and Gambling Accounts/Apps: DraftKings, Esports Entertainment
  • E-Commerce Accounts/Apps: Amazon, PayPal, Etsy, PayPal, Venmo, etc.
  • Financial Accounts/Apps: Banks, Scottrade, E*Trade
  • Retail Accounts: Any store, online shopping that has a username and a password
  • Security Information: Two factor authentication, mobile phone PIN/PW, facial recognition, etc.

Here’s a little-known fact: without the proper legal authority to access these assets, the “agent” or “fiduciary” could be committing a crime. The Consumer Fraud and Abuse Act provides that it is a federal crime to access a computer and obtain information without authorization or when exceeding authorized access.

Most states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA 2017). The Act contains specific language to be used in wills, trusts or power of attorney to name a “designated recipient” or “fiduciary” to access, control, transfer, or close digital assets upon incapacity or after death. RUFADDA also provides specific procedures for companies to disclose digital assets to a designated recipient or fiduciary.

If your estate planning assets do not address the issue of digital assets or do not use the specific language of RUFADDA, or generally if your estate planning documents were created before 2017, it’s time for a review that includes digital assets.

Even if all you have is a personal email account, you have digital assets to protect. It’s not a big problem to address them in your estate plan but can become a bigger program if they are neglected.

Let us help you make sure your digital assets are covered in your estate plan.

Reference: Southern Nevada Business Weekly (Sep. 17, 2020)“Properly addressing digital assets on your estate plan”

 

Social Security in 2021

Issues for Social Security in 2021 include the annual cost-of-living adjustment (COLA) for benefits to be 1.3%, which is a small but significant increase for millions of beneficiaries. They’ll see a raise in their monthly payments beginning in January 2021. However, the benefits increase isn’t the only change coming next year, according to AARP’s October article entitled “Biggest Social Security Changes for 2021.” Some of the biggest changes affecting Social Security recipients in 2021, including the average monthly benefits in 2021 (+ difference from 2020):

  • Retired worker: $1,543 (+$20)
  • Retired couple: $2,596 (+$33)
  • Widow or widower: $1,453 (+$19)
  • Widow with two children: $3,001 (+$39)
  • Disabled worker: $1,277 (+$16)
  • Disabled worker w/ spouse, children: $2,224 (+$29)
  • SSI for individual: $794 (+$11)
  • SSI for couple: $1,191 (+$16)

The 1.3% COLA that starts in January was calculated based on the year-over-year rate of inflation. It’s the difference between the Consumer Price Index for Urban Wage Earners (CPI-W), a government measurement of prices typically paid for a basket of goods and services, in the third quarter of 2019 and the third quarter of 2020. The modest increase signals the relatively low rate of inflation over the past year. When there’s no change in the index, or if prices have fallen year over year, there’s no COLA.

For the average retired worker, the monthly Social Security in 2021 benefit will go up by $20 to $1,543 in January from $1,523 this year. For the average retired couple who both collect benefits, the payment will rise by $33 to $2,596, up from $2,563, and for the average disabled worker, monthly benefits will increase by $16 to $1,277 from $1,261. The maximum Social Security check for a person retiring at full retirement age will rise to $3,148 a month in 2021 from $3,011 — an increase of $137.

The payroll tax that funds Social Security in 2021 is set at 12.4% on eligible wages. Employees pay 6.2%, and employers pay the other half. Self-employed workers pay the whole 12.4%. The money paid in by today’s workers goes to cover current benefits, with any excess going into the Social Security trust fund.

A recent change in law states that the new Medicare premium will be less than previously projected, which preserves part of the COLA for most beneficiaries. Initially, higher emergency Medicare spending due to COVID-19 was expected to lead to very high Medicare premiums in 2021. Most beneficiaries would have seen their COLA wiped out by Part B premium increases, if the law hadn’t been changed.

Those who get Supplemental Security Income (SSI) that helps some individuals with little or no income meet basic living needs, will also see a 1.3% rise in their monthly benefits. For the average individual, that means $11 more a month, to $794 from $783. The average couple gets $16 more a month, to $1,191 from $1,175. SSI is funded by general tax revenue, not Social Security payroll taxes.  These are just a few of the changes for Social Security in 2021.

Let us help you with your estate planning.

