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Balancing retirement with special needs planning

How Can You Disinherit A Child?

How can you disinherit a child, and be sure that your plan is going to stand up to challenge? Let’s say you want to leave everything you own to your children, but you can’t stand and don’t trust their spouses. That might make you want to delay making an estate plan, because it’s a hard thing to come to terms with, says a recent article “Dealing with disinheritance, spouses” from the Times Herald-Record. There are options, but make the right choice, or your estate could face challenges.

Some people choose to leave nothing at all for their child in the will, so that if there is a divorce or if the child dies, their assets won’t end up in the daughter or son-in-law’s pocket. For some parents, particularly those who are estranged from their children, this can create more problems than it solves.

Disinheriting a child with a will is not always a good idea. If you die with assets in your name only, they go through the court proceeding called probate, when the will is used to guide asset distribution. The law requires that all children, even disinherited ones, are notified that you have died, and that probate is going to occur. The disinherited child can object to the provisions in the will, which can lead to a will contest. Most families engaged in litigation over a will become estranged—even those that weren’t beforehand. The cost of litigation will also take a bite out of the value of your estate.

A common tactic is to leave a small amount of money to the disinherited child in the will and add a no-contest clause in the will. The no-contest clause expressly states that anyone who contests the will loses any right to their inheritance. Here is the problem: the disgruntled child may still object, despite the no contest clause, and invalidate the will by claiming undue influence or incapacity or that the will was not executed properly. If their claims are valid, then they’ll have great satisfaction of undoing your planning.

A trust is better to disinherit a child than a will. Not only do trusts avoid probate, but (unless state law requires otherwise at death) the children do not receive notice of the creation of a trust. An inheritance trust, where you leave money to your child, names a trustee to be in charge of the trust and the child is the only beneficiary of the trust. The child might be a co-trustee, but they do not have complete control over the trust. The spouse has no control over the inheritance, and you can also name what happens to the assets in the trust, if the child dies.

This kind of planning is called “controlling from the grave,” but it’s better than not knowing if your child will be able to protect their inheritance from a divorce or from creditors.

With a national divorce rate around fifty percent, it’s hard to tell if the in-law you welcome with an open heart, will one day become a predatory enemy in the future, even after you are gone. The use of trusts can ensure that assets remain in the bloodline and protect your hard work from divorces, lawsuits, creditors and other unexpected events.

Reference: Times Herald-Record (June 6, 2020) “Dealing with disinheritance, spouses”

 

Balancing retirement with special needs planning

What Should I Keep in a Safe Deposit Box?

What should I keep in a safe deposit box? A safety deposit box isn’t a smart choice for everything. Kiplinger’s recent article entitled “9 Things You’ll Regret Keeping in a Safe Deposit Box” advises that there are some items you might not want to lock up in your bank, which isn’t open nights, holidays, or weekends. During this pandemic, hours of operation for many businesses are reduced. In fact, some financial institutions, like Bank of America, have temporarily closed some locations. There are other banks that require an appointment for in-branch services, like accessing your safe deposit box. This would create a headache for you in your attempt to retrieve important documents or items when you need them.

While keeping things in a safe deposit box is wise, there are some important items you should consider storing elsewhere, because you’ll need to access more often or on short notice. Maybe they should be in a fireproof safe that’s secured to the floor in your home.

Cash. Keeping a wad of cash in a safe deposit box, isn’t a good idea because if you need it in a pinch and the bank is closed, you’re out of luck. In addition, that cash will lose its buying power over time because of inflation and some banks don’t allow cash in a safe deposit box. Finally, cash in a safe deposit box isn’t protected by the FDIC. To have FDIC insurance (covering up to $250,000 per depositor per insured bank), your cash needs to be deposited in a qualifying deposit account, such as a checking account, savings account, or CD.

Your Passport. OK, most of us don’t need your passport in hand at a moment’s notice. However, you may need to take an emergency trip, which will happen during non-banking hours. Without your passport handy, there’s not much you can do about those calls in the middle of the night requiring you to dash.

