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Serving Clients in Edmond, OK
and the Surrounding Area

Why Is A Will Important?

estate planning faqA Gallup poll released in June showed that slightly less than half of all Americans have a will to tell loved ones what they want to happen with their estate after they die. Many may ask why is it important to have a will, and what’s surprising is that the results of this survey have been almost the same since 1990, explains the article “6 Reasons You Need to Make a Will Now” from Real Simple. The survey also showed that upper-income Americans are more likely than lower-income Americans to have a will, and the younger people are, the less likely they are to have a will.

One of the lessons from the pandemic, is how fragile our lives are. It’s never too early to start planning and properly document your wishes. If you need more reasons to begin estate planning, here are six:

No will often leads to unwanted consequences. In deciding why is it important to have a will some misconceptions can be dealt with.  A major misconception is the idea that you don’t need a will because everything you own will go to your family. Not necessarily. Each state has its own laws about what happens if you have no will, and those laws are usually based on bloodlines or kinship. Most states leave two-thirds of your assets to your children and one-third to your spouse. Will your spouse be able to maintain the same standard of living, or even remain in the family home if this is how assets are distributed? A no-will situation is a no-win situation and can fracture even the best families.

Wills are used to name guardians for minor children. No parent, especially young parents, thinks that anything will happen to them, or even more unlikely, to both parents. However, it does. Creating a will offers the opportunity to name guardians to care for your children after death. If you don’t designate a guardian, a judge will. The judge will have never met your children, nor understand your family’s dynamics, and might even determine that the children should be raised by strangers.

Wills and pet trusts can protect pets after your demise. If you have beloved animal companions, it’s important to understand what can happen to them after you die. The law considers pets to be property, so you can’t leave money to your pet. However, you can create a pet trust and name a person to be the caregiver for your pet, if it survives you. The trust is enforceable, and the pet’s care can be detailed. Otherwise, there is no guarantee your pet will avoid being euthanized.

Taxes are part of death. Creating an estate plan with an experienced estate planning attorney who is knowledgeable about estate taxes, could save your heirs from losing a significant part of their inheritance. There are many tools and strategies to minimize taxes, including making charitable gifts. Plans for large estates can be structured in a way to avoid as much as 40% of tax exposure. It’s even more important to protect a smaller estate from being lost to taxes.

Peace of mind. Remember, wills and estate plans are not just for the benefit of the person who creates them. They are for the family, the surviving spouse, children, and grandchildren. If you did not take the time and make the effort to create an estate plan, they are the ones who will live with the consequences. In many cases, it could change their lives—and not for the better.

Putting it off never ends well. When you’re young and healthy, it seems like nothing can ever go wrong. However, live long enough, and you learn life has ups and downs and unexpected events—like death and serious illness—happen to everyone. Creating an estate plan won’t make you die sooner but having one can provide you and your loved ones with security, so you can focus on living.

Reference: Real Simple (June 25, 2021) “6 Reasons You Need to Make a Will Now”

 

Splitting An Estate among Kids

Estate Planning in Edmond OklahomaA father who owns a home and has a healthy $300,000 IRA has two adult children. The youngest, who is disabled, takes care of his father and needs money to live on. The second son is successful and has five children. The younger son has no pension plan and no IRA. The father wants help deciding how to distribute 300 shares of Microsoft, worth about $72,000. The question from a recent article in nj.com is “What’s the best way to split my estate for my kids?” The answer is more complicated than simply how to transfer the stock.

Before the father makes any kind of gift or bequest to his son, he needs to consider whether the son will be eligible for governmental assistance based on his disability and assets. If so, or if the son is already receiving government benefits, any kind of gift or inheritance could make him ineligible. A Third-Party Special Needs Trust may be the best way to maintain the son’s eligibility, while allowing assets to be given to him.

Inherited assets and gifts—but not an IRA or annuities—receive a step-up in basis. The gain on the stock from the time it was purchased and the value at the time of the father’s death will not be taxed. If, however, the stock is gifted to a grandchild, the grandchild will take the grandfather’s basis and upon the sale of the stock, they’ll have to pay the tax on the difference between the sales price and the original price.

You should also consider the impact on Medicaid. If funds are gifted to the son, Medicaid will have a gift-year lookback period and the gifting could make the father ineligible for Medicaid coverage for five years.

