Estate Planning

When planning your estate, you must consider how you hold title to your real and personal property. The title and your designated beneficiaries will control how your real estate, bank accounts, retirement accounts, vehicles and investments are distributed upon your death, regardless of whether there is a will or trust in place and potentially with a result that you never intended.

One of the most important steps in establishing your estate plan is transferring title to your assets. If you have created a living trust, it is absolutely useless if you fail to transfer the title on your accounts, real estate or other property into the trust. Unless the assets are formally transferred into your living trust, they will not be subject to the terms of the trust and will be subject to probate.

Even if you don’t have a living trust, how you hold title to your property can still help your heirs avoid probate altogether. This ensures that your assets can be quickly transferred to the beneficiaries, and saves them the time and expense of a probate proceeding. Listed below are three of the most common ways to hold title to property; each has its advantages and drawbacks, depending on your personal situation.

Tenants in Common: When two or more individuals each own an undivided share of the property, it is known as a tenancy in common. Each co-tenant can transfer or sell his or her interest in the property without the consent of the co-tenants. In a tenancy in common, a deceased owner’s interest in the property continues after death and is distributed to the decedent’s heirs. Property titled in this manner is subject to probate, unless it is held in a living trust, but it enables you to leave your interest in the property to your own heirs rather than the property’s co-owners.

Joint Tenants:  In joint tenancy, two or more owners share a whole, undivided interest with right of survivorship. Upon the death of a joint tenant, the surviving joint tenants immediately become the owners of the entire property. The decedent’s interest in the property does not pass to his or her beneficiaries, regardless of any provisions in a living trust or will. A major advantage of joint tenancy is that a deceased joint tenant’s interest in the property passes to the surviving joint tenants without the asset going through probate. Joint tenancy has its disadvantages, too. Property owned in this manner can be attached by the creditors of any joint tenant, which could result in significant losses to the other joint tenants. Additionally, a joint tenant’s interest in the property cannot be sold or transferred without the consent of the other joint tenants.

Community Property with Right of Survivorship: Some states allow married couples to take title in this manner. When property is held this way, a surviving spouse automatically inherits the decedent’s interest in the property, without probate.

Make sure your estate planning attorney has a list of all of your property and exactly how you hold title to each asset, as this will directly affect how your property is distributed after you pass on. Automatic rules governing survivorship will control how property is distributed, regardless of what is stated in your will or living trust.

In first marriages, the couple generally has the same goals when it comes to their estate planning: take care of the surviving spouse for as long as he or she lives, then whatever is left will go to the children. They may own many of their assets jointly and, at the death of the first spouse, more than likely everything will go to the surviving spouse just as they had planned.

But second marriages (after divorce or death of the first spouse) are different. There may be his children, her children and sometimes their children. Each spouse probably has assets they brought into this marriage, and they will want those to go to their own children after they die.
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“The sandwich generation” is the term given to adults who are raising children and simultaneously caring for elderly or infirm parents.  Your children are one piece of “bread,” your parents are the other piece of “bread,” and you are “sandwiched” into the middle.

Caring for parents at the same time as you care for your children, your spouse and your job is exhausting and will stretch every resource you have.  And what about caring for yourself? Not surprisingly, most sandwich generation caregivers let self-care fall to the bottom of the priorities list which may impair your ability to care for others.

Following are several tips for sandwich generation caregivers.

