Barnes Lipscomb & Stewart PLLC

Complete Your Estate Plan While the Year is Still New

A new year brings all sorts of new opportunities. Promises that we make to ourselves don’t always get fulfilled, but one that you can do, with the help of an estate planning attorney, is complete or update your estate plan. It’s good for you and your family.

Having an up-to-date estate plan, before filing this year’s tax returns, is still a possibility. Putting an estate plan in place might be a significant factor in your tax planning, as well as protecting your family from future events. A few key tips come from an article in Utah Business, “5 Estate Planning Tips For 2019,”

Your Will. If you have a will, you’re ahead of more than half of the people in the U.S. Remember, however, that estate planning isn’t a one-time thing. It’s an ongoing process that requires making sure your plan reflects your current wishes and financial situation. You should review your will at least every few years. However, there are also some life events that should trigger a review, regardless of when the last review occurred. These include marriage, divorce, the birth or adoption of a child or grandchild, an inheritance, a large financial loss and the loss of a spouse.

A Trust. Anyone can create a trust, and it has real estate planning advantages. You can use a trust to pass assets to heirs and other beneficiaries, just like you could with a will. However, assets passed through a trust don’t need to go through probate. Using a trust to transfer assets provides privacy.

The Current Tax Breaks. The 2017 Tax Cuts and Jobs Act gives us some significant tax cuts in 2019, such as a temporary doubled lifetime exclusion for the gift and estate tax, temporary exemptions from the generation-skipping transfer tax, higher annual gift limits and charitable contribution deductions. To see if you can use of any of these tax benefits, speak to an experienced estate planning attorney.

Talk to an Attorney for a Review of Your Estate Plan. It’s important to remember that estate planning is complicated. You should, therefore, develop a comprehensive estate plan with the help of an experienced attorney. Don’t be tempted to use an online legal do-it-yourself service to save a few dollars, because any mistakes you make could have a big impact on you and your family’s financial future.

Don’t overlook the importance of sitting down with an estate planning attorney. Estate planning law is based on state law, and every state has its own laws and procedures to be followed. If your estate plan is not done correctly, you run the risk of a will that is declared invalid during probate. That would mean that your assets will not be distributed, according to the wishes you expressed in your will.  As a result, decisions will be made according to the law. An estate planning attorney will ensure that your wishes are properly documented. She or he will also be able to help you work through the details, based on years of experience in helping others through this process.

Reference: Utah Business (February 5, 2019) “5 Estate Planning Tips For 2019”

When Was the Last Time Your Estate Plan Was Reviewed?

If you don’t remember the last time that your estate plan and related documents were reviewed, that’s a clear signal that you should put this task on your to-do list and on your estate planning attorney’s appointment calendar.

Reviewing an estate plan is kind of like going to the doctor for an annual physical. Everyone knows that they should do this. However, many simply don’t do it. Just as good health requires ongoing maintenance, including an annual physical, so does your estate plan.

WMUR’s recent article, “Money Matters: Reviewing your estate plan,” says a common question is “When should I review my documents?”

Every few years is the quick answer, but a change in your life may also necessitate a review. Major life events can be related to a marriage, divorce, or death in the family; a substantial change in estate size; a move to another state and/or acquisition of property in another state; the death of an executor, trustee or guardian; the birth or adoption of children or grandchildren; retirement; and a significant change in health, to name just a handful.

When you conduct your review, consider these questions:

• Does anyone in your family have special needs?
• Do you have any children from a previous marriage?
• Is your choice of executor, guardian, or trustee still okay?
• Do you have a valid living will, durable power of attorney for health care, or a do-not-resuscitate to manage your health care, if you’re not able to do so?
• Do you need to plan for Medicaid?
• Are your beneficiary designations up to date on your retirement plans, annuities, payable-on-death bank accounts, and life insurance?
• Do you have charitable intentions and if so, are they mentioned in your documents?
• Do you own sufficient life insurance?

In addition, review your digital presence and take the necessary efforts to protect your online information, after your death or if you’re no longer able to act.

Sometimes, reviewing an estate plan prompts changes to your plan. You may decide to make some gifts with “warm hands,” while you are still living, to loved ones or to charitable organizations. This is the time to consider the bigger picture, including your legacy. It’s a good habit to get into, just like getting an annual physical.

