Don’t Risk the Complications of a DIY Will

December 4, 2024

Ensuring that your wishes are carried out after passing is essential. However, the risk involved in creating a DIY Will can lead to unexpected complications. While DIY wills might seem like a quick and cost-effective solution, these documents come with risks that can create costly issues for your loved ones.

The price tag associated with a professional will is often a barrier. Preparing an essential will with a lawyer can range from $100 to several hundred dollars, with more complex cases costing even more. On the other hand, DIY will kits are available online for as little as $20. It’s no wonder the cheaper option tempts some people. It seems like a cost-saving measure. However, it often turns out to be anything but that.

Creating a will seems simple enough. However, legal standards must be followed. DIY kits often leave too much room for error, especially regarding proper witnessing, explicit language and meeting legal requirements.

One of the most frequent mistakes is failure to witness the will properly. Many people are unaware that two independent witnesses who do not benefit from the will must be present. Errors like misspelled names, incorrect property descriptions, or even failing to sign the document correctly are all common. These mistakes can invalidate the will, leading to additional expenses and complications.

The complications of an invalid or poorly crafted DIY will are not worth the risk. When a will is ruled invalid, a person’s estate is divided based on state laws rather than the deceased’s wishes, which could mean loved ones miss out on what was intended for them. Legal battles often arise among family members, leading to strained relationships and high legal fees.

A report from Co-operative Legal Services found that over 38,000 families face extended probate issues each year due to poorly prepared DIY wills. In many cases, legal fees drain a large portion of the estate, reducing the inheritance the deceased intended to pass on.

A DIY will seem sufficient if you have a straightforward estate, like leaving everything to one person. However, DIY will often fall short as soon as there are additional complexities, such as children from previous relationships, business ownership, or property in multiple locations.

These kits don’t cover complex issues like inheritance tax planning, specifying conditions, or accounting for family changes like marriage or divorce. A basic DIY will also lacks flexibility; if your situation changes, such as remarrying or having additional children, it may not account for these changes unless it’s entirely redone.

Although a DIY will initially seem cost-effective, many families discover the hidden costs once probate begins. If the will is invalid or unclear, family members may face extended probate processes, which increase legal fees and administrative expenses.

As noted in an article from The Guardian, the complications from an ineffective will can eat away as much as 10% of an estate’s value. For an estate worth $160,000, this means $16,000 lost to fees that could have been avoided.

Using a qualified estate planning attorney is the best way to ensure that your will is comprehensive and legally sound. These professionals can provide the legal guidance needed to meet state standards and to incorporate any specific wishes or complex situations into your will. They can also offer peace of mind by drafting a will that remains valid as your life circumstances change.

Some organizations offer cheaper will-drafting options. However, it is essential to ensure that any service you choose is regulated. If you work with a lawyer, look for someone accredited with the appropriate legal organization for added security.

When drafting a will with an attorney, you gain access to their knowledge and experience handling the legal requirements that a DIY kit might miss. Lawyers are well-versed in laws that can affect your will and estate, such as rules on estate taxes, property division and inheritance rights for unmarried partners. They can help structure a will that protects your loved ones from potential legal disputes or lengthy probate processes.

Creating a will with an estate planning attorney can make all the difference for your loved ones. Don’t risk the complications of a DIY will. If you would like to learn more about wills and trusts, please visit our previous posts.

Reference: The Guardian (Feb. 9, 2015) “The dangers of DIY wills”

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Pour-Over Will is a Safety Net for Assets not in a Revocable Trust

December 2, 2024

Estate planning can sometimes feel daunting, especially when it comes to ensuring that your assets go to the right people without hassle. The pour-over will, especially when paired with a revocable trust, can provide peace of mind. A pour-over will is like a safety net for assets that are not in a revocable trust.

This type of will allows any remaining assets you hadn’t transferred to your trust during your lifetime to “pour over” into the trust when you pass away. This ensures that everything is gathered into one place—the trust you created—so it can be distributed according to your wishes.

