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Common Mistakes in Special Needs Planning

Common Mistakes in Special Needs Planning

Statistics show that 26% of American adults live with some form of disability–  more than you might think. However, federal and state benefits, such as Medicaid and Supplemental Security Income (SSI), are available for persons with special needs. These benefits are “needs-based,” which means the amount of assets and income the beneficiary can have are very limited.

When planning for a loved one with special needs, you must ensure they don’t receive money or other assets thatcould cause disqualification from their government benefits. Here are some common mistakes in special needs planning.

Gifts

Gifts of money or assets from well-intentioned family members or friends can disqualify a loved one with special needs from government benefits. This would cauwe their countable assets to exceed the acceptable limit. After getting disqualified, it can be difficult to requalify for benefits. It’s better to have gifts go to a special needs trust or a similar financial planning tool set up for the benefit of the recipient.

Disinherit

Some parents believe if they disinherit their child with special needs, that child’s siblings will help take care of them for the remainder of their life. This plan puts a lot of responsibility on the other siblings and can fall apart for many reasons. If the inheritance is in the siblings’ names, it could be lost due to divorce, lawsuits, bankruptcy, or irresponsible spending. Additionally, Louisiana’s forced heirship laws can foil such a plan. Forced heirship requires that a special needs child (or grandchild in some circumstances) must received a certain amount of a decedent’s estate after he or she dies.

Lack of a Trust

Failing to create a special needs trust for your loved one with special needs is a common mistake.  Government benefits are used for basic living expenses, such as housing, food, and medical care. Therefore, a person with special needs usually won’t have enough money for other expenses, such as travel and hobbies. Creating a special needs trust can make funds available for expenses that government benefits don’t cover.

Crowdfunding

Similar to gift-giving from family members and friends, donations from a crowdfunding campaign can negatively affect your loved one with special needs. By pushing their countable assets over the acceptable limit. If you want to create a crowdfunding campaign to benefit your loved one with special needs, find a way to keep the funds out of your loved one’s name. Again, a special needs trust could be a good option.

Consult an Attorney

The best way to avoid making mistakes that could cause your loved one with special needs to lose their government benefits is to consult with an attorney experienced in elder law and estate planning. They will be able to help you find the best solution for your particular situation.

Our law firm is dedicated to informing you of issues affecting persons with special needs. We help you and your loved ones plan for the best possible future. Contact us today to schedule an appointment.

This article offers a summary of aspects of estate planning and elder law. It is not legal advice and does not create an attorney-client relationship. For legal advice, contact our Ruston, LA office by calling us at (318) 255-1760.

Estate Planning with Your Parents

Estate Planning with Your Parents

Discussing your parents’ wills, or lack thereof, with them, can be intimidating. Many adult children put off having the “dreaded talk” of estate planning with your parents and are unprepared when an unforeseen event like an accident or illness happens. A 2022 survey conducted by caring.com shows despite the COVID-19 pandemic, two-thirds of adult Americans do not have a will or estate plan. Putting off the discussion is risky, even if there is apprehension about getting started.

Protecting Your Family While Still Alive

A will is only part of an estate plan and only becomes active upon death. However, crucial documents such as a living will, powers of attorney, and living trusts protect a parent’s quality of life and outline their medical preferences while alive. This point is an important distinction to draw in conversation with your parents. Estate planning isn’t just about inheriting property, money, and objects. It is also a plan for your parents’ future, bringing peace to their daily lives, knowing emergency instructions exist.

While talking to your parents about estate planning helps them, it also helps the family’s adult children. Often with their own family to care for, they must plan for their future beyond their parents. When parents don’t prepare for retirement, including the need for long-term care or end-of-life decision-making, caretaking might cost the adult children a lot of money, derailing the next generation’s financial stability. Every family has a vested interest in discussing their parents’ estate plans.

Incapacitation and End-of-life Care

Even if your parents have a modest estate, they should make their preferences known regarding incapacitation and end-of-life care. Are there enough available estate assets to cover them through retirement and long-term care issues? If not, there are other options for protecting you and your parents from financial ruin. An estate planning or elder law attorney develops strategies to meet these specific goals.

Professional legal advice helps to start the conversation with parents and siblings. There will be many ideas and viewpoints. Each may be valid, but remember, what seems fair to one sibling may not seem reasonable to another. An open family discussion will instruct specific people to make medical and financial decisions, pay for higher levels of care, and offer options for long-term care services and facilities. It also prevents conflict after parents are gone about “what they would have wanted.” If your parents are making a first-time plan, encourage them to create one that clearly outlines expectations while alive and after death to avoid future issues.