Reference: WMUR (January 24, 2019) “Money Matters: Reviewing your estate plan”

How Does a Real Estate Trust Work?

Most people purchase their homes without thinking about a trust. However, this option can provide some benefits to the owner and their family. By putting the property in a trust, your successor becomes the trustee. For older individuals buying homes, this may be worth considering.

Let’s say you are moving to a new state as part of your retirement plan. One option that you might want to consider is putting your home in a trust. This means that you are in charge of the property as the trustee, but your successor—the person who becomes the trustee upon your passing—gains immediate control of the property.

Being the trustee of a property gives you certain powers over where your home will pass once upon your death. It can also enable you to shield your estate from future economic problems, says Investopedia in the recent article, “Buying a Home in Trust.”

First, decide who will have the legal right to sell the home. Then, you need to determine what type of trust to set up for the estate. Let’s look at the two basic types: the revocable trust and the irrevocable trust.

A revocable trust is an agreement that establishes the rights and heirs of the estate. The owner of the trust has full control at all times and can change it when he or she wants. Based upon the way in which you set up the documents, all or one of the future trustees can also change the document at any time.  Revocable means “capable of being canceled.”

In contrast, an irrevocable trust generally doesn’t allow any changes or terminations of the trust without permission of the beneficiary. The trustee acts more like a fiduciary who’s charged with maintaining the assets for the beneficiary. Irrevocable trusts can protect assets from creditors, if the assets were placed in the trust before the credit problems.

Whether creating a revocable or an irrevocable trust, it’s important to work with an experienced estate planning attorney. However, it is important to be aware of how putting a home in a trust may impact your eligibility for Medicaid, if that may be a future issue.

This plan may not work if you are buying a home in a retirement or care community. Check with a local estate planning attorney, who will be able to review the contract from the community to see if it can be purchased in this way.

Do you want to fund the future maintenance of the home? If your intention in using the trust is to pass the property on to a family member, this question will need to be answered before deciding to use a revocable or irrevocable trust.

Reference: Investopedia (October 13, 2018) “Buying a Home in Trust”

Is There a Pre-Nup in Travis Scott’s “Kardashian” Future?

Members of the Kardashian clan are excellent business people—something that’s often forgotten in the focus on their elaborate lifestyles. Kylie’s no exception, worth nearly a billion dollars, according to Forbes.

One of the questions around the Super Bowl was not about football. All eyes were on Kylie Jenner and wondering if she would receive a proposal from rapper Travis Scott, as reported in the Houston Chronicle article, “Did Kylie Jenner make Travis Scott sign an ironclad prenup before saying I do?” Scott made a very brief appearance on stage, and then the Twitterverse went up in flames over a photo of Jenner wearing a large diamond ring—posted by Scott.

While it’s not certain that the big question was asked and answered, it’s almost certain that before it happens, Scott will be signing a prenup agreement from Jenner.

A prenuptial agreement or "prenup" is an agreement signed before marriage that establishes the property and financial rights of each spouse in the event of a divorce.

In Touch magazine says there is a prenup that includes a gag clause forbidding Scott from talking to anyone about Kylie or the rest of the Kardashian family.

The prenup also allegedly obligates Scott to appear in episodes of the reality TV show, "Keeping Up With the Kardashians," and participate in family vacations and holiday cards, according to the publication.

"He's signed his life away, basically ... or any chance to stake a claim in Kylie's empire, that's for sure," In Touch reported.

Scott's hesitation to sign the paperwork is said to be the reason why the couple has yet to get engaged. The magazine also reported that the prenup was "crucial before any formality."

You don’t have to be a social media star or a billionaire to consider having a pre-nup prepared before walking down the aisle. The other legal work that’s best to do before or shortly after you wed: an estate plan.

Reference: Houston Chronicle (February 4, 2019) “Did Kylie Jenner make Travis Scott sign an ironclad prenup before saying I do?”

Foreign Assets and Estate Planning

As more people call themselves “citizens of the world,” there are an increasing number of Americans with assets in other countries. This makes estate planning a bit more complex.