Even though pour-over will still need to go through probate, they streamline the process by consolidating everything into your trust, making it easier for the appointed trustee to handle everything in one place. According to Investopedia, pour-over wills cover any assets left outside the trust at death.

A revocable or living trust is a legal arrangement you create while alive. It allows you to transfer your assets into the trust’s ownership, and you can continue to control these assets, making adjustments or even dissolving the trust if you choose. This type of trust is often used to help avoid the probate process for assets placed within it.

When you set up a pour-over will alongside a revocable trust, the will is a backup for any assets that might not make it into the trust before you pass away. Let’s say, for instance, you acquire a new property but forget to transfer it to your trust. A pour-over will ensure that property eventually lands in your trust, keeping your wishes intact.

While the assets already placed in a revocable trust bypass probate, any assets that transfer via a pour-over will still go through this legal process. However, since the pour-over will usually contain fewer assets or smaller items, the probate process can be more straightforward and less expensive than it might be for a standard will covering all your assets. Probate rules vary by state, but having a pour-over will simplify things since it consolidates your assets into your trust, making it easier to administer your estate.

Not everyone needs a pour-over will. However, it’s a valuable tool in certain circumstances. Here are some situations where this combination might make sense:

You Have a Complex or Changing Asset Portfolio: If you often acquire new assets , it can be easy to overlook transferring something to your trust. A pour-over will capture anything not moved to the trust, ensuring that nothing gets left behind in the probate process.
You Want Flexibility and Control During Your Lifetime: A revocable trust allows you to control your assets and adjust as your needs change. Pairing this with a pour-over will ensure that any missed items are still distributed according to your intentions.
You’re Concerned About Privacy for Your Beneficiaries: Probate records are typically public, so any details in a standard will might be open to view. However, funneling your assets into a trust through a pour-over will add privacy.

A pour-over will pair with a revocable trust can offer several benefits:

Simplicity: Consolidating everything into a single trust makes it easier for your beneficiaries and trustee to manage your estate.
Reduced Legal Complications: This setup can help avoid disputes over assets, since everything is eventually directed to the trust where your wishes are clear.
Peace of Mind: Knowing that your assets will end up in the right hands, even if you forget to transfer something to your trust, can provide significant reassurance.

While a pour-over will is like a safety net for assets that are not in a revocable trust, be aware of a few drawbacks. Assets undergoing a pour-over must still undergo probate, meaning they aren’t entirely shielded from court proceedings. However, this may be a minor inconvenience if the peace of mind it provides outweighs the potential cost of probate.

A pour-over will also slow down the distribution of assets since probate can take time. This is worth considering for families or beneficiaries needing a quicker transition.

Setting up a pour-over will and revocable trust usually involves some paperwork and the help of an estate planning attorney. An attorney can guide you through drafting both documents, ensuring that your assets are accounted for and that any remaining assets will flow smoothly into your trust upon your passing.

Are you thinking about a pour-over will and revocable trust? It’s never too early to start planning. If you would like to learn more about trusts, please visit our previous posts.

Reference: Investopedia (April 1, 2024) “Pour-Over Will Definition and How It Works With a Trust”

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Creating a Comprehensive Estate Plan for Cryptocurrency is Essential

November 18, 2024

Creating a comprehensive estate plan for cryptocurrency is essential. Cryptocurrency is no longer just for tech enthusiasts. With the growing popularity of Bitcoin, Ethereum and other digital currencies, estate planning now involves accounting for these unique assets. Cryptocurrency brings new challenges, unlike traditional investments, such as real estate or bank accounts. There’s no customer service to help recover your funds, and if you don’t have the proper protection in place, your digital wealth could be lost forever.

One of the main differences with cryptocurrency is how it’s stored. Digital wallets protect your crypto holdings, and private keys control access to those wallets. A common phrase in the crypto world is “Not my key, not my coin,” which means that you don’t have access to the funds if you don’t have the private key.