• Hold an all-family meeting regarding your parents. Involve your parents, your parents’ siblings, and your own siblings in a detailed conversation about the present and future.  If you can, make joint decisions about issues like who can physically care for your parents, who can contribute financially and how much, and who should have legal authority over your parents’ finances and health care decisions if they become unable to make decisions for themselves.  Your parents need to share all their financial and health care information with you in order for the family to make informed decisions.  Once you have that information, you can make a long-term financial plan.
• Hold another all-family meeting with your children and your parents.  If you are physically or financially taking care of your parents, talk about this honestly with your children.  Involve your parents in the conversation as well.  Talk – in an age-appropriate way – about the changes that your children will experience, both positive and challenging.
• Prioritize privacy.  With multiple family members living under one roof, privacy – for children, parents, and grandparents – is a must.  If it is not be feasible for every family member to have his or her own room, then find other ways to give everyone some guaranteed privacy.  “The living room is just for Grandma and Grandpa after dinner.”  “Our teenage daughter gets the downstairs bathroom for as long as she needs in the mornings.”
• Make family plans.  There are joys associated with having three generations under one roof.  Make the effort to get everyone together for outings and meals.  Perhaps each generation can choose an outing once a month.
• Make a financial plan, and don’t forget yourself.  Are your children headed to college?  Are you hoping to move your parents into an assisted living facility?  How does your retirement fund look?  If you are caring for your parents, your financial plan will almost certainly have to be revised.  Don’t leave yourself and your spouse out of the equation.  Make sure to set aside some funds for your own retirement while saving for college and elder health care.
• Revise your estate plan documents as necessary.  If you had named your parents guardians of your children in case of your death, you may need to find other guardians.  You may need to set up trusts for your parents as well as for your children.  If your parent was your power of attorney, you may have to designate a different person to act on your behalf.
• Seek out and accept help.  Help for the elderly is well organized in the United States.  Here are a few governmental and nonprofit resources:
  • www.benefitscheckup.org – Hosted by the National Council on Aging, this website is a one-stop shop for determining which federal, state and local benefits your parents may qualify for
  • www.eldercare.gov – Sponsored by the U.S. Administration on Aging
  • www.caremanager.org  -- National Association of Professional Geriatric Care Managers
  • www.nadsa.org – National Adult Day Services Association

Testamentary capacity refers to a person’s ability to understand and execute a will. As a general rule, most people who are over the age of eighteen are thought to be competent to make and sign the will. They must be able to understand that they are signing the will, they must understand the nature of the property being affected by the will, and they must remember and understand who is affected by the will. These are simple burdens to meet. However, there are a number of reasons a person might challenge a will based on testamentary capacity.

If the testator of a will suffers from paranoid delusions, he or she may make changes to a testamentary document based on beliefs that have no basis in reality. If a disinherited heir can show that a testator suffered from such insane delusions when the changes were made, he or she can have the will invalidated. Similarly a person suffering from dementia or Alzheimer’s disease may be declared unfit to make a will. If a person suffers from a mental or physical disability that prevents them from understanding from understanding that a will is an instrument that is meant to direct how assets are to be distributed in the event of his or her death, that person is not capable of executing a valid will.

It is not entirely uncommon that disinherited heirs complain that a caretaker or a new acquaintance brainwashed the testator into changing his or her will. This is not an accusation of incapacity to make the will, but rather a claim of undue influence. If the third party suggested making the changes, if the third party threatened to withhold care if the will was not changed, or if the third party did anything at all to produce a will that would not be the testator’s intent absent that influence, the will may be set aside for undue influence. Regardless of the reason for the challenge, these determinations will only be made after the testator’s death if the will is presented to a court and challenged. For this reason, it is especially important for the testator to be as thorough as possible in making an estate plan and making sure that any changes are made with the assistance of an experienced estate planning attorney.

A durable power of attorney is an important part of an estate plan. It provides that, in the event of disability or incapacitation, a preselected agent can be granted power over the affairs of the individual signing the document. This power can be limited to specific decisions, like the decision to continue life sustaining treatment, or it can be much broader in scope to allow the agent power over the individual’s financial dealings.

Estate planning is meant to prepare for contingencies beyond an individual’s control. A traumatic accident could leave an individual without the ability to manage his or her own financial affairs. Debilitating diseases, like Alzheimer’s, can affect a person’s ability to make sound decisions for him or herself. In these scenarios, someone must be appointed to do make decisions on behalf of the incapacitated individual. Preparing a durable power of attorney as a part of an estate plan accomplishes three things. First, it gives the power of appointment to the individual, instead of to a judge. Second, it avoids the need for a potentially expensive court proceeding necessary to make that appointment. Finally, a power of attorney may be used to respond to time sensitive issues without waiting for a court hearing to grant an agent the power to act.