Structuring how assets are owned in foreign countries needs to be carefully done to ensure the success of estate and tax planning, advises Forbes in the article “6 Ways To Protect Your Foreign Assets In Estate Planning.” citizenship. The first step: an estate planning attorney who is familiar with foreign assets and their impact on American estate planning.

Talk with an experienced attorney, before you purchase that Italian villa or cottage in the Cotswolds. They can advise you on the best way to structure ownership, based on the country’s laws. In the legal department, you should also hire a local counsel. You need to know how local law will affect your estate and tax planning. Some countries do not recognize trusts, which would make a big difference, if your U.S. will transfers all of your assets to a trust. They’ll also be needed to represent you with the purchase and transfer of real estate.

Be sure to disclose all of your assets to your estate planning attorney. Your attorney must be aware of the assets that you have and where they’re located, to help you determine how best to pass them at your death and the estate tax implications.

Depending on where the foreign assets are located, it may be wise to have two wills: one disposing of the foreign property and another for your U.S. assets. It is crucial that your U.S. attorney and your foreign counsel coordinate on drafting the wills. You don’t want one will to cancel out the other.

Probating a will written in a foreign language can be difficult and time consuming. A foreign will must be translated and understood by the government in that country. With a separate will in each country, this usually can make probate easier.

You may be surprised to find out that as a U.S. citizen, you’re taxed on your worldwide assets for estate tax purposes. Your attorney will be able to advise you on the estate tax implications of your foreign property and if there are any treaties in place with that country that will lessen the estate taxes.

Foreign asset ownership can be quite complicated. Speak with your advisors and make sure that you and your budget are prepared for all of the associated costs that come with a foreign property, whether you’ve inherited it or are purchasing it as your retirement home. Once you’ve addressed legal and tax hurdles, start packing!

Reference: Forbes (January 29, 2019) “6 Ways To Protect Your Foreign Assets In Estate Planning”

Top Five Estate Plan Epic Fails

The problem with mistakes to an estate plan, is that many are irreversible and cannot be fixed. Those that can be fixed are often expensive. It is best to do it right the first time.

Many of the top reasons for estate plans to fail, are a matter of maintenance. Just as your home or car needs ongoing care, so does your estate plan. The simple things often lead to the biggest problems.

Investopedia’s article, “5 Ways to Mess Up Estate Planning” gives us a list of these common issues.

Not Updating Beneficiary Designations. Be certain those to whom you intend to leave your assets are clearly named on the proper forms. Whenever there’s a life change, update your financial, retirement, and insurance accounts and policies, as well as your estate planning documents.

Forgetting Key Legal Documents. Revocable living trusts are the primary vehicle used to keep some assets from probate. However, having only trusts without a will can be a mistake—the will is the document where you designate the guardian of your minor children, if something should happen to you and/or your spouse.

Bad Recordkeeping. Leaving a mess is a headache. Your family won’t like having to spend time and effort finding, organizing and locating your assets. Draft a letter of instruction that tells your executor where everything is located, the names and contact information of your banker, broker, insurance agent, financial planner, attorney, etc. Make a list of the financial websites you use with their login information, so your accounts can be accessed.

Faulty Communication. Telling your heirs about your plans can be made easier with a simple letter of explanation that states your intentions, or even tells them why you changed your mind about something. This could help give them some closure or peace of mind, even though it has no legal authority.

Not Creating a Plan. This last one is one of the most common. There are plenty of stories of extremely wealthy people who lose most, if not all, of their estate to court fees and legal costs, because they didn’t have an estate plan.

The solution is simple: make a recurring appointment with your estate planning attorney every two or three years, or when something big in your life changes. Follow through on the instructions, like funding a trust or talking with heirs about your thought processes for asset distribution.

Reference: Investopedia (September 30, 2018) “5 Ways to Mess Up Estate Planning”

Why You Need a Power of Attorney

Accidents and injuries occur all the time. That’s why every adult needs a power of attorney, in the same way that everyone needs a will. A power of attorney lets you name a person who can step in to conduct your affairs, if you are unable to.

Many people assume that if something unexpected happens to them, like a sudden illness or an accident, their spouse or a family member will be automatically able to handle everything for them. That’s not always the case.