If you don’t create a secure plan to transfer these keys to your beneficiaries, your cryptocurrency could be lost forever after your passing. Imagine losing a loved one and knowing they invested in Bitcoin without knowing where to find it or how to access it. There are no bank statements or account numbers to check, and without a clear estate plan, their digital wealth may disappear for good.

According to ACTEC, you must establish a secure plan for transferring these digital assets. One option is to use a third-party custodian to manage and store your cryptocurrency’s private keys. This minimizes the risk of losing your digital wealth through theft or mismanagement.

Some people prefer to store their private keys on physical items like a metal plate or a secure USB drive. While this method gives you direct control, keeping these items safe and ensuring that your heirs know where to find them is crucial. If these physical keys are lost, so is your crypto.

Another approach is to transfer your cryptocurrency into a corporate entity. This can simplify managing and passing down your crypto holdings, reducing the burden on your heirs to figure out how to handle the technical aspects of private keys.

Cryptocurrency is decentralized, which means there’s no central authority or institution to recover your assets if things go wrong. If you don’t create a clear plan for your crypto, it can easily be lost forever, leaving your family with nothing.

Creating a comprehensive estate plan for cryptocurrency is essential. This plan should clearly outline where your private keys are stored, how to access them and who will manage them after you’re gone.

If you’ve named a fiduciary, such as an executor or trustee, to manage your cryptocurrency, they may face unique difficulties. Cryptocurrencies are known for their volatility, with values fluctuating rapidly. Most fiduciaries are tasked with preserving the value of assets, and managing such volatile investments can be particularly challenging.

There’s also the issue of security. Fiduciaries may not be equipped to handle cryptocurrency’s technical requirements. They could accidentally lose access to these assets if unfamiliar with how digital wallets and private keys work. Selecting a fiduciary who understands these complexities or can seek help from those experienced in cryptocurrency management is essential.

Regarding taxes, the IRS treats cryptocurrency like any other property. You’ll owe capital gains tax if you sell your cryptocurrency for more than you paid. If you’ve held the cryptocurrency for over a year, you’ll pay long-term capital gains tax, which generally has a lower rate.

Cryptocurrency also plays a role in estate and gift taxes. Timing is essential here. If you transfer your crypto during a market downturn, you could lower the tax burden on your estate. Once the value goes back up, your heirs will benefit from the appreciation without the estate being taxed on the total amount.

Without a detailed estate plan, your cryptocurrency could be lost, mismanaged, or subject to excessive taxes. As digital assets become more common, it’s essential to account for them in your estate plan, just like any other investment. Estate planning lawyers can help you navigate these digital challenges and ensure that your cryptocurrency is adequately passed down to your heirs.

Don’t wait until it’s too late to secure your cryptocurrency. Speak with an estate planning lawyer today to create a solid plan for passing down your digital wealth. If you would like to learn more about managing cryptocurrency in your estate planning, please visit our previous posts.

Key Takeaways:

Protect your cryptocurrency: Digital wealth could be lost forever without proper estate planning.
Secure transfer of assets: Create a clear plan to ensure that your loved ones can access your cryptocurrency after your passing.
Reduce tax burden: Plan strategically to minimize capital gains and transfer taxes on your cryptocurrency.
Choose the right fiduciary: Select someone knowledgeable about cryptocurrency to manage your digital assets securely.

Reference: The American College of Trust and Estate Counsel (ACTEC) (Sep. 8, 2022) “Understanding Cryptocurrency in Estate Planning”

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Estate Planning for a Child with Addiction

November 6, 2024

Estate planning for a child with addiction is not just about leaving them an inheritance — it’s about ensuring that the inheritance supports their recovery and future well-being. Parents often find themselves facing tough decisions when their child struggles with substance abuse. However, creating a plan with clear goals can provide a sense of control and security for everyone involved, as per Kiplinger.

When a child has an addiction, direct access to their inheritance can do more harm than good. A well-structured trust can help protect the child and their financial future, especially when the trustee has clear instructions and guidance on handling distributions.

What kind of trust should you set up for a child with addiction? Trusts designed for minors or those with intellectual disabilities may not be appropriate in this case, since the goals are very different. For children struggling with substance use, a trust must account for their unique needs and the challenges they may face in their recovery journey.