When to Talk about Estate Planning

The sooner, the better. It may take several planning sessions. Figure out the best time when the entire family can get together and keep each meeting to about an hour, presenting a clear agenda. Consider when your parents are at their best during any given day. Some parents may prefer the morning while others prefer the afternoon. Working family members may require weekend meetings. Try to accommodate all family members’ needs but prioritize your parents.

To clearly understand what to address in your family meetings, research what is included in comprehensive estate planning. At your first meeting, providing a general overview may encourage your parents to retain an estate planning attorney. Their attorney may attend some of your meetings or provide answers to specific questions that come up.

Updating an Estate Plan

If an older estate plan is in place, you will need an estate planning lawyer to review its current effectiveness. A child-specific trust when children were minors is outdated if you are adults. Rules and safeguards for trusts and other legal entities may change or no longer be relevant. Estate planning is not a set-it-and-forget-it enterprise. State and federal laws frequently change and can impact existing plans.

Your parents may have multiple marriages between them. In blended families, stepparents can be cause for concern for adult children. It can get very messy, so specific instructions about what goes to a second husband or wife versus what goes to biological or stepchildren must be clear. Some parents consider this a privacy issue and do not want to share these details. Do your best to explain future concerns and pivot to long-term care planning issues while still alive rather than inheritance after death. The goal is to help preserve their assets to live comfortably in a medical crisis and leave the legacy they intended after death. You want to understand their wishes for themselves as well as other family members.

Understanding Your Parent’s Point of View

Have your parents review, or identify what roles they expect their spouse and adult children to play in the estate plan — letting the family know who is selected and why helps manage future expectations. If there is contention on the part of a family member about roles, talk out the feelings and try to bring everyone to an understanding about your parents’ point of view. Take notes during your discussions and refer to them often, following up with supporting data to put family members at ease when resolving sticking points.

Try to keep the conversation on track and handle one topic at a time. Key topics to review will include the estate plan, net-worth statement, family business (if any exists), powers of attorney for health care and financial and digital assets, trusts, will, living will, real and personal property, investments, and long-term care. Set goals for your meetings to provide direction. Know that some of these conversations may be unpleasant or unpredictable. There are as many communication styles among family members as there are unique personalities. Scenarios are endless, so patience and flexibility are key to success.

Include your estate planning attorney and financial advisor if there are certain issues you can’t seem to get past as a family. Directly or indirectly, professional guidance will provide information that will clear up disagreements. Everyone can air their grievances, and the professionals can address each issue from a practical standpoint and how it affects your parents’ well-being emotionally and financially. Although a series of family meetings with honest intentions to help guide your parents’ estate planning can be challenging, the entire family will benefit in the future. Contact our Ruston, LA office by calling us at (318) 255-1760 to speak to one of our experienced estate attorneys.

Avoiding Inheritance Mistakes

Avoiding Inheritance Mistakes

Having to cope with the death of a loved one and receiving an inheritance can be an emotional time. The loss of a loved one is sad, but the influx of funds can bring joy or relief. It can be hard to think and plan objectively. After receiving an inheritance, some people are blowing through it surprisingly quickly.  Avoiding inheritance mistakes is important. Here are some mistakes people make when inheriting money and how to avoid them.

Not Factoring in Potential Taxes

Depending on the size of the inheritance, you may get bumped into a higher tax bracket than you were previously. You could also be on the hook for capital gains taxes. It is a good idea to talk with a financial advisor or an accountant before you spend any of your inheritance.

Failing to Make a Budget

If you don’t have a budget and are not used to managing money, you may not be prepared to handle a large influx of funds. This could lead to overspending and quickly disappearing inheritance. If you already have a budget, factoring in your new funds will help you see how it will affect your saving and spending strategy.

Spending Too Much

When receiving a large sum of money, it can be easy to think that there is plenty to last. All too often people blow through inheritances by making big ticket purchases, such as cars, boats, or vacations. Even if the purchases don’t seem all that big, the costs add up quickly, especially if items purchased have additional costs, such as maintenance and insurance.

Stay grounded and think about whether or not you really need what you’re thinking of buying. Also consider how much more money you could have in the future if you invest the money instead of spending it now. If you know how much you will inherit before you receive it, you can create a budget to make it last.

Not Paying Off Debts

Paying off debts is the first thing you should do if you inherit a large sum of money. Paying off your mortgage, credit cards, or student loans will give you more freedom to do other things. You will still need to balance the debts you decide to pay with the amount of money you’d like to invest for the future.

Losing Other Income Sources

For people receiving asset-based or income-based government benefits, such as disability payments or Supplemental Security Income (SSI), receiving an inheritance could disqualify them from the benefits. This is something the benefactor needs to plan for before they pass on the inheritance. Establishing and