The Tri-County Times explains in its article, “Power of attorney protects loved ones,” that a POA is granted to an "attorney-in-fact" or "agent." It gives that individual the legal authority to make decisions for an incapacitated "principal." The laws for creating a power of attorney vary based on the state.  However, there are some general similarities.

If no one has been named as an agent or granted legal access to financial, medical and other information, family members may be left out of making decisions for their loved ones. Further, the government may appoint someone to make certain decisions for an individual, if no POA is named.

Almost everyone can benefit from establishing a power of attorney.

A signed power of attorney will remove the legal obstacles that may arise in the event that a person is no longer physically or mentally capable of managing certain tasks.

A power of attorney is a broad term that covers a wide range of decision-making. The main types of POA are a general power of attorney, health care power of attorney, durable power of attorney and special power of attorney.

The responsibilities of some of these overlap, but there are some legal differences. For instance, a durable power of attorney relates to all the appointments involved in general, special and health care powers of attorney being made "durable"—meaning that the document will remain in effect or take effect if a person becomes mentally incompetent.

Certain powers of attorney may expire within a certain time period.

An agent appointed through POA may be able to handle many tasks, depending on what powers are granted in the document. They include banking transactions, filing tax returns, managing government-supplied benefits, deciding on medical treatments and executing advanced health care directives.

A power of attorney and health care power of attorney should both be discussed with your estate planning attorney, as part of your overall estate plan. Doing this with an attorney ensures that you will have the documents prepared correctly, so that if and when you need them, they will be accepted by financial institutions or health care providers.

Reference: Tri-County (MI) Times (January 24, 2019) “Power of attorney protects loved ones”

How to Care For Your Pets After You’re Gone

Welcoming a new pet into the home, is always a happy occasion. Planning for a furry friend’s life after its owner has passed, is as important as any other aspect of pet care.

It’s interesting that so many Americans still don’t have wills, yet a recent survey of pet owners showed that almost half of them have taken steps to take care of their animal companions, if they should die first. Maybe pet owners know something that people without pets don’t?

However, you feel about pets and wills, there are many ways to ensure that Bella, Luna, Sadie or Bailey will enjoy their lives in good care, after their humans are gone. Those include traditional financial planning instruments, like pet trusts, living trusts, annuities and even life insurance.

Forbes’s article, “3 Financial Planning Tips For Pets Owners,” says that typically, “pet estate plans” should cover more than simply who will care for the pet, when you are no longer around. Expenses such as food, doggie day care, grooming, veterinarian bills and medication should also be considered.

20% of all respondents in the survey said they have financially planned for their pets' future care. About 38% said they added the pet's future caregiver as a beneficiary to a life insurance policy and 35% added more coverage to their life policies. 13% also recently purchased annuities naming the pet's caregiver as the beneficiary.

However, many pet owners forget about end-of-life planning. Consider an individual trust for your pet or donating funds to your local humane society or pet shelter.

One question many have before adding a new animal to the family, is whether they can afford it. The cost of an animal from a breeder can be high, so a more affordable option is to check out your local humane society or animal rescue group. Remember that the costs of food, vet bills and other supplies are just as important to think about, before making a pet a part of your family. Pets are too often returned to animal shelters, because pet parents were unable to afford to properly care for the pet.

Last, ask about pet insurance at your veterinarian. Many clinics offer plans and staff members will be able to talk to you about the right option based on the type of animal, breed, age and other criteria of your pet.

Pet owners usually think of their pets as members of the family, and planning for their “furry kids” is as important as planning for their children and grandchildren.

Reference: Forbes (January 27, 2019) “3 Financial Planning Tips For Pets Owners”

Seniors Who Find Love Don’t Always Marry Because of Social Security

Widowed or divorced seniors who decide to remarry late in life, need to understand that this may make a big change in their Social Security benefits. They also need to review their estate plan.

Marital status is part of the calculations made by the Social Security Administration to determine benefit levels. That’s why there are couples in their 50s and 60s who chose not to marry, but live together instead. They aren’t radicals embracing free love. They just don’t want to lose out on their benefits.

Investopedia’s recent article, “How Remarrying Late in Life Impacts SS Benefits,” gives us some things to consider.