A trust for a child with a substance use disorder can either play an active or passive role in their recovery. Some parents may prefer a trust focusing solely on the child’s basic needs — housing, food and healthcare. Others may want a more proactive approach, where the trustee is involved in the child’s treatment plan, helping to pay for rehabilitation, therapy and ongoing support.

Parents should discuss with their estate planning attorney how they want the trust to work. Should it fund recovery efforts? Should distributions only be allowed if the child is making progress toward recovery? Having these conversations ahead of time ensures that the trust aligns with the parents’ goals and the child’s long-term needs.

Understanding the recovery process is essential to structuring estate planning for a child with addiction. Recovery doesn’t happen overnight. Many children go through several stages before they reach a place of stability, and setbacks are common. In fact, relapses are often part of the process.

One model of behavioral change, known as the Transtheoretical Model, suggests that recovery involves several stages, including:

Precontemplation: The child is not yet ready to address their addiction.
Contemplation: They recognize the problem but feel conflicted about taking action.
Preparation: The child begins making small changes and planning more significant steps.
Action: The child actively works to change their behavior and engage in recovery.
Maintenance: They develop coping strategies to maintain sobriety.
Relapse: Relapse is common but can be seen as part of the learning process.

A trust designed to support recovery should not penalize the child for relapsing. It should instead provide resources to help them get back on track and continue their journey toward a healthier future.

Incentives can be a helpful tool in encouraging a child with addiction to stick to their recovery plan. However, offering cash as an incentive is generally not recommended, as it can lead to a greater risk of relapses.

Incentives should instead be non-monetary, such as paying for a vacation, using a vehicle, or covering the cost of a fitness membership. The trustee should be able to decide when the child has met the goals necessary to earn these incentives. This approach helps ensure that rewards begin with genuine recovery progress.

When planning for a child with addiction, the right estate plan can make a significant difference in their recovery and long-term well-being. By setting up a specialized trust, you can offer them the support they need without the risk of enabling harmful behavior.

Don’t leave your child’s future to chance—take control by working with an experienced estate planning attorney who can help you structure a plan that aligns with your goals and safeguards your child’s inheritance. If you would like to learn more about estate planning for complicated family histories, please visit our previous posts.

Reference: Kiplinger (Mar. 8, 2019) “Designing Trusts for Substance Abuse Problems“

Testamentary Trust can Protect your Intellectual Property

November 4, 2024

When managing your estate, people often overlook intellectual property (IP). If you are an artist, inventor, or business owner, your IP can be one of your most valuable assets. Incorporating IP into your estate plan is crucial to ensure that it benefits your heirs, primarily through a testamentary trust. A testamentary trust can protect your intellectual property.

A testamentary trust is created as part of your will and only takes effect after you pass away. It allows you to name a trustee who will manage the trust’s assets, including your intellectual property, to benefit your chosen beneficiaries. According to Forbes, by establishing a testamentary trust, you choose how to handle your IP and ease the burden on heirs.

For those with valuable intellectual property—such as copyrights, trademarks, patents and trade secrets—a testamentary trust can effectively safeguard and distribute these assets after you’re gone.

Intellectual property is often complex and requires ongoing management. Here are a few reasons why a testamentary trust can help:

Ongoing Management Needs: IP may need someone with knowledge of the field to manage it properly. Your beneficiaries might not be familiar with your creations’ legal rights or value, so appointing a trustee ensures that someone experienced handles these responsibilities.
Protecting Financial Interests: If your IP continues to generate revenue (e.g., royalties from books, music, or inventions), a trustee can distribute these funds according to your instructions.
Avoiding Probate Delays: By placing your IP in a trust, the assets can bypass probate, ensuring that they are handled efficiently without long delays or court involvement.