A power of attorney provides much flexibility for the individual signing it. It can take effect only upon disability, or right away, regardless of disability. It can specify what funds may or may not be used for. If a person does not want to live in an assisted living facility, he or she can make sure that money from his or her own bank accounts is not used for those purposes. Different assets can be managed by different agents. The power of attorney can give an agent power to distribute assets as gifts on a specific schedule to collaborate with an existing estate plan. The level of detail and amount of instruction that is possible as a part of the document is unlimited. It will always be quicker and more economical than a guardianship or conservatorship proceeding, and it will always serve the disabled person’s interests better than the broad powers granted to an individual by a court.

Some of the most generous provisions of the tax code are those that permit beneficiaries of IRAs and other qualified retirement plans to defer income tax on the plans until time of withdrawal. This allows the IRA or qualified plan to grow significantly more than if it were subject to tax on gains each year.

Another equally generous provision of the tax code permits beneficiaries to withdraw only a minimum amount from IRAs or qualified plans each year. By taking only these “required minimum distributions” a beneficiary can stretch out distributions over the better part of his or her lifetime, resulting in further deferral of income tax on the amount remaining in the plan.

Unfortunately, most beneficiaries fail to take advantage of this latter provision and withdraw all of the IRA or qualified plan funds immediately, thereby losing the significant tax advantages of tax-deferred growth.
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An executor is responsible for the administration of an estate. The executor’s signature carries the same weight of the person whose estate is being administered. He or she must pay the deceased’s debts and then distribute the remaining assets of the estate. If any of the assets of the estate earn money, an executor must manage those assets responsibly. The process of doing so can be intimidating for an individual who has never done so before.

After a person passes away, the executor must locate the will and file it with the local probate office. Copies of the death certificate should be obtained and sent to banks, creditors, and relevant government agencies like social security. He or she should set up a new bank account in the name of the estate. All income received for the deceased, such as remaining paychecks, rents from investment properties, and the collection of outstanding loans receivable, should go into this separate bank account. Bills that need to be paid, like mortgage payments or tax bills, can be paid from this account. Assets should be maintained for the benefit of the estate’s heirs. An executor is under no obligation to contribute to an estate’s assets to pay the estate’s expenses.

An inventory of assets should be compiled and maintained by the executor at all times. An accounting of the estate’s assets, debts, income, and expenses should also be available upon request. If probate is not necessary to distribute the assets of an estate, the executor can elect not to enter probate. Assets may need to be sold in order to be distributed to the heirs. Only the executor can transfer title on behalf of an estate. If an estate becomes insolvent, the executor must declare bankruptcy on behalf of the estate. After debts are paid and assets are distributed, an executor must dispose of any property remaining. He or she may be required to hire an attorney and appear in court on behalf of the estate if the will is challenged. For all of this trouble, an executor is permitted to take a fee from the estate’s assets. However, because the executor of an estate is usually a close family member, it is not uncommon for the executor to waive this fee. If any of these responsibilities are overwhelming for an executor, he or she may elect not to accept the position, or, if he or she has already accepted, may resign at any time.

Life insurance can be an integral part of an estate plan. Policies can be set up to be paid directly to the beneficiary, without the need to pass through the estate, and without the need for any taxes to be paid. Having a life insurance policy ensures that some assets will be liquid, so that debts and expenses can be paid quickly and easily without the need to dispose of assets. Beneficiaries can be changed at any time as can the benefit amount. The policy can be used to accumulate savings if the plan is surrendered before death. Life insurance policies, especially those purchased later in life, can pay out significantly more than what was invested into them. There are many benefits to purchasing a life insurance policy as part of an estate plan.

An attorney can set up a life insurance trust to help avoid estate taxes. A life insurance trust must be irrevocable, cannot be managed by the policy holder, and must be in place at least three years before the death of the policy holder. Any money received from the life insurance trust is not a part of the taxable estate. The need for this is rare as the exemption for estate taxes is currently almost five and a half million dollars, but it is a useful tool for some nonetheless.