An IRA must be initially funded with cash. Once funded, stocks held in one IRA may be transferred to another IRA owned by the same person, and upon death they can go to an inherited IRA for a beneficiary. However, in this case, if the son doesn’t have any earned income and doesn’t have an IRA, the stock can’t be moved into an IRA.

Gifting may be an option. A person may give up to $15,000 per year, per person, without having to file a gift tax return with the IRS. Larger amounts may also be given but a gift tax return must be filed. Each taxpayer has a $11.7 million total over the course of their lifetime to gift with no tax or to leave at death. (Either way, it is a total of $11.7 million, whether given with warm hands or left at death.) When you reach that point, which most don’t, then you’ll need to pay gift taxes.

Medical expenses and educational expenses may be paid for another person, as long as they are paid directly to the educational institution or health care provider. This is not considered a taxable gift.

This person would benefit from sitting down with an estate planning attorney and exploring how to best prepare for his youngest son’s future after the father passes, rather than worrying about the Microsoft stock. There are bigger issues to deal with here.

Reference: nj.com (June 24, 2021) “What’s the best way to split my estate for my kids

Stress-free Asset Transfers?

Fiduciary duties for trusteesWe can all agree that end-of-life planning is a sensitive topic. Nonetheless, taking the time to consider a loved one’s estate and distribution of wealth can set the family at ease and also make certain that there is a smooth transition of assets, without unnecessary legal hurdles or headaches. Creating stress-free asset transfers is a goal of much estate planning.

MarketWatch’s article entitled “3 tips for navigating estate planning with loved ones” explains that, if you’re thinking about starting the process of estate planning with a close family member, like an elderly parent or a new spouse, read these recommendations for stress-free asset transfers:

  1. Stress the ultimate benefit of peace of mind. Estate planning helps the transfer of assets in an efficient and less stressful manner. It also minimizes estate tax liability of your assets when you die. Most of all, your loved ones will benefit with the peace of mind.
  2. Be as open as you can. Be honest and communicate openly about your loved one’s wishes on how they would like to distribute their estate and wealth either during life or death. Many assumptions can be made about end-of-life financial planning, like parents who assume their children will not fight when dividing their assets. This can put a lot of stress on surviving siblings, so communicate clear expectations during the planning process. It is also important to take some time to consider trustees and executors, and to encourage your parent or spouse to name an executor who is organized and thorough. Once this individual is named, be sure he or she understands the location of all of your loved one’s assets.
  3. Use care with beneficiary selections. Naming beneficiaries can have important tax implications. It is common to name a trust as the beneficiary of an IRA account, when your children are young. However, as they grow up, this can be an issue. When an IRA is distributed to a trust, it triggers taxes. The assets will be taxed immediately before being distributed to beneficiaries. Name children as direct beneficiaries of their IRA, so that they have other options available to them. Many of these may provide significant tax savings.

One more thought: using “transfer on death” designations for individual accounts is similar to a beneficiary designation for a retirement account. However, it permits your parent or spouse to name beneficiaries when they pass and prevents their money from going through a lengthy and expensive probate.

The best time to discuss estate planning with your parents is now. Work with an experienced estate planning attorney to guide you through this process.

Reference: MarketWatch (June 5, 2021) “3 tips for navigating estate planning with loved ones”

 

Can I Write a Perfect Will?

estate planning faqThe Good Men Project’s recent article entitled “10 Tips to Writing the Perfect Will” says that writing a perfect will is hard but not impossible. The article provides some tips to keep in mind:

  1. Include Everything. If you have items that are very important to you, make sure they are in the right hands after your death.
  2. Consult an Experienced Estate Planning Attorney. It is a challenge to write a will, especially when you do not know all the legal processes that will take place after your death. An estate planning lawyer can educate you on how your estate is being distributed after your death and how to address specific circumstances.
  3. Name an Executor. An executor will manage and distribute your assets after you die. Select a trustworthy person and be sure it is someone who will respect you and your will.
  4. Name the Beneficiaries. These people will get your assets after you pass away. Name them all and include their full names, so there is no confusion.
  5. Say Where Everything Can Be Found. Your executor should know where all of your property and assets can be found. If there is any safe place where you keep things, add it to your will.
  6. Describe Residual Legacies. This is what remains in your estate, once all the other legacies and bequests are completed. If you fail to do this, it will be a partial intestacy. No matter that the legacies would be distributed according to the will, the intestacy laws will control the residue, which may not be to your liking.
  7. Name Guardians for Your Minor Children. Appoint a guardian to take care of any minor children or the court will appoint their guardians, again this may not be to your liking.
  8. Be Specific. An ambiguous will creates issues for the executor and may require court intervention. Be specific and include heirs’ full names. Account numbers, security boxes and anything of the sort should also be included in your will for easy access.
  9. Keep it Updated. If you experience a major life event, update your will accordingly.
  10. Get Signatures from Witnesses. Once your will is completed, you need witnesses who are at least 18 and are not beneficiaries. Sign and date the will in front of these witnesses, and then ask them to date and sign it too.

If you have any questions about wills, speak to an experienced estate planning attorney.

Reference: The Good Men Project (May 28, 2021) “10 Tips to Writing the Perfect Will”

 

Adult Children on Bank Accounts

Asset protection in Edmond OklahomaMany may add their adult children to bank accounts.  There is a question of whether this is a good idea?  Adding another person to your bank account provides both of you with complete access to the account. A person can be a power of attorney and a joint account holder, but the two are very different roles, explains the article “What are my rights when someone adds me to a bank account?” from Lehigh Valley Live.

A joint account is a bank or investment account shared by two individuals, although more than two people may be on an account. They have equal access to funds, as well as equal responsibilities for any fees or expenses associated with the account. If there are transactions, depending upon the rules of the institution, all owners may be required to sign documents. The key is how the account is titled. That’s the controlling factor in determining how the assets in the account are divided, if one of the owners dies. There are several different types of joint ownership.   In deciding whether to add adult children to bank accounts these things must be thought about.

One is “Joint Tenants with Rights of Survivorship,” or JTWROS. If one of the account owners should die, the assets in the account go directly to the surviving account holder. These assets do not go through probate.

Then there’s “Tenants in Common,” or TIC. With TIC, each individual account owner has the right to designate a beneficiary for their portion of the assets upon their death. The assets might not be split 50/50. How the account is titled lets the account owners divide ownership however they want.

Another one: “Joint Tenants by the Entirety.” This describes a married couple who own real estate or a financial account as a legal entity with equal ownership. Neither person may transfer their half of the property during their lifetime or through a will or a trust. When one spouse dies, the entire account goes to the surviving spouse and it transfers without passing through probate.

In the example given at the start of the article, the establishment of a joint account gives both the father and son equal access to the account. If the father is unable to handle the account at any time in the future, for whatever reason, the son will be able to step in.

Power of Attorney or POA is a completely different thing. A POA is a legal document giving a person the authority to act on behalf of another person for a specific transaction or general legal and financial matters. Just as there are numerous types of joint ownership, there are numerous types of POA.

A general POA gives a person the power to act on behalf of the principal for all legal, property and financial matters, as long as the principal’s mental capacity is sound. The Durable POA gives authority to a person to act on behalf of the principal, even after the principal becomes mentally incapacitated. Special or limited power of attorney gives authority to act only for specific matters or transactions. A Springing Durable POA provides authority to act only under certain events or levels of incapacitation, which is defined in detail in the document.

You can be both a joint owner of an account and a power of attorney. These are two different ways to help a parent with financial and legal activities. An estate planning attorney can help create the POA that best fits the situation.

Reference: Lehigh Valley Live (June 10, 2021) “What are my rights when someone adds me to a bank account?”

 

Typical Estate Planning Documents?

What are the typical estate planning documents?  For many people, eight documents form the foundation of an estate plan. It’s not that difficult a project as it seems, explains the article “8 Documents That Are Essential to Planning Your Estate” from msn.com. When you’ve completed your estate plan, you’ll also gain the peace of mind of knowing that you’ve done what was needed to protect your family. It’s well worth the effort.

Last will and testament. A last will and testament is one of the typical estate planning documents.  This is the basic document that gives you the ability to tell your family what you want to happen with your assets. It is used to name an executor—a person who will be in charge of managing your estate. Your will is also where you name a guardian who will be in charge of raising minor children. You can use the will to convey funeral instructions, but you may want to do that in a separate document, in case your will isn’t found right away. Your estate planning attorney will help you figure out the best way to handle that.