According to Charles Schwab, it’s essential to identify the types of intellectual property you own. Some common forms of IP you might place in a testamentary trust include:

Copyrights: If you’ve created original works, like books, music, or artwork, a copyright allows you to control their use and distribution. These assets can be precious and may need careful management to ensure continued profitability.
Patents: For inventors, patents provide exclusive rights to their creations. By placing them in a trust, you ensure that they are protected and passed on to your heirs in a controlled manner.
Trademarks: Your brand’s name, logo, or symbols may be essential for business success. A testamentary trust can keep these assets intact and help manage any ongoing legal protections they require.
Trade Secrets: If you’ve developed formulas, customer lists, or other confidential business information, you can protect them with a trust. A trustee can make sure they remain confidential and continue to benefit your heirs.

Appointing a knowledgeable trustee is critical to the success of managing your IP. This person or organization will be responsible for protecting your intellectual property, ensuring registrations are maintained and continuing to enforce your rights. They will also distribute any income from the IP according to the terms laid out in the trust.

When setting up a testamentary trust for your intellectual property, you can specify how long the trust will last. For instance, if you own copyrights, these can last for 70 years after your death, which means the trust may need to remain in effect for decades.

Carefully think about the future value of your IP and when it might be best for your heirs to take complete control of the assets. You can set specific milestones, such as when your children reach a certain age or achieve educational goals.

Intellectual property can be a critical asset in your estate plan. However, it requires careful management to ensure that it benefits your loved ones. Using a testamentary trust, you can protect and leverage your intellectual property in ways that align with your values. If you would like to learn more about testamentary trusts, please visit our previous posts.

References: Forbes (Jan. 24, 2024) “What Is A Testamentary Trust?” and Charles Schwab (Jun. 14, 2024) “4 Steps to Help Protect Your Intellectual Property“

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Grandparents Raising Grandchildren need Specialized Estate Planning

October 28, 2024

Grandparents raising grandchildren need specialized estate planning. Navigating these issues can feel overwhelming. A skilled lawyer can help you understand your estate planning options and secure your grandchild’s future.

According to AARP, grandparents responsible for their grandchildren must often establish a legal relationship to care for them fully. Without this, you may face difficulties enrolling them in school, getting medical care, or making important decisions on their behalf. Here are the primary options to consider:

Guardianship: This legal arrangement allows grandparents to decide about their grandchildren’s health, education and welfare. However, it is important to note that guardianship doesn’t always sever legal parenthood and may leave the biological parents with some authority.
Grandparent Power of Attorney: A power of attorney (POA) for grandparents is much more flexible than guardianship. This makes it suitable as a temporary solution. It confers the power to make decisions, such as enrolling a child in school or seeking medical treatment.
Adoption: Adoption is the most permanent option, since it legally transfers all parental rights to the grandparents. Once completed, all legal rights to the child transfer from the biological parents to you.

Each of these legal tools comes with specific responsibilities and levels of authority. Therefore, it’s crucial to consult with an estate planning attorney to choose the best path for your family.

In some states, consent laws allow you to enroll a child in school or access medical care without a formal legal relationship. These laws allow caregivers to sign an affidavit confirming they are the primary caregiver, which may be enough to get the child’s medical services or educational enrollment. However, these laws vary by state, so you must check the rules in your area or consult an attorney.

Many grandparents worry about the financial burden of raising grandchildren, especially without formal legal arrangements. Public benefits are fortunately available for children that don’t require grandparents to have custody or guardianship. Programs such as Social Security benefits, child support, or foster care payments can help ease the financial strain. Your income may sometimes not even be counted when determining the child’s eligibility for assistance.

An article from the Chillicothe Gazette discusses an interview with Southeastern Ohio Legal Services attorney Sierra Cooper, where she covered adoption by grandparents. Among other topics, Sierra discussed how the power of attorney or caretaker authorization could provide a quicker route to gaining legal rights.

Sierra also discussed guardianship and adoption as complex but more permanent options. While the process can be challenging, legal tools are available to provide simple, short-term answers as well as enduring solutions.

Estate planning goes beyond simply caring for your grandchild while you’re alive. A solid estate plan will make all the difference if something happens to you. You can outline a guardian and backup guardian to take over raising them or establish a trust to manage their inheritance.