There is a limit to how much life insurance an individual is permitted to purchase. A person may carry a multiple of his or her gross income which reduces with age. A twenty five year old can buy a policy worth thirty times his or her annual income. A sixty five year old may only purchase ten times his or her annual income worth of life insurance. This is an important factor to consider when deciding whether life insurance should be a part of your estate plan.

Life insurance as a part of estate planning is a complicated issue. It makes sense to consult with an estate attorney and a tax professional before meeting with an insurance broker. Both can help an individual understand the benefits of insurance over other means of transferring assets.

One common way to avoid probate of real estate after the owner dies is to hold the title to the property in joint names with rights of survivorship with children or other beneficiaries.  This is accomplished by adding the names of the children and certain legal terms to a new deed for the property and then recording it in the applicable public land records. 

Many people believe that they do not need to pay an attorney to help them prepare and record the new deed.  Instead, they think that a deed form can simply be downloaded from the internet or obtained from a book that can then be easily filled out and recorded.  But deeds are in fact legal documents that must comply with state law in order to be valid.  In addition, in most states, property will not pass to the other owners listed in a deed without probate unless certain specific legal terms are used in the deed.

How is a Defective Deed or an Invalid Deed Corrected? 

If the problems with a defective deed or an invalid deed are discovered before the owner dies, then the problems can be addressed by preparing and recording a “corrective deed” in the applicable public land records.  This should only be done with the assistance of an attorney.

Unfortunately, many times the problems with a defective deed or an invalid deed are not discovered until after the owner dies.  If this is the case, then the problems cannot be fixed with a corrective deed since the deceased owner is unable to sign the corrective deed.  Instead, the property will most likely need to be probated in order to fix the problems with the title.  Aside from probate taking time and costing money for legal fees and court expenses, until the problems with the title are sorted out in probate court, heirs will not be able to sell the property.  Or, worse yet, the property may be inherited by someone the owner had intended to disinherit when they prepared and recorded their own deed.

What Should You Do?

If you want to add your children or other beneficiaries to your deed in order to avoid probate, and you think you can save a few bucks by using a form you find on the internet or in a book, think again.  Deeds are legal documents that have very specific requirements and are governed by different laws in each state (in other words, a deed that is valid in California may not necessarily be valid in Florida). 

If you want your home or other real estate to pass to your children or other beneficiaries without probate, then seek the advice of an attorney who is familiar with the probate and real estate laws of the state where your property is located. This will insure that the deed will be valid and your property will in fact avoid probate and pass to your intended heirs.

When someone dies without a will, it is known as dying intestate.  In such cases, state law (of the state in which the person resides) governs how the person's estate is administered. In most states, the individual's assets are split -- with one third of the estate going to the spouse and all surviving children splitting the rest. For people who leave behind large estates, unless they have established trusts or other tax avoidance protections, there may be a tremendous tax liability, including both estate and inheritance tax.

For just about everyone, the cost of having a will prepared by a skilled and knowledgeable attorney is negligible when compared to the cost of dying intestate,  since there are a number of serious consequences involved in dying without a proper will in place.

Legal Consequences

The larger your estate, the more catastrophic the consequences of dying intestate will be. If you die without a will, the freedom to decide how your property will be divided will be taken from you and the state in which you reside will divide your assets.

Not only will you not be able to decide on the distribution of your property, but a stranger will be making personal, familial decisions. This may be divisive among your family members; instead of leaving your loved ones in peace, you may leave them engaged in bitter disputes over a family heirloom or even a simple memento. This can be especially true in situations where there are children from a previous marriage.

Tax Consequences

In addition to the legal and personal problems associated with dying intestate, the tax results can be severe as well. This is particularly true for clients who have not consulted with an estate planning attorney in order to protect themselves through tax avoidance methods. Both the state and federal governments can tax the transfer of property and an inheritance tax may be imposed on the property you have left to your heirs.