What happens if you don’t have a will? In that case, a probate court will determine who will be your executor. It might be a spouse, a grown child, or someone you don’t know or would not want to handle your estate. It’s best to have a will and select your executor yourself. When your estate goes through probate, all of the information in your will becomes part of the public record, so don’t put anything in your will, like passwords or account numbers.

Revocable living trust. Another of the typical estate planning documents is a revocable trust.  Trusts are used to pass assets and property without going through probate. Your estate planning attorney will help create the trust and you’ll decide who will be in charge of it upon your death. You can be the trustee while you are living, but then you lose any estate tax benefits. If you have substantial property or wealth, trusts are a good tool to control assets and save on estate taxes.

Beneficiary designations. Any time you purchase a new insurance policy or a retirement plan, you are asked to name a beneficiary. If your first job came with a retirement plan, you likely also named a beneficiary for that plan. These designations allow the assets to pass directly to the beneficiary upon your death. They aren’t included in your will and they don’t go through probate. The biggest problem with beneficiary designations? Neglecting to update them through the many changes in life. Review and update your beneficiary designations on a regular basis.

Durable power of attorney. This document allows you to name the person to act on your behalf, if you become incapacitated because of illness or injury. They can manage your legal and financial affairs. Here’s an important point: if you become incapacitated, you cannot assign this role to someone. It needs to be done when you are legally competent.

Health care power of attorney and living will. The health care power of attorney lets someone else make medical decisions on your behalf, if you are too sick to do so yourself. The living will gives you the opportunity to explain what kind of care you do or do not want if you are close to death. If the idea of staying alive on a heart machine makes you unhappy, for instance, you can document your wishes, so loved ones don’t have to wonder what you want.

Digital assets. Much of our lives are lived online, and we have assets that won’t be found in a search of the attic or basement. Each online platform that you use may have a directive process, where you can clearly state who you want to have access to your digital assets and what you would like to have happen to them upon your death.

A letter of intent. Writing a letter of intent is a way to convey your wishes to loved ones for what you’d like to happen after you die. It may not be legally enforceable, like a will or a trust, but your loved ones will appreciate knowing what you want for funeral planning or a memorial service.

List of important documents. Sparing your family a post-mortem scavenger hunt is a gift to the living. Make a list of documents and make sure they know where important documents can be found. Include a list of routine bills, the professionals you rely on, including contact information and account numbers. Some families use a briefcase to store the important papers, but a fireproof and waterproof safe is more secure.

Reference: msn.com (June 19, 2021) “8 Documents That Are Essential to Planning Your Estate”

 

Will There Be Medicare Expansion?

Edmond estate planning when divorcedWill there be medicare expansion?  Senate Majority Leader Chuck Schumer and Senate Budget Committee Chairman Bernie Sanders are working on legislation that would build on the dual economic proposals unveiled earlier this year by President Biden: the $2.3 trillion American Jobs Plan and the $1.8 trillion American Families Plan.

Fox Business’ recent article entitled “Democrats eye major Medicare expansion as part of $6T reconciliation bill” reports that the package—which Democrats could pass on a party-line vote using their slimmest-possible Senate majority— includes other Democratic goals. These include lowering Medicare’s eligibility age from 65 to 55 or 60 and expanding the program to cover dental work, eye glasses and eye surgeries, as well as hearing aids.

“There’s a gaping hole in Medicare that leaves out coverage for dental, vision, and hearing — this is a serious problem,” Schumer, D-N.Y., tweeted on Monday. “I’m working with @SenSanders to push to include dental, vision, and hearing Medicare coverage in the American Jobs and Families Plans.”

Dropping the Medicare eligibility age to 60 could provide coverage for up to 11.7 million people with employer-based insurance, 2.4 million people with private coverage and another 1.6 million people who are uninsured. Medicare is the federal health care program for people over the age of 65.

“If you talk to family medicine or primary care doctors, they will tell you with certainty that ignoring medical issues related to dental, vision and hearing often devolves into far more serious medical problems for people — especially seniors — that cost more to treat and are harder to remedy,” Schumer said during a news conference Sunday.