Grandparents may also want to consider durable powers of attorney and advance healthcare directives for themselves. These documents outline your wishes in case of an emergency.

If you are a grandparent raising grandchildren. or anticipate that you may need to take on this role, it’s essential to have specialized estate planning in place. By acting now, you can protect your grandchildren’s future and ensure that they have the support they need. If you would like to learn more about planning for grandparents, please visit our previous posts.

References: AARP (Aug. 11, 2011) “Raising Grandkids: Legal Issues” and Chillicothe Gazette (Oct. 8, 2018) “Need to help care for grandchildren? Here’s some legal tips”

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Estate Planning When You’re Single

October 24, 2024

Estate planning when you’re single can be daunting when there is no one to assist you. For one woman, the wake-up call arrived when listening to a friend explain all the tasks she needed to perform for her 91-year-old mother, whose needs were increasing rapidly. Solo agers, people who are growing older without spouses, adult children, or other family members, are now a significant part of the older population, says the article “Going Solo: How to Plan for Retirement When You’re on Your Own” from The New York Times.

Seniors who are married or have adult children have many of the same retirement planning issues as their solo ager counterparts. However, figuring out the answers requires different solutions. Managing future healthcare issues, where to live and how to ensure that retirement savings lasts needs a different approach.

Options must be addressed sooner rather than later. Estate planning is a core part of the plan. While you can’t plan everything, you can anticipate and prepare for certain events.

Determining who you can count on in a healthcare crisis and to handle your financial and legal issues is key. This is challenging when no obvious answers exist. However, it should not be avoided. You’ll need an estate plan with advance directives to convey your wishes for medical treatment and end-of-life care.

An estate planning attorney will help draw up a Power of Attorney, so someone of your choice can step in to make legal and financial issues if you become incapacitated. You’ll also want a Healthcare Proxy to name a person who can make medical decisions on your behalf if you can’t communicate your wishes. While it’s comfortable to name a trusted friend, what would happen if they aren’t able to serve? A younger person you know and trust is a better choice for this role.

A Last Will and Testament is needed to establish your wishes for distributing property. Your will is also used to name an executor who administers the will. Think about people you trust who are a generation or two younger than you, like a niece or nephew or the adult child of someone you know well. You’ll need to talk with them about taking on this role; don’t spring it on them after you’ve passed. Just because someone is named an executor doesn’t mean they have to accept the role.

Where you age matters. From safety and socialization standpoints, aging alone in a single-family home may not be the best option. Having a strong network of friends is important for the solo ager. Moving to a planned community with various support systems may be better than aging in place. Explore other housing options while you are still able to live on your own, so you can make an informed choice if and when the time comes for community living.

Estate planning when you’re single doesn’t have to be a headache. A combination of professional help will make the solo aging journey better. An experienced estate planning attorney, financial advisor and health insurance source can help you navigate the legal and business side of your life. Check with your town’s senior center for available social services and activities resources. If you would like to learn more about planning as a single person, please visit our previous posts.

Reference: The New York Times (Sept. 21, 2024) “Going Solo: How to Plan for Retirement When You’re on Your Own”

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The Difference Between an Heir and a Beneficiary

October 15, 2024

When it comes to estate planning, it’s essential to understand the difference between an heir and a beneficiary. While these terms are often used interchangeably, they have distinct meanings that can affect who receives your assets after you pass away. According to Nerd Wallet, knowing how heirs and beneficiaries work is key to ensuring that your estate plan reflects your wishes and protects your loved ones.

An heir legally inherits property from a person who dies without a will, a situation called dying intestate. When someone dies intestate, the state’s probate court follows local laws to determine who the heirs are and how the property should be distributed.

The closest relatives are usually given priority. For example, a spouse or children are often the first to inherit, followed by parents and other family members like siblings, nieces and nephews. The specifics depend on your state’s inheritance laws, so it’s always wise to understand how this works in your area.

If you have a will or trust, heirs are not automatically guaranteed to inherit your property, unless they are named beneficiaries.