First, if either you or your intended is widowed and receiving Social Security benefits based on the deceased spouse’s work record, age is important. A surviving spouse who remarries prior to age 60, becomes ineligible to receive benefits on their late spouse’s record. However, after your first anniversary with your new spouse, you become eligible for spousal benefits, based on the new spouse’s work record.

Decide whether to wait for marriage in order to keep a widow’s benefit for longer, or if the spousal benefit from a new union will offer more financial security. If you’re married at least nine months prior to one spouse’s death, the surviving spouse is eligible for spousal benefits based on the second marriage.

If one or both members of the new couple is divorced, things are trickier because the Social Security Administration does allow a divorced spouse to collect spousal benefits based upon the work records of their deceased ex-spouse, as long as the divorced beneficiary meets the following criteria:

• The original marriage lasted at least 10 years;
• The beneficiary applying for divorced spousal benefits has remained unmarried; and
• The beneficiary applying for divorced spousal benefits is at least 62.

If you are divorced from an ex who significantly out-earned you and your new fiancé, remarrying stops the ex-spousal benefits you’d otherwise receive. This can make a big difference in your finances, and cohabitating without getting hitched, may make more financial sense for some couples.

Beneficiaries who are receiving Social Security Disability Insurance (SSDI) may have the toughest calculations, as far as a second marriages are concerned. This is because SSDI beneficiaries are subject to a family maximum benefit (FMB) calculation. The FMB limits the amount of money available for auxiliary benefits, like the dependent child benefit. Figure out and compare these three amounts to determine FMB:

1. 85% of the worker’s average indexed monthly earnings (AIME).
2. The worker’s primary insurance amount (PIA), based on full retirement age.
3. 150% of the worker’s PIA.

If number three is the highest of these three calculations, then the FMB is the higher of number one or two. But if number one is the highest of the three calculations, then the FMB is number three.

Love at any age and stage is a wonderful thing, but if marriage is involved, there are financial and estate planning consequences to take into consideration. Couples need to be informed about what will change, and what will not, when they marry. A visit to the estate planning attorney’s office is definitely in order for “gray” newlyweds. Without updating the estate plan, children from a prior marriage could end up being completely disinherited.

Reference: Investopedia (August 1, 2018) “How Remarrying Late in Life Impacts SS Benefits”

I’m Too Young to Need a Will

When most people in their 50s don’t have a will, it’s no surprise that people in their 20s and 30s don’t think they need a will. However, they do, especially if they have small children.

Most of us live for a long time, before we come in contact with the death of parents or friends. However, others are unfortunately witness to the passing of people, for one reason or another, who die far too early. Death is a painful topic, and that’s why many people, especially young adults, don’t like to think about dying. That includes thinking about having a will.

The Lebanon Democrat’s recent article, “End-of-life planning beneficial no matter your age,” reports that two out of every five people older than 45 don’t have a prepared will—and they haven’t even thought about estate planning. Even a little bit of simple planning can help make life for your family much easier, when you die.

There will be less stress and fewer fights, and it can help survivors know what should be done and how to do it. However, if you die without a will, your property may be awarded to others, based on the decisions of a judge and an appointed administrator—who could be complete strangers to you.

Get all of your wishes down in writing so your family understands and can follow your instructions. This will make things much easier for your surviving family and/or beneficiaries. If you have a senior in your family, make certain that he or she has a will, especially while they are still legally competent.

Talk to an experienced estate planning attorney. You should arrive with some understanding of these basics:

• Name the individual, known as the executor, you want to administer your affairs.
• Decide who should take control of your possessions. Mapping out who gets what, can save a lot of time and anguish down the road.
• As you make out your will, also have your attorney prepare a living will—a legal document that states what actions should be taken for your health, if you’re no longer able to make decisions for yourself, due to illness or incapacity.
• Keep your original will in a safe place and be sure that others know where to find it, in case of an emergency.

Finally, be sure that you update your will as time goes by. Events such as the death of a spouse or other loved one, divorce, retirement, relocation or the addition of a family member may require changes to be made.

People think that seniors in failing health or people who have been struck by serious illnesses, are the ones who need to have a will. Having a will is just a part of adult life: making preparations for one of life’s eventualities, to protect the ones you love.

Reference: Lebanon Democrat (January 18, 2019) “End-of-life planning beneficial no matter your age”