The Original Copy of Your Will. You may want to keep a copy of your own will, your spouse’s and any in which you’re named the executor in a safe deposit box. However, don’t store the original copy of your will there, particularly if you’re the only owner. That’s because after your death, the bank will seal the safe deposit box, until your executor can prove she has the legal right to access it. This could mean a long and potentially expensive delay before your will is executed and your assets can be disbursed to the intended heirs. Keep the original copy of your will with your estate planning attorney or in a location where your executor can get to it without any legal hassles.

Letters of Instruction. Many people write a letter of instruction to accompany their will. This letter can describe whether you want to be buried or cremated and the type of service you want. This letter can include details on specific bequests of sentimental items, but it’s no help if its’ locked in your safe deposit box.

Durable Power of Attorney (POA). This document gives a trusted friend, family member, or professional adviser the authority to financial make decisions on your behalf. However, if your POA is in a safe deposit box that no one can access, the person you’re depending on to protect you at your time of need could find her hands tied. Keep the original POA with the original copy of your will and give copies to those who may need it one day.

Advance Directives. A living will and a health care proxy are sometimes collectively known as advance directives, but each has a unique purpose. A living will states your wishes for end-of-life care, and a health care proxy (also known as a health care power of attorney) names a person to make medical decisions for you, if you can’t make them yourself. Neither is any good locked away in an inaccessible safe deposit box.

Uninsured Jewelry and Collectibles. Heirloom jewelry and your valuable stamp collection and rare coins are good candidates for a safe deposit box, but they must be properly insured. The FDIC doesn’t insure contents, and neither does the bank, unless it’s stated in your agreement.

Any Illegal or Dangerous Items. Your bank should provide you with a list of items that are not permissible to keep in a safe deposit box. This will include things like firearms, illegal drugs and hazardous materials.

Reference: Kiplinger (June 1, 2020) “9 Things You’ll Regret Keeping in a Safe Deposit Box”

 

Balancing retirement with special needs planning

Utilizing the SECURE and CARES Acts?

Are you utilizing the SECURE and CARES Acts in the best way possible? The SECURE Act made a number of changes to IRAs, effective January 1, 2020. It was followed by the CARES Act, effective March 27, 2020, which brought even more changes. A recent article from the Milwaukee Business Journal, titled “IRA planning tips for changes associated with the SECURE and CARES acts,” explains what account owners need to know.

Setting Every Community Up for Retirement (SECURE) Act

The age when you have to take your RMD increased from 70½ to 72, if you turned 70½ on or before December 31, 2019. Younger than 70½ before 2020? You still must take your RMDs. But, if you can, consider deferring any distributions from your RMD, until you must. This gives your IRA a chance to rebound, rather than locking in any losses from the current market.

Beneficiary rules changed. The “stretch” feature of the IRA was eliminated. Any non-spousal beneficiary of an IRA owner who dies after Dec. 31, 2019, must take the entire amount of the IRA within 10 years after the date of death. The exceptions are those who fall into the “Eligible Designated Beneficiary” category. That includes the surviving spouse, a child under age 18, a disabled or chronically ill beneficiary, or a beneficiary who is not more than ten years younger than the IRA owner. The Eligible Designated Beneficiary can take distributions over their life expectancy, starting in the year after the death of the IRA holder. If your estate plan intended any IRA to be paid to a trust, the trust may include a “conduit IRA” provision. This may not work under the new rules. Talk with your estate planning attorney.

IRA contributions can be made at any age, as long as there is earned income. If you have earned income and are 70 or 71, consider continuing to contribute to a Roth IRA. These assets grow tax free and qualified withdrawals are also tax free. If you plan on making Qualified Charitable Distributions (QCD), you’ll be able to use that contribution (up to $100,000 per year) from the IRA to offset any RMDs for the year and not be treated as a taxable distribution.