Reference: AARP (Oct. 28, 2020) “Biggest Social Security Changes for 2021”

Suggested Key Terms: Disability, Social Security, Supplemental Security Income, Social Security Disability Insurance

When Parents Move In

When parents move into someone else’s household, 14% of the homeowners were the parent of the head of household in 2017. That number is an increase from 7% in 1995, according to the Pew Research Center.

“While the rise in shared living during and immediately after the recession was attributed in large part to a growing number of millennials moving back in with their parents, the longer-term increase has been partially driven by a different phenomenon: parents moving in with their adult children,” according to the Pew report.

US News and World Report’s recent article entitled “When Your Elderly Parents Move In With You” says that if your children also return home after college, you might wind up supporting your children and your parents at the same time.

The critical thing to do is to make a plan. Discuss your goals, the finances and the possibilities, which includes in-home care or nursing home care. Let’s look at how to care for aging parents in your home.

Get Financially Prepared. When parents move in, it will add new costs to your budget. In addition to health care for aging parents, the most disruptive implications are often the financial cost of supporting another dependent and having the space to accommodate them in the household. Talk about whether your parent will be contributing Social Security income or other retirement assets toward household expenses.

Think About Hiring Extra Help. Caring for a parent with significant health problems who needs help with basic living tasks can quickly become overwhelming for an adult child with children and work responsibilities. An aging parent might need around-the-clock care. A home health aide could be brought in during work hours or there’s also adult day health care services. However, these costs can add up. It’s not uncommon for the child who is caring for a parent to scale back his or her own career to accomplish both tasks.

Plan Before They Move In. Begin the discussion about the transition as early as you can. It can be doubly stressful to be executing a move in the middle of a crisis or urgent situation, like a health emergency or the death of a parent.

Remember that when parents move in, it often means you may need to schedule their activities and medical appointments. This can take time away from normal family routines.

Let us help you plan your estate.

Reference: US News and World Report (Aug. 30, 2020) “When Your Elderly Parents Move In With You”

Suggested Key Terms: Elder Law Attorney, Disability, Supplemental Security Income, Elder Care, Caregiving, Elder Care

How to Catch Up on Retirement Savings

Many workers need to catch up on retirement savings because they haven’t created any plans to save for their retirement. However, you can start turning that situation around now. Money Talks News’ recent article entitled “The 7 Fastest Ways to Catch Up on Retirement Savings” says that, even if you can’t add to retirement savings at the moment, here are some ideas to plan for how you’ll address this shortfall, when you’re back on your feet financially.

Review your budget. If you need more money for retirement savings, change your budget. Make certain that all your money is identified and working for you. Reduce or cut expenses that prevent you from achieving goals.

“Catch up” your 401(k). If you are over 50, take advantage of the ‘catch-up contribution’ in your 401(k). In 2020, the base limit for contributions to workplace retirement accounts is $19,500. In addition, starting at age 50, workers with a 401(k) plan can contribute an extra $6,500 per year. If you have an IRA — either traditional or Roth — you can contribute $6,000, plus an extra $1,000 beginning at age 50.

Leverage all investment opportunities. When you invest in your 401(k), put enough in to at least get any full employer matching funds. There are also employers that match contributions to a health savings account, which can be a great hidden way to save for retirement. You can also maximize IRA contributions (Roth or traditional), depending on what is possible given your income. Any money left over can be invested it in a taxable account.

Bolster your earnings. If you’re behind in saving for retirement, you might need to boost your earnings more quickly. To earn more income, consider changing jobs, get training to update your skills, or finding a side gig. If income doesn’t grow over time, it’s hard to have savings strategies accelerate retirement success.

Be wise with raises and windfalls. When you get a raise, split the amount and put half in a checking account and half toward retirement savings.

Minimize your spending. This can be the toughest part, but it’s also perhaps the most important. Reducing spending increases your savings, and it also teaches you to live with less. If you learn to live more modestly, you won’t need to save as much to continue your lifestyle in retirement. If you’re unsure where all your money is going, monitor your spending. List all the expenses and track them over time. When you know where your money is going, you’ll have the information needed to determine if there are places where spending can be diverted to savings.

Make a “mortgage payment” after the house is paid off. If you’ve worked hard to pay off the mortgage, save the money that was budgeted for the house. Save it in an investment account to use for retirement spending. Do the same when you pay off a car loan and watch your wealth grow.  We can help you with your estate planning in retirement.

Reference: Money Talks News (Oct. 8, 2020) “The 7 Fastest Ways to Catch Up on Retirement Savings”