A beneficiary is a person or entity specifically named in a will, trust, or other legal document to inherit assets. Unlike heirs, beneficiaries can include family members, friends, charitable organizations or even pets.

Beneficiaries are designated through estate planning tools such as wills, trusts, or life insurance policies. You can name specific people to receive certain assets and include instructions on what should happen if one of your beneficiaries cannot inherit. This flexibility allows you to customize your estate plan according to your specific wishes.

If you pass away without a will, the court will decide who your heirs are based on state law. On the other hand, if you have a will or trust, you get to choose your beneficiaries. Doing this prevents you from leaving the decision to the court, ensuring that your assets are distributed the way you want.

For example, if you want your spouse to inherit most of your assets but also wish to leave a portion to a close friend or charity, you can name them as beneficiaries in your estate plan. This way, you control who inherits your estate instead of relying on default state laws.

If you don’t have a will or don’t name beneficiaries on key assets, such as life insurance policies or retirement accounts, your loved ones may have to go through the probate court process. The court will use intestacy laws to determine your heirs and distribute your assets, which might not align with your wishes.

In some cases, if no heirs can be found or named, your estate could go to the state through a process called escheat. This situation can leave your family without the inheritance you intended for them. Create a clear, legally binding estate plan that outlines who your beneficiaries are to avoid these outcomes.

Naming beneficiaries in your estate plan is straightforward but requires careful thought and organization. Here’s how you can start:

Take inventory of your assets – Make a list of everything you own, including property, investments and sentimental items.
Decide who will benefit from your estate – Consider who would benefit the most from your assets. You can choose close family members, friends, or even charitable organizations.
Name beneficiaries in a will or trust – Work with an estate planning attorney or use an online service to create a will or trust that clearly outlines your beneficiaries.
Update your beneficiary designations—Name beneficiaries directly on assets like life insurance policies or retirement accounts. This ensures that the assets pass directly to them, avoiding probate.

By understanding the difference between an heir and a beneficiary, you can use estate law to control the legacy you leave behind. If you would like to learn more about heirs and beneficiaries, please visit our previous posts.

Reference: NerdWallet (Nov. 13, 2023) “What Is an Heir? Meaning and Types”

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Important Steps to take After the Passing of a Spouse

October 9, 2024

The passing of a spouse is one of life’s most stressful events, topping the list of most mental health checklists for anxiety-creating experiences. There are important steps to take after the passing of a spouse. It’s important to build in answers to “what if’s” into an estate plan, advises a recent article from The Penny Hoarder, “How to Change Your Estate Plan After Your Spouse Dies.”

It’s easy to procrastinate estate planning. However, even if you have a will, as 1.3 million Americans do, you’re not finished. Regular updates of your estate plan to reflect new circumstances are necessary, especially upon the death of a spouse. It’s complicated to do this when grief is fresh. However, it becomes manageable by taking this task one step at a time.

Married couples typically create their estate plans together, with the understanding of one spouse outliving the other. Being realistic about who is likely to die first sounds a bit morbid. However, it should be taken into consideration. Males tend to have shorter lifespans, while people who live with chronic conditions, like diabetes, heart disease, or cancer, should keep the impact of their conditions in mind when making plans for the distant or not-so-distant future.

Powers of Attorney should be updated every few years. This is the person chosen to handle financial and legal affairs in case of incapacity. In most cases, this is assigned to a spouse, so it should be updated soon after the spouse passes. The power of attorney does not have to be an adult child but should be trusted, organized, and financially savvy.

Another document to be updated is the Healthcare Proxy, sometimes called a Medical Power of Attorney. An adult child living nearby, a trusted friend, or another relative needs to be named and the document executed in case you should become incapacitated. This way, someone can act on your behalf without going to court to obtain guardianship.

Wills and trusts need to be updated. With your spouse’s passing, your estate may now be vulnerable to estate taxes on the state and federal levels. Who do you want to inherit your property from, and what’s the best way to pass assets on to the next generation? An experienced estate planning attorney will be needed to make this happen most efficiently and expeditiously.