Coronavirus Aid, Relief and Economic Security (CARES) Act

The deadline for contributions for traditional or Roth IRAs this year is July 15, 2020. The 2019 limit is $6,000 if you are younger than 50 and $7,000 if you are 50 and older.

RMDs have been waived for 2020. This applies to life expectancy payments. It may be possible to “undo” an RMD, if it meets these qualifications:

  • The RMD must have been taken between February 1—May 15 and must be recontributed or rolled over prior to July 15.
  • RMDs taken in January or after May 15 are not eligible.
  • Only one rollover per person is permitted within the last 12 months.
  • Life expectancy payments may not be rolled over.

Individuals impacted by coronavirus may be permitted to take out $100,000 from an IRA with no penalties. They are eligible if they have:

  • Been diagnosed with SARS-Cov-2 or COVID-19
  • A spouse or dependent has been diagnosed
  • Have experienced adverse consequences as a result of being quarantined, furloughed or laid off or having work hours reduced due to the virus, are unable to work because of a lack of child care, closed or reduced hours of a business owned or operated by the individual or due to other factors, as determined by the Secretary of the Treasury.
  • Note that these distributions are still taxable, but the income taxes can be spread ratably over a three-year period and are not subject to the 10% early distribution penalty.

Keep careful records, as it is not yet known how any of these distributions/redistributions will be accounted for through tax reporting. All of these tips will allow you to utilize the SECURE and CARE Acts effectively.

Reference: Milwaukee Business Journal (June 1, 2020) “IRA planning tips for changes associated with the SECURE and CARES acts”

 

Brad Wiewel discussed his new book Surviving Texas Probate

Brad Wiewel discusses Surviving Texas Probate

In the second part of our video series, Brad Wiewel discussed his new book, Surviving Texas Probate, on KXAN.  Brad and host Rosie Newberry talked about how the Probate process works in Texas.  The conversation addressed what makes the system in Texas different from other states, some of the common mistakes in planning that complicate the Probate process, and how proper planning can avoid Probate all together.

Brad’s discussion of his new book, Surviving Texas Probate, is also available on KXAN’s website: https://www.kxan.com/studio-512/surviving-texas-probate-with-the-wiewel-law-firm/

Balancing retirement with special needs planning

Times In Life When Wills Need To Be Reviewed

There are times in life when wills need to be reviewed. Estate planning lawyers hear it all the time—people meaning to update their will, but somehow never getting around to actually getting it done. The only group larger than the ones who mean to “someday,” are the ones who don’t think they ever need to update their documents, says the article “12 Different Times When You Should Update Your Will” from Kiplinger. The problems become abundantly clear when people die, and survivors learn that their will is so out-of-date that it creates a world of problems for a grieving family.

There are some wills that do stand the test of time, but they are far and few between. Families undergo all kinds of changes, and those changes should be reflected in the will. Here are one dozen times in life when wills need to be reviewed:

Welcoming a child to the family. The focus is on naming a guardian and a trustee to oversee their finances. The will should be flexible to accommodate additional children in the future.

Divorce is a possibility. Don’t wait until the divorce is underway to make changes. Do it beforehand. If you die before the divorce is finalized, your spouse will have marital rights to your property. Once you file for divorce, in many states you are not permitted to change your will, until the divorce is finalized. Make no moves here, however, without the advice of your attorney.

Your divorce has been finalized. If you didn’t do it before, update your will now. Don’t neglect updating beneficiaries on life insurance and any other accounts that may have named your ex as a beneficiary.

When your child(ren) marry. You may be able to mitigate the lack of a prenuptial agreement, by creating trusts in your will, so anything you leave your child won’t be considered a marital asset, if his or her marriage goes south.

Your beneficiary has problems with drugs or money. Money left directly to a beneficiary is at risk of being attached by creditors or dissolving into a drug habit. Updating your will to includes trusts that allow a trustee to only distribute funds under optimal circumstances protects your beneficiary and their inheritance.

Named executor or beneficiary dies. Your old will may have a contingency plan for what should happen if a beneficiary or executor dies, but you should probably revisit the plan. If a named executor dies and you don’t update the will, then what happens if the second executor dies?