Biden campaigned on expanding the Affordable Care Act and vowed to drop the qualifying Medicare age to 60, with an option for individuals between the ages of 60-64 to keep their coverage. Under an early draft of the $6 trillion plan, roughly half of the proposed spending would be paid for. Democratic efforts to begin moving forward with a party-line bill will start soon.

“We expect to have a whole lot done in July,” Sanders said last week.

Still, it’s unclear whether the measure would receive the necessary support from all 50 Senate Democrats. Moderate members, like Sen. Joe Manchin of West Virginia, have said they want to look at a bipartisan infrastructure-only deal and have not committed to using reconciliation to pass more progressive priorities.

Reference: Fox Business (June 21, 2021) “Democrats eye major Medicare expansion as part of $6T reconciliation bill”

 

When Should I do Estate Planning?

Legacy and estate planning for children in EdmondOkay, you just hit 40 and you’re thinking about what your life will be like now that you are middle-aged. You better start thinking about retirement.  Your children will need money to go to college one day, and you may wonder when should I do estate planning?

So, you’re not even considering the possibility of estate planning because that’s something that you do when you’re old, like in your 60s, right?

Wrong, says Reality Biz News’ recent article entitled “When is the right time to consider estate planning?” While the life expectancy for the average American might be between 80 and 85, stuff happens, and so does death. You should be certain that your family is provided for, if you pass away unexpectedly.

It’s much easier to plan for the inevitable when you are young and healthy.  However, many people wait until they’re in the hospital to begin considering estate planning. Let’s look at some signs you should begin estate planning:

If you are in your twenties and living from paycheck to paycheck, it might not make much sense to plan for the distribution of your estate. Your bestie knows she’s getting your Beats, and your vintage records are going to your significant other. However, you should start planning your estate, when you begin saving money and making investments. Talk to an experienced estate planning attorney, if you fall into one of these categories:

You have a savings account. If you have a savings account with a few thousand dollars, you might want to think about who you want the money to go to if you pass away.

Have you recently been married? If you recently wed (or divorced), you and your spouse will want to start making a plan for who will get your joint assets when you’re no longer around. If you’re divorced, you should remove your ex from your will.  If you don’t have a will, your property will go directly to your spouse when you die. However, there are a few exceptions, including the fact that you can leave a bank account to a payable on death beneficiary. This will avoid probate and have the funds in that account go directly to that designated beneficiary.

You have assets of over $100,000. If you have some significant savings, you should ask an experienced estate planning attorney about creating a trust for anyone who may be dependent upon you.

You want to travel. Before you plan your ascent of Mount Everest, update your will. If you have minor children, you will want to nominate a guardian for them, in the event that you fall off the mountain and do not return.

You own property. If you own a house, a car, a boat, or other real estate but aren’t married and have no children, make a will. That way you can leave those assets to whomever you want.

Reference: Reality Biz News (April 23, 2021) “When is the right time to consider estate planning?”

 

Fraudsters Continue to Target Elderly

Edmond estate planning when divorcedFraudsters continue to target elderly, and in fact the National Council on Aging reports that seniors lose an estimated $3 billion to financial scams, which is the worst possible time in life to lose money. There’s simply no time to replace the money. Why scammers target the elderly is easy to understand, as reported in the article “Scam Alert: 4 Types of Fraud That Target the Elderly (and How to Beat Them)” from Kiplinger. People who are 50 years and older hold 83% of the wealth in America, and households headed by people 70 years and up have the highest median net worth. That is where the money is.

The other factor: seniors were raised to mind their manners. An older American may feel it’s rude to hang up on a fast-talking scammer, who will take advantage of their hesitation. Lonely seniors are also happy to talk with someone. Scammers also target widows or divorced older women, thinking they are more vulnerable.

Here are the most common types of scams that fraudsters continue to target elderly with:

Imposter scams. The thief pretends to be someone you can trust to trick you into giving them your personal information like a password, access to a bank account or Social Security number. This category includes phone calls pretending to be from the Social Security Administration or the IRS. They often threaten arrest or legal action. Neither the IRS nor the SSA ever call people to ask for personal information. Hang up!

