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Preparing for a Baby Includes an Estate Plan

Parents-to-be are busy with juggling doctor’s appointments, preparing a nursery, picking out names and getting ready for their lives to change. However, there’s more.

When expecting a new addition to the family, parents need to address the more serious aspects of this milestone. That means taking care of legal, financial and insurance matters to protect the family.

U.S. News & World Report’s recent article, “Financial Steps to Take When You're Pregnant” reminds us that pregnancy is a terrific time to review your financial life. It's a great time to assess your budget, emergency savings, estate planning documents and insurance needs to see if anything needs to be refreshed.

Here are a few things to do to prepare for a new baby:

Employee Benefits. Take a look at your employee benefits or have a conversation with HR to determine how much time you can take off and whether you'll be paid your salary, while on parental leave. This is important because many families are faced with higher living costs by the presence of a new baby, as well as taking parental leave that may cut their take-home pay. New parents may have to use the Family and Medical Leave Act (FMLA), which offers eligible employees 12 weeks of unpaid leave; or tap short-term disability insurance, which typically only replaces a portion of your salary. The amount you receive in short-term disability will also be impacted by whether you pay premiums with pretax or post-tax dollars. If you pay with pretax, your benefit will be subject to taxes, which will decrease the overall amount received.

While reviewing these policies, look at your health insurance and see whether prenatal visits and pediatric care are covered. You could be liable for health insurance premiums if you're taking leave from work. Remember that you'll need to add your baby to your medical insurance within 30 days of the birth.

Budget. Calculate new baby expenses, such as childcare.

Life Insurance. Determine if your current life insurance will meet your needs. If you need more, look at term life insurance. It’s usually affordable and expires after a set term, typically anywhere from 10 to 30 years. This policy payout would help a surviving parent or a guardian care for your child.

Estate Planning. Consider who would care for your child, if both parents were to die before he or she turns 18. Talk to family or close friends about who you'd like as guardian of the child. Talk to an estate planning attorney to update (or create) a will and guardianship choices. In addition, ask about formulating a plan for how inheritance, insurance, and other assets will be handled and disbursed, if you die while the child is a minor. A testamentary trust is a way to direct a future inheritance. You can designate your child as the beneficiary and a relative or close friend as the trustee. The trustee will help decide how the money is spent. This trust is usually included in the will and activates after the death of the person who created it.

Beneficiary Designations. Update any beneficiary designations on your retirement and insurance accounts.

529 College Savings Account. It’s hard to imagine how fast a newborn turns into a child packing for college, but it happens in the blink of an eye. Once the child is born, open and begin funding a 529 college savings account, and encourage grandparents to make contributions as well.

Reference: U.S. News & World Report (August 29, 2019) “Financial Steps to Take When You're Pregnant”

A Long Road Ahead for Epstein’s Victims

Having signed his last will and testament two days before he committed suicide in a jail cell, Epstein created what may be a fortress around his estate, which will be problematic for the many women who have come forward to accuse him.

In most cases, when an estate is settled, debts and expenses are paid first, followed by charitable and spousal transfers, and then estate taxes are levied. However, in the case of Jeffrey Epstein, things are likely to become extremely tangled.

CNBC’s recent article, “Here’s why a bitter legal battle could be ahead for Jeffrey Epstein’s estate,” reports that a lengthy fight is coming as Jeffrey Epstein’s estate addressees the legal claims over the distribution of his assets. The 66-year-old was facing federal charges of sex trafficking of minors and sex trafficking conspiracy.

The time to do your will isn’t two days before you die.

Attorneys believe there will be a long legal fight, as alleged victims file claims against the money manager’s estate. The Epstein estate will be in the middle of lawsuits for a long time, until all of the plaintiffs are paid.

Let’s look at some the issues that heirs, plaintiffs and attorneys will face.

1. Creditors get paid first. Epstein’s will tells his executor to pay from the estate several costs, including funeral and burial expenses, administration costs and “all of my debts duly proven and allowed against my estate.” The will then directs the executor to give all of his property after these payments and distributions to The 1953 Trust, which was also established on August 8. The trust distributions aren’t known, because the trust document wasn’t attached to the will.