A young family member grows up. Most people name a parent as their executor, then a spouse or trusted sibling. Two or three decades go by. An adult child may now be ready to take on the task of handling your estate.

New laws go into effect. In recent months, there have been many big changes to the law that impact estate planning, from the SECURE Act to the CARES act. Ask your estate planning attorney every few years, if there have been new laws that are relevant to your estate plan.

An inheritance or a windfall. If you come into a significant amount of money, your tax liability changes. You’ll want to update your will, so you can do efficient tax planning as part of your estate plan.

Can’t find your will? If you can’t find the original will, then you need a new will. Your estate planning attorney will make sure that your new will has language that states revokes all prior wills.

Buying property in another country or moving to another country. Some countries have reciprocity with America. However, transferring property to an heir in one country may be delayed, if the will needs to be probated in another country. Ask your estate planning attorney, if you need wills for each country in which you own property.

Family and friends are enemies. Friends have no rights when it comes to your estate plan. Therefore, if families and friends are fighting, the family member will win. If you suspect that your family may push back to any bequests to friends, consider adding a “No Contest” clause to disinherit family members who try to elbow your friends out of the estate.

Reference: Kiplinger (May 26, 2020) “12 Different Times When You Should Update Your Will”

 

Balancing retirement with special needs planning

Your Children Wish You Had an Estate Plan

It is the adult children who are in charge of aging parents when they need long-term care. They are also the ones who settle estates when parents die. Even if they can’t always come out and tell you, your children wish you had an estate plan. The recent article, “Why your children wish you had an Elder Law Estate Plan” from the Times Herald-Record spells out exactly why an elder law estate plan is so important for your loved ones.

Avoid court proceedings while living. In a perfect world, everyone over age 18 will have an advance directive, including a power of attorney, a health care proxy, and a living will. These documents appoint others to make financial, legal, and medical decisions, in case of incapacity. Without them, the children will have to get involved with time-consuming, expensive guardianship proceedings, where a judge appoints a legal guardian to make these decisions. Your life is turned over to a court-appointed guardian, instead of your children or another person of your choosing.

Avoid court proceedings after you die. If you die and assets are in your name alone, then your estate will go through probate, a court proceeding that can be time consuming and costly. Not having any assets in trusts leaves your kids open to the possibility of wills being challenged, disputes among family members and litigation that can drag on for years.

Wills in probate court are public documents. Trusts are private documents. Do you really want a stranger to access your will and learn about your assets?

An elder law estate plan also plans for the possibility of long-term care and costs. Nursing home care costs can run between $12,000—$18,000 per month. If you don’t have long-term care insurance, you can create a Medicaid Asset Protection Trust (MAPT) that protects assets in the trust from nursing home costs, once the assets are in the trust for five years. The MAPT also protects assets from homecare provided by Medicaid, called “community” Medicaid, once the assets are in the trust for 30 months under a new rule that starts on October 1, 2020.

The “elder law power of attorney” has unlimited gifting powers that could save about half of a single person’s assets from the cost of nursing homes. This can be done on the eve of needing nursing home care, but it is always better to do this planning in advance.

Having a plan in place decreases stress and anxiety for adult children. They are likely busy with their own lives, working, caring for their children and coping in a challenging world. When a plan is in place, they don’t have to start learning about Medicaid law, navigating their way through the court system, or wondering why their parents did not take advantage of the time they had to plan properly.

You probably don’t want your children remembering you as the parents who left a financial and legal mess behind for the them to clean up. Speak with an elder law estate planning attorney to create a plan for your future. Your children will appreciate it.

Reference: Times Herald-Record (May 23, 2020) “Why your children wish you had an Elder Law Estate Plan”

Balancing retirement with special needs planning

How Do I Talk about End-Of-Life Plans?

With the coronavirus pandemic motivating people to think about what they prioritize in their lives, experts say you should also take the time to consider how to talk about end-of-life plans.