Medicare representative. A person calls claiming to be a representative from Medicare to get older people to provide personal information. Medicare won’t call to ask for your Social Security number or to obtain bank information to give you new benefits. Phone scammers are able to “spoof” their phone numbers—what may appear on your caller ID as a legitimate office is not actually a call coming from the agency. Before you give any information, hang up. If you have questions, call Medicare yourself.

Lottery and sweepstakes scams. These prey on the fear of running out of money during retirement. These scams happen by phone, email and snail mail, congratulating the recipient with news that they have won a huge lottery or sweepstakes, but the only way to access the prize is by paying a fee. The scammers might even send a paper check to cover the cost of the fee, but that check will bounce. Once you’ve sent the fee money, they’ll pocket it and be gone.

What can you do to protect yourself and your loved ones? Conversations between generations about money become even more important as we age. If an elderly parent talks up a new friend who is going to help them, a red flag should go up. If they are convinced that they are getting a great deal, or a windfall of money from a contest, talk with them about how realistic they are being. Make sure they know that the IRS, Medicare and Social Security does not call to ask for personal information.

For those who have not been able to see elderly parents because of the pandemic, this summer may reveal a lot of what has occurred in the last year. If you are concerned that they have been the victims of a scam, start by filing a report with their state’s attorney general office.

Reference: Kiplinger (June 10, 2021) “Scam Alert: 4 Types of Fraud That Target the Elderly (and How to Beat Them)”

 

Reviewing Estate Plans Matters

Reviewing estate plans matters, and if your estate plan or your parent’s estate plan hasn’t been reviewed in the last four years—or the last forty years—it’s time for an estate plan check-up—sooner, not later. Besides the potential for costing a lot to correct, says a recent article in Forbes entitled “5 Reasons To Have Your Parents’ Estate Plan Reviewed,” the documents may no longer work to achieve your parent’s wishes.

Rather than fix a messy situation after death, have an experienced estate planning attorney review the documents now. Here’s why.

Stale documents are anathema to financial institutions. If a power of attorney is more than twenty years old, don’t expect it to be received well by a bank or brokerage house. The financial institution will probably want to get an affidavit from the attorney who originally created the document to attest to its validity. Start with a hunt to find said attorney, and then hope that nothing occurs between the time that you request the affidavit and the time it arrives. For one client, the unexpected death of a parent during this process created all kinds of headaches. A regular review and refresh of estate documents would have prevented this issue.

State laws change. Changes to state laws change how estates are handled. They may be positive changes that could benefit your parents and your family. Let’s say your mother’s will leaves all of the contents of her home to numerous people. Locating all of these people becomes costly, especially if the will needs to be probated. Many states now allow for a separate document that lets personal items be disposed of, without being part of the probated estate. However, if the will has not been reviewed in ten or twenty years, you won’t know about this option.

Languages in estate planning documents change. In addition to changes in the law, there are changes to language that may have a big impact on the estate. Many attorneys have changed the language they use for trusts based on the SECURE Act. If your parent has a retirement account payable to a trust, it is critical that this language be modified, so that it complies with the new law. Lacking these updates, your parent’s estate may be subject to an increase in taxes, fees, or penalties.

Estate laws change over time. Recent years have seen major changes to estate law, from the aforementioned SECURE Act to changes in federal exclusions and gift taxes. Is your parent’s estate plan (or yours) in compliance with the new laws? If assets have changed since the last estate plan was done, there may be tax law changes to be incorporated. Are there enough assets available to pay the taxes from the estate or the trusts? If many accounts pass by beneficiary designation, getting beneficiaries to come up with the cash to pay the tax bill may be problematic.

The decedent’s wishes may not be followed, if documents are not updated. Here’s an example. A man came to an estate planning attorney’s office with his father’s will, which had not been updated. His father died, having been predeceased by the father’s sister. The man was the only living child. He and his father had a mutual understanding that the son would inherit the entire estate on the death of his father. However, his father’s sister had also died, and the will stated that her children would receive the sister’s share. The man had to share his inheritance with estranged nieces and nephews. Had the will been reviewed with an attorney, this mishap could have been prevented very easily.

Reference: Forbes (May 25, 2021) “5 Reasons To Have Your Parents’ Estate Plan Reviewed”

 

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