The most effective way to avoid all of these negative tax consequences is to create a will with a competent attorney. Your lawyer will help you to choose a proper executor (the person who will administer your estate, distribute your property and pay your debts), and will assist you in finding ways to limit your tax liability. There are several ways your attorney can help you to do this:

• By gifting some of those you want to inherit before you die
• By creating one or several trusts
• By purchasing a life insurance policy
• By buying investments in your loved one's name

These methods will ensure that your loved ones receive the assets you desire them to have, while simultaneously protecting them from possibly enormous tax burdens after you pass.

For those who have no family, dying without a will can be even more troublesome and costly, since their entire fortunes can be left to the state. If a genealogical search doesn't turn up any blood relatives, all of your assets will be claimed by the government. This means that any individual, group, organization or charity you wished to endow will receive nothing.

It is never easy to think of one's own mortality, but it is even more painful to contemplate leaving a messy, uncomfortable situation behind when you pass. By engaging the services of an excellent estate planning attorney, who will help you fashion a legally binding, precisely designed document,  you can make sure that your loved ones are well taken care of and that your final wishes are respected and implemented.

In this computer age, when so many tasks are accomplished via the internet -- including banking, shopping, and important business communications -- it may seem logical to turn to the internet when creating a legal document such as a will . Certainly, there are several websites advertising how easy and inexpensive it is to do this. Nonetheless, most of us know that, while the internet can be a wonderful tool, it also contains a tremendous amount of erroneous, misleading, and even dangerous information.

In most cases, as with so many do-it-yourself projects, creating a will most often ends up being a more efficient, less expensive process if you engage the services of a qualified attorney.  Just as most of us are not equipped to do our own plumbing repairs or automotive repairs, most of us do not have the background or experience to create our own legal documents, even with the help of written directions.

Situations that Require an Attorney for Will Creation

 In certain cases, the need for an estate planning attorney is inarguable. These include situations in which:

• Your estate is large enough to make estate planning guidance necessary
• You want to disinherit your legal spouse
• You have concerns that someone may contest your will
• You worry that someone will claim your mind wasn't sound at the signing

Mistakes and Omissions 

It has always been possible to write a will all by yourself, even before the advent of the typewriter, let alone the computer.  Such a document, however, is unlikely to deal with the complexities of modern life.  Many estate planning attorneys have seen, and often been asked to repair, wills that have mistakes or significant omissions. These experts have also become aware of situations in which the survivors of the deceased wind up in court, spending thousands of dollars to contest ambiguously worded or incomplete wills. Without legal guidance from a competent estate planning attorney, creating a "boxtop" will can result in tremendous financial and emotional risk.

Evidence that Online Wills Are Not Foolproof

Evidence that many other complications can arise when an individual creates a will using generalized online directions can be found in the following facts: 

• Each state has its own rules (e.g. requiring differing numbers of disinterested party signatures)
• Even uncontested wills can remain in probate if not executed in an exacting fashion
• Estate planning attorneys find legal software programs inadequate
• Even legal websites themselves recommend bringing in an attorney in all but the very simplest cases
• Some legal websites provide inexpensive monthly legal consultations with attorneys to protect their client and themselves

Areas that Frequently Cause Problems 

Self-constructed wills often become problematic when the testator:

• Names an executor who has no financial or legal knowledge
• Leaves a bequest to a pet  (legally, you must leave the bequest to an appointed caretaker)
• Puts conditions on payouts to an that are difficult, or impossible, to enforce
• Makes unusual end-of-life decisions or puts living will information into the will
• Designates guardians for children, but neglects to name successor guardians
• Neglects to coordinate beneficiary designations where, for example, the will and  insurance policy designations contradict one another
• Leaves funeral instructions into the will since the document will most likely not be read until after the funeral has taken place
• Leaves inexact or ambiguous instructions dealing with blended families
• Neglects to mention small items in the will which, though of small financial value, are meaningful to loved ones and may cause contention

In order to ensure that you leave your assets in the hands of those you wish, and to avoid leaving your loved ones with bitter disputes and expensive probate costs, it  is always wise to consult with an experienced estate planning attorney when making a will.  In this area, as in so many others, it is best, and safest, to make use of those with expertise in the field.