After a spouse passes, you’ll also want to review beneficiaries on life insurance, retirement accounts and any accounts with a named beneficiary. If these documents have contingency beneficiaries who receive the assets, you’ll be in good shape if the primary beneficiary has died. However, do you know for sure the accounts are structured this way? Reviewing all these accounts is surely a good idea.

It may be time for the estate to include a trust. The most significant change occurring when a spouse dies is the surviving spouse is now legally considered single. All states have laws about how much assets may be owned to qualify for Medicaid. This number is dramatically lower for a single person than for a married couple. The surviving spouse may need to put their assets into a trust to exempt some assets that would otherwise need to be spent down before qualifying for Medicaid.

This is also the time to review end-of-life documents, including a Living Will and other medical directives.

There’s no way to make the loss of a spouse easy. However, these important steps to take after the passing of a spouse will provide some peace of mind. If you would like to learn more about planning for surviving spouses, please visit our previous posts.

Reference: The Penny Hoarder (Sep. 5, 2024) “How to Change Your Estate Plan After Your Spouse Dies”

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Unique Challenges to Estate Planning for Non-Citizens with U.S. Assets

October 2, 2024

There are unique challenges to estate planning for non-citizens with U.S. assets. Non-citizens’ estate planning isn’t something that all estate lawyers are ready to handle. However, avoiding an excess tax burden is important. However, the right help can drastically reduce your tax burden and increase what you leave behind to loved ones.

One of the most important factors to consider regarding estate planning for non-citizens is residency status. The U.S. estate tax laws apply differently to residents and non-residents. Guardian Life shares that U.S. citizens and residents are entitled to a significant estate tax exemption—currently set at $13,610,000 for 2024.

However, non-residents with U.S. assets face a much smaller exemption of just $60,000. This stark difference means that non-citizens may be subject to high estate taxes, potentially up to 40% on assets exceeding the $60,000 threshold.

Residency status is a critical element in determining estate tax obligations. The Internal Revenue Service (IRS) uses the concept of “domicile” to decide who qualifies for the higher exemption. A person is considered domiciled in the U.S. if they live there and intend to remain permanently. Non-citizens who do not meet these criteria are considered non-residents and are subject to the lower exemption.

For example, someone living in the U.S. on a non-resident visa might still be considered domiciled for estate tax purposes. This contrasts with income tax rules, which would still treat them as a non-resident.

There are several strategies that non-citizens can employ to minimize their U.S. estate tax obligations:

Gifting Assets During Lifetime: One effective way to reduce estate taxes is by gifting assets while the donor is still alive. The IRS allows an annual exclusion for gifts up to $17,000 per recipient without any tax implications. This strategy can help decrease the value of the estate subject to tax upon death.
Leveraging Estate Tax Treaties: The U.S. has estate tax treaties with several countries, providing more favorable exemptions for residents of those countries. These treaties can significantly reduce estate tax obligations for non-citizens, making it crucial to understand which countries have such agreements with the U.S.
Utilizing Life Insurance: Life insurance can be a powerful tool in estate planning for non-citizens. Life insurance payouts are generally exempt from U.S. estate taxes, making them an attractive option for providing liquidity to cover any potential estate taxes without selling off other assets.

Given the complexities of U.S. estate taxes for non-citizens, seeking advice from experienced estate planning professionals who understand U.S. tax law and international estate planning is crucial. This includes not only tax attorneys but also financial advisors who are familiar with cross-border tax issues. A well-crafted estate plan can ensure that your assets are protected, and your family’s financial future is secure.

There are unique challenges to estate planning for non-citizens with U.S. assets. If you’re a non-citizen with U.S. assets, the tax implications can be significant. However, with the right planning, they don’t have to be. If you would like to learn more about planning for non-citizens with US assets, please visit our previous posts.

Reference: Guardian Life (Aug. 28, 2024) “US estate tax strategies for noncitizens and nonresidents with US assets”

Photo by Ajay Donga

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