This means creditors, including plaintiffs of the many lawsuits against Epstein who receive a judgment in their favor against the estate, will be paid before property passes through to the heirs.

2. All trusts not equal. Trusts may provide creditor protection, but not all trusts offer the same level of protection. Irrevocable trusts can’t be changed by the grantor, once they’ve been established. When you transfer the assets to this trust, they’re out of your estate and you save on taxes at death. In addition, you’ve given up control of the asset—that’s why these trusts offer creditor protection. However, revocable trusts can be revised by the grantor during his or her life. Because the terms can change, the assets are still deemed to be owned by the grantor—making them subject to estate taxes and seizure from creditors.

You don’t save on estate taxes when you create a revocable trust, and Epstein’s trust is revocable. And although moving assets to an irrevocable trust may protect them from creditors, it won’t work if you’re facing legal claims.

3. Where you live is key. Epstein was a resident of St. Thomas in the U.S. Virgin Islands, but his will mentions five properties, including a mansion in New York City. The other properties, all owned by corporations of which he owns shares, are in New Mexico, Florida, Paris and the Virgin Islands. New York is known to chase down well-to-do residents who claim to live in tax-free havens. They conduct non-residency audits and hit them with taxes. Big estates can mean a lot of revenue for New York.

New York State is not likely to let this big estate pass without grabbing its fair share of income and estate taxes. People may own as many homes as they like, but the state’s auditors will want to know where they keep their cherished belongings, where they vote and what state issues their driver’s license. It’s more than spending 183 days in a different state, as far as New York State is concerned.

Reference: CNBC (August 24, 2019) “Here’s why a bitter legal battle could be ahead for Jeffrey Epstein’s estate”

Why Your Will Needs to Change Again

Some people change their wills every time there’s a small family skirmish. However, most sign their wills and shove them in a drawer and try not to think about death. This is a mistake, for them and their families.

Even if your own life never changes, there are changes in the law and changes in the lives of the people around you that merit a review of your will and your estate plan every three or four years. If there are major changes in your family, like death, divorce, birth or marriage, you definitely need a review. However, if you don’t remember who you named as executor or who you want to make health care decisions on your behalf in a while, you need an estate plan review.

Forbes’ recent article, “Why You Should Change Your Will Now,” warns us that if you’ve taken the “one and done” approach to your estate plan, think again. In addition to the reasons already mentioned, your assets may have changed dramatically since you signed your will. The plan you put in place years ago, may not have considered new federal and state estate taxes. Now that you’ve accumulated significant wealth that will be passed on to your children, you might need to review your plans for that wealth for your children.

You may want to include grandchildren to help pay for their college education.

It is also not uncommon for parents to want to protect their children from themselves. This can be because of addiction issues or a lack of financial literacy. If that’s an issue, some parents elect to hold monies in trust for adult children, as a way to ensure that the funds will be there throughout the child’s lifetime.

A person’s estate plan should grow with them over time. An estate plan for a twenty-something may be very basic, but a newly-married couple will want to include provisions for their spouse. Parents need to think about providing for and protecting their children. Adult children have another set of concerns and you need prepare for the possibility of divorcing spouses, poor life choices, addiction issues and just poor money management. There are many stages in life when you may need to readjust the provisions for your children in your estate planning documents.

The first task is locating the will, while the second is making an appointment to meet with your estate planning attorney. There may be opportunities for tax savings that didn’t exist when the will was first created, or strategies that are no longer necessary.

Reference: Forbes (August 27, 2019) “Why You Should Change Your Will Now”

Will Tarantino’s “Once Upon A Time…In Hollywood” Put Money in Manson’s Heir’s Bank Account?

Despite his research and efforts, things are getting a little complicated for Quentin Tarantino’s movie Once Upon A Time…In Hollywood. It may be that the cult leader’s grandson picks up some healthy royalties from the movie.

Spoiler alert: the latest Quentin Tarantino movie includes an extremely graphic bloodbath. That’s never unexpected from this director. However, in a case that mixes movies, murder and money, Manson’s heir and not his victim’s families, may receive profits from music written by Manson that was used in the movie.