Queens News Service’s recent article entitled “How to have the hardest conversation: Making end-of-life decisions” reports that in this coronavirus pandemic, some people are getting scared and are realizing that they don’t have a will. They also haven’t considered what would happen, if they became extremely ill.

They now can realize that this is something that could have an impact upon them.

According to the U.S. Centers for Disease Control and Prevention (CDC), 70% of Americans say they’d prefer to die at home, while 70% of people die in a hospital, nursing home, or a long-term care facility. This emphasizes the importance of discussing end-of-life plans with family members.

According to a survey of Californians taken by the state Health Care Foundation, although 60% of people say that not burdening their loved ones with extremely tough decisions is important, 56% have failed to talk to them about their final wishes.

“Difficult as they may be, these conversations are essential,” says American Bar Foundation (ABF) Research Professor Susan P. Shapiro, who authored In Speaking for the Dying: Life-and-Death Decisions in Intensive Care.

“Now is a good time to provide loved ones with the information, reassurance and trust they need to make decisions,” Shapiro says.

Odds are the only person who knows your body as well as you do, is your doctor.

When thinking about your end-of-life plans, talk with your doctor and see what kind of insight she or he can provide. They’ve certainly had experience with other older patients.

If you want to make certain your wishes are carried out as you intend, detail all of your plans in writing. That way it will be very clear what your loved ones should do, if a decision needs to be made. This will eliminate some stress in a very stressful situation.

Even after the COVID-19 pandemic is over, everyone will still need a will.

Talk with an experienced elder law or estate planning attorney to make certain that you have all of the necessary legal documents for end-of-life decisions.

Reference: Queens News Service (May 22, 2020) “How to have the hardest conversation: Making end-of-life decisions”

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Balancing retirement with special needs planning

Looking at tapping an Inherited IRA?

Are you looking at tapping an inherited IRA this year?  The rules about when and how you can tap the money you inherited changed with the passage of the SECURE Act at the end of December 2019. It then changed again with the passage of the CARES Act in late March, in response to the financial impact of the pandemic.

Things are different now, reports the article “Read This Before You Touch Your Inherited IRA Funds” from the News & Record, but one thing is the same: you need to know the rules.

First, if the owner had the account for fewer than five years, you may need to pay taxes on traditional IRA distributions and on Roth IRA earnings. This year, the federal government has waived mandatory distributions (required minimum distributions, or RMDs) for 2020. You may take out money if you wish, but you can also leave it in the account for a year.

Surviving spouses who don’t need the money may consider doing a spousal transfer, rolling the spouse’s IRA funds into their own. The RMD doesn’t occur until age 72. This is only available for surviving spouses, and only if the spouse is the decedent’s sole beneficiary.

The federal government has also waived the 10% early withdrawal penalty for taxpayers who are under 59½. If you are over 59½, then you can access your funds.

The five-year method of taking IRA funds from an inherited IRA is available to beneficiaries, if the owner died in 2019 or earlier. You can take as much as you wish, but by December 31 of the fifth year following the owner’s death, the entire account must be depleted. The ten-year method is similar, but only applies if the IRA’s owner died in 2020 or later. By December 31 of the tenth year following the owner’s death, the entire IRA must be depleted.

Heirs can take the entire amount in a lump sum immediately, but that may move their income into a higher tax bracket and could increase tax liability dramatically.

A big change to inherited IRAs has to do with the “life expectancy” method, which is now only available to the surviving spouse, minor children, disabled or chronically ill people and anyone not more than ten years younger than the deceased. Minor children may use the life expectancy method until they turn 18, and then they have ten years to withdraw all remaining funds.

There is no right or wrong answer, when it comes to taking distributions from inherited IRAs. However, it is best to do so, only when you fully understand how taking the withdrawals will impact your taxes and your long-term financial picture. Speak with an estate planning attorney to learn how the inherited IRA fits in with your overall estate plan.