Wealth Advisor’s recent article, “Charles Manson’s grandson can profit off of Once Upon a Time…In Hollywood,” also notes that the movie prominently features a song called “Look at Your Game, Girl,” written by aspiring songwriter Charles Manson before his followers’ murderous spree. The tune is sung a cappella by girls in Manson’s ‘family,’ as they walk through Los Angeles and forage for food.

Tarantino said that he only used Manson’s music, after assuring himself that his family wouldn’t benefit, and that royalties and licensing fees would go to the victims’ families. However, since the movie was released, controversy has exploded and a DailyMail.com investigation has discovered the issue around Manson’s music is far more complicated and likely to wind up in court.

“Quentin told friends that he struggled with the decision to use Manson’s music, and only agreed to use it after being assured that any money from its use would go to the victims’ families,” a movie insider told DailyMail.com

Mary Ramos, music supervisor on the film, agreed, noting “Even considering using that, we wanted to find out ... what happens if this is used, where the money goes. And there was a trust set up for the victims, and no-one even associated with the Mansons and the Manson family makes money off that song.”

Manson had initially visited director Roman Polanski’s home in 1968 search of Hollywood legend Doris Day’s music producer son Terry Melcher, who had talked about giving Manson a recording deal. Manson was upset that Melcher changed his mind on the contract, and discovered that he no longer lived at the house.

On August 8, 1969, Manson ordered family devotees Charles ‘Tex’ Watson, Patricia Krenwinkel and Susan Atkins to return to the house and kill everyone inside, including actress Sharon Tate, Polanski’s wife.

Fast forward a few decades. Guns N’ Roses recorded Manson’s song “Look at Your Game, Girl” on the hit album ‘The Spaghetti Incident?’ that went platinum in 1993. Lawyer Nathaniel Friedman, who filed a 1971 wrongful death suit for one of the victim’s grandchildren, negotiated a lucrative settlement with the band.

However, that wrongful death judgment wasn’t extended, and eventually the rights to profits from Manson’s music reverted to the killer’s family, although that led to a bitter fight when Manson died in prison in 2017, at age 83. There were two men who claimed to be Manson’s biological sons. Another man said he was Manson’s biological grandson, and a friend claimed to have been bequeathed Manson’s estate in his final will.

Jason Freeman won the battle to take possession of the killer’s remains in March 2018, but the legal battle over who will inherit the estate has not yet been concluded. It’s possible the Freeman will prevail, and if that happens, any royalties, licensing fees or profits from the use of the killer’s song in the movie will end up in Freeman’s pocket.

Reference: Wealth Advisor (August 27, 2019) “Charles Manson’s grandson can profit off of Once Upon a Time…In Hollywood”

Estate Planning Essentials

An estate plan starts with a will, but that’s just the beginning. A true estate plan includes addressing issues that occur while we are living, as well as when we have passed. Everyone needs to have these plans in place, regardless of how much or little one owns.

Having an estate plan means that you and your family are prepared not just for death, but also for illness and incapacity. Distribution of your property according to your wishes, is just one part of an estate plan. Minimizing state and federal estate taxes is another. A complete estate plan addresses many legal, financial and health issues.

Investopedia’s recent article, “6 Estate Planning Must-Haves,” provides us with a list of items every estate plan should include:

• A will and/or a trust;
• Powers of attorney;
• Beneficiary designations;
• A letter of intent; and
• Guardianship designations.

In addition to these documents and designations, a thorough estate plan also should consider the purchase of insurance, like long-term care insurance, a lifetime annuity to generate some level of income until death, and life insurance to pass money to beneficiaries without probate.

Let's look at each item on this checklist to make sure you haven't left any decisions to chance.

Wills and Trusts. A will or trust should be one of the primary parts of your estate plan, even if you don't have a lot of assets. Wills make certain that your assets are distributed according to your instructions. Some trusts also help limit estate taxes or legal challenges. Talk to an experienced estate planning attorney about wills and trusts.

Power Of Attorney. A durable power of attorney (POA) allows an agent or a person you assign to act on your behalf, if you’re unable to do so yourself. A healthcare power of attorney (HCPA) designates another person to make critical healthcare decisions on your behalf in the event of incapacity.

Beneficiary Designations. Some of your assets will pass to your heirs without being mentioned in your will, such as 401(k) plan assets. Therefore, maintain a beneficiary and a contingent beneficiary on these types of accounts. Likewise, insurance plans should have a beneficiary and a contingent beneficiary, because they also pass outside of a will. Your beneficiaries should be over 21 and mentally competent.

Letter of Intent. This is simply a document for your executor or a beneficiary to define what you want done with a particular asset after your death or incapacitation. Some letters of intent also contain funeral details and other special requests. A letter of intent isn’t legally binding. It helps inform a probate judge of your intentions and may help in the distribution of your assets, if the will is declared invalid for some reason.

Guardians. If you have minor children or are considering having kids, naming a guardian is very important. Be sure the person(s) shares your views, is financially sound and willing to raise your children. You should also name a backup or contingent guardian.

Most people don’t understand that if you don’t name a guardian in your will, the decision is made by the court. It is possible that the court choses someone you would never have wanted to raise your children.

Meet with an estate planning attorney and prepare a complete estate plan to protect your loved ones.

Reference: Investopedia (July 16, 2019) “6 Estate Planning Must-Haves”

Lump Sum or Traditional Lifetime Payout—The Big Pension Question

For those who are lucky enough to have a defined-benefit pension plan, one of the big decisions that comes with retirement is whether or not to take a lump sum payment and mange the money yourself, or receive it in monthly payments.

Before coming to any conclusion on this large financial decision, you need to understand the options, advises Investopedia in the article “Lump Sum vs. Regular Pension Payments: What's the Difference?”

A lump sum distribution is a one-time payment from your pension administrator. Taking a lump sum payment gives you access to a large sum of money that you can spend or invest as you want. You have flexibility.

Once you and your spouse die, the pension payments might stop. However, with a lump sum, you could name a beneficiary to receive money after you and your spouse are gone, if any money is remaining.

The income from pensions is taxable, but if you roll over that lump sum into your IRA, you’ll have much more control over when you take out the funds and pay the income tax on them. You’ll have to take required minimum distributions from your IRA at age 70½.

A regular pension payment is a set monthly payment retirees get until death. Some pensions continue with the surviving spouse at that point, but some don’t.

A lump sum requires careful asset management, and with a lump sum, there’s no guarantee that your money will last a lifetime. You also need to think about health insurance because in some situations, company-sponsored coverage ends if an employee takes the lump sum payout. Therefore, you may need to include the extra cost of health insurance in your calculations.

A downside of pensions is that an employer could go bankrupt and find itself unable to pay retirees. Benefits are safeguarded by the Pension Benefit Guaranty Corporation (PBGC). This is a government entity that collects insurance premiums from employers sponsoring insured pension plans. The PBGC only covers defined-benefit plans (stated payments) and doesn’t cover defined-contribution plans (like 401(k) plans). It earns money from investments and receives funds from the pension plans it takes over. The maximum pension benefit guaranteed by PBGC is set by law and adjusted yearly.

Think about why your company would even want you to cash you out of your pension plan. Employers may use it as an incentive for older, higher-cost workers to retire early. They may make the offer because eliminating pension payments gives them accounting gains that increases corporate income.

If you take the lump sum, your company won’t have to pay the administrative expenses and insurance premiums on your plan.

From an actuarial standpoint, the typical recipient receives about the same amount of money from the lump sum or the lifetime payout. There’s no way to game the system to get more from your pension. If your health is poor, you may do better with the lump sum, as long as it is managed carefully. Another strategy is to take a lump sum and put part of it into an annuity to provide lifelong income, and invest another part of it to hopefully enjoy market gains. However, if you’re worried about Wall Street and enjoy good health, you may want to stay with a stable monthly payment.

Reference: Investopedia (April 14, 2019) “Lump Sum vs. Regular Pension Payments: What's the Difference?”

How Do We Keep Important Papers Protected?

If you had to leave your house because of a hurricane or wildfire, would you be able to grab your important papers on the way out the door?

Once an estate plan has been created, the next step is to determine where to keep these and other important documents, so that they will be safe in an emergency.

CNBC’s recent article, “Here are the best ways to secure important financial documents,” says that you must make sure you keep documents safely secured. The same is true about digital assets, passwords and social media accounts.

Some states have public will registries, and there are also private will registry companies.  While estate planning documents don’t need to be registered, it may be a good idea. However, registering documents may not be sufficient.

It is important that your family knows about your wills and other documents, and where to locate them. Don’t forget about your digital assets, since these assets can be bequeathed, just like bank and investment accounts.

Make multiple copies of information to protect yourself against loss.

Here are some action steps to take:

• Buy a multifunction scanner and use it when you get a new important document;
• Back up your digital documents on a thumb drive or a secured digital card that you can easily remove from your device. Make a copy of that storage device and put it somewhere offsite;
• Create a cloud storage account with Google, Apple, Dropbox, or Box, specifically for backing up your documents;
• Secure the data on your mobile devices and be careful with your computer, tablet and smartphone. Keep sensitive data on external storage or in the cloud;
• Choose an individual to look after your social media. Companies have their own policies for when an owner passes away; and
• There are online companies that assist in storing passwords in the cloud, but you also need to have a directive for your accounts, so that someone besides you can access the accounts and manage your data.

Even if you live in an area that has never experienced a hurricane, flood, tornado or wildfires, that doesn’t not mean that some kind of natural disaster could strike. Planning ahead will make rebuilding your life less challenging.

Reference: CNBC (August 19, 2019) “Here are the best ways to secure important financial documents”

Titling Property in an Estate Plan

How property is titled is extremely important for an estate plan to work as desired. Titling determines the form of ownership, and that determines the transferability of the owner’s interest in the property. Property titling is not a do-it-yourself project.

One of the goals of titling property in an estate plan, is to create an “automatic” transfer of property that does not require probate, as discussed in a recent article from Pauls Valley Democrat, “Considerations in how to title your property.”

The first is Joint Tenancy with Right of Survivorship. This form of ownership passes title to the survivor immediately upon death and avoids probate. The transfer to the survivor happens automatically at the death of one of the joint owners.

To complete the transfer, one must confirm the death in the county records and effectively give notice that one joint tenant has died, and that the ownership is now in the survivor(s) name. This is usually accomplished, by having the survivor complete an Affidavit of Surviving Joint Tenant. The affidavit affirms the death of one party (in many cases a spouse), and the survivorship to title of the other party. This affidavit and a certified copy of the death certificate are filed with the county.

The survivor now owns the property as an individual. He or she can now sell or deed the property to others, including children, without a probate action to clear the title.

Next is Tenancy in Common. Ownership as a tenant in common gives an undivided interest in the whole property (like a third), which stands on its own and can be bought and sold. Tenancy in Common is used when two or more people want to keep their title separate from the other at death. Therefore, an undivided one-half owner has the right to use the entire property, including the right to benefit from one-half of the rent, lease or crop share. However, if several people own an undivided interest, control, usage and management can become complicated.

If, for some reason, a husband and wife own their property as tenants in common, and one spouse dies, his undivided interest remains as a part of his estate. In that case, his estate must be probated to provide a clear transfer of title to the surviving spouse or to other heirs.

It’s an added expense for the survivor that can be avoided, if another form of ownership is used.

This is a complex area of the law that requires the help of a seasoned estate planning attorney. People run into two problems with property titling: they try to figure it out for themselves and make expensive mistakes, or they fail to retitle property after completing an estate plan, thereby rendering the plan useless. An estate planning attorney will know how the ownership should be structured and the individuals need to follow up and retitle property, as directed by their attorney.

Reference: Pauls Valley (OK) Democrat (August 21, 2019) “Considerations in how to title your property”

Estate Planning When the Family Includes a Disabled Child

Parents with disabled children face a different set of challenges with their estate planning. It can seem overwhelming, but there are steps to take to plan for their child’s future, when the parents aren’t there to help.

The future can seem daunting when parents consider what will happen to a disabled child, when the parents become elderly and eventually pass away. There are steps that need to be taken, as reported by Yahoo News’ recent article, “4 Tips for Estate Planning When Your Child Has a Disability” to prepare.

1. Draft a letter of intent. This is a letter of instruction that includes instructions that your family and friends will need, if you die or for any reason become incapacitated. This letter should list the passwords to your online financial accounts and personal information someone would need to efficiently step into your life, your home and care for child with a disability. It can include medications, daily routine, strategies you use for calming, therapists’ contact info and other daily living items someone not living in your home may not know about your life.
2. See an estate planning lawyer. Ask an attorney to help you build a vision for what you want your child’s future to look like. Have the attorney create a will and a special needs trust. A special needs trust lets you to distribute funds and property in a way that doesn’t interfere with government program benefits.
3. Create a power of attorney or guardianship. A power of attorney for financial and medical issues may be a viable solution. Supported decision-making is an alternative that empowers those with intellectual disabilities to make choices with support and while preserving their rights. If guardianship is your objective, talk to an attorney before your child reaches age 17.
4. Create an ABLE account. This account can hold funds to ensure your child’s regular account never has more than $2000, which would jeopardize government program benefits, like Medicaid.

An experienced elder law estate planning attorney will have gone through this process before with other families and can help put all of these pieces into place. Take one step at a time, and keep going—this can be overwhelming, but the end result will be well worth it. You will feel better knowing that you did what was necessary to protect your child, and in the end, isn’t that what matters most?

Reference: Yahoo News (August 26, 2019) “4 Tips for Estate Planning When Your Child Has a Disability”

Will Jeffrey Epstein’s Estate Escape Punishment?

Epstein signed a will two days before he succeeded in his second suicide attempt that seeks to place all of his assets into a secret trust. The probate court has yet to decide what to do about the trust and the claims made against the estate.

Epstein’s will, which is a public document, claimed assets of more than $577 million. The trust, which is a “pour-over will” that seeks to transfer all of his assets into a trust, was filed in the U.S. Virgin Islands. There are a number of legal issues that remain unresolved.

None of his assets can be moved into the trust, until a probate court decides what to do with the numerous claims made against the convicted sex offender and his estate.

CBS News’ recent article, “What we know about Jeffrey Epstein's will, and what happens next with his estate,” provides a list of questions that can help explain what happens next with Epstein's estate. His estate will be overseen by the two executors named in the will, attorneys Darren K. Indyke and Richard D. Kahn.

The terms of the trust are not public, because they’re not part of the will itself. Epstein's creation of the trust is commonly done by those who desire privacy. Of course, there is some surprise because the will and the trust were created just two days before he died. One of the most intriguing parts of Epstein's will is that it lists his domicile (his permanent residence) as the U.S. Virgin Islands. Domicile is important in determining which jurisdiction controls the estate. Domicile must be proven in a probate court, and is usually accomplished with tax returns, a driver’s license, or documented time spent in the jurisdiction.

Another question about Epstein's will, is whether it will even be declared valid. His will, and thus his entire trust, can be held invalid, if the will wasn’t properly executed and if it wasn't properly witnessed or signed. There can’t be any fraud, undue influence, or duress. Since the will was made right before his suicide, there’s no certainty of his mental capacity.

His testamentary capacity, which means his mental ability make a valid will or estate, will probably be decided by a probate judge. If his estate planning documents are voided, the assets would transfer to the beneficiary of the estate, which is his brother Mark Epstein. However, Mark would still be liable for creditors' claims and any alleged victims' lawsuits.

Before the assets pass from his estate into the private trust, all creditors’ claims must be satisfied in probate court.

With many different factions competing for the assets and a number of legal issues, this case could take as long as ten years to be resolved.

Reference: CBS News (August 21, 2019) “What we know about Jeffrey Epstein's will, and what happens next with his estate”