Reference: News & Record (May 25, 2020) “Read This Before You Touch Your Inherited IRA Funds”

 

Balancing retirement with special needs planning

What You Need to Do after a Loved One Dies

The Dallas Morning News’ recent article entitled “Three things to do on the death of a loved one” explains the steps you should take, if you are responsible for a family member’s assets after they die.

Be sure the property is secured. A deceased person’s property becomes a risk in some instances. Friends and family will help themselves to what they think they should get, including the deceased’s personal property. Once it is gone, it is hard to get it back and into the hands of the individual who’s legally entitled to receive it.

Criminals also look at the obituaries, and while everyone is at the funeral or otherwise unoccupied, burglars can break into the house and steal property. Assign security or ask someone to stay at the house to protect the property. You can also change the locks. Credit cards, debit cards, and checks need to be protected. The deceased’s mail must be collected, and cars should be locked up.

Make funeral plans. If you’re lucky, the deceased left a written Appointment of Burial Agent with detailed instructions, which can make your job much easier.

For example, Texas law lets a person appoint an agent to be in charge of funeral arrangements and to describe the arrangements. An estate planning attorney can draft this document as part of an estate plan. You should see if this document was included. If you’re listed as the agent, present the paper to the funeral home and follow the instructions. If there are no written instructions, the law will say who has the authority to make arrangements for the disposition of the body and to plan the funeral.

Talk to an experienced attorney. When a person dies, there is often a lapse in authority. The decedent’s power of attorney is no longer in effect, and the executor designated in the will doesn’t have any authority to act, until the will is admitted to probate and the executor is appointed by the probate judge and qualifies by taking the oath of office and filing a bond, if required. Direction is needed earlier rather than later, on what you’re permitted to do. The probate of a will takes time.

It is best to get started promptly, so that there’s an executor in place with power to handle the affairs of the decedent.

Reference: Dallas Morning News (April 10, 2020) “Three things to do on the death of a loved one”

 

Balancing retirement with special needs planning

Protecting a Digital Legacy

There’s never an easy time to talk about end-of-life planning, and a pandemic that has everyone thinking about death can make it harder, says the article “Wannabe Wired: Preparing your digital legacy,” from The Lawton Constitution. Most of us think about creating a will, making burial plans and ensuring that our loved ones are cared for when we are gone. However, planning to protect a digital legacy is often neglected.

You don’t have to be Bill Gates or own billions in bitcoins to have a digital legacy. In fact, most people don’t even recognize their digital assets as a new type of property. If you have bank accounts, social media, own any websites or have original music, artwork, or videos online, you have digital assets.

Prior planning can help your loved ones protect your digital legacy, as well as your traditional property.

Different online platforms have different policies about what happens to accounts owned by people who have passed. Sometimes there is an option to delete or deactivate a profile, if the owners have checked the right box. However, that’s not always the case. Many digital giants won’t allow someone who is not the owner, to gain access to their accounts or the data.

Start by making a list of user names and passwords. If you can, go through all of your accounts one by one to see if they allow users to make a plan for what happens if the owner dies. Some, like Facebook, allow the account owner to name a Legacy Contact. That person is permitted to manage tribute posts on your profile, deciding who can and who cannot post on your account and request the removal of your account. Just go to General Account Settings and click on the “Memorialization Setting.” You also have the option to have your account deleted after you die.

Not every platform makes this process so easy. Some will delete accounts, if there is no activity after a certain number of months or years. If you have a business that relies on a free email service like Yahoo!, this could cause your family to lose access to valuable information.

Once you’ve made a thorough list of all of your online accounts and passwords, talk with a trusted family member about your wishes for your digital accounts. Do not include the document with online accounts and passwords in your will! Remember that your will is likely to be a probated document, meaning that it will be entered into the public record. You don’t want people accessing your online accounts—it’s an invitation to identity theft.

Speak with your estate planning attorney about protecting your digital and traditional legacy. It will spare your loved ones a lot of trouble and provide you with peace of mind.

Reference: The Lawton Constitution (May 12, 2020) “Wannabe Wired: Preparing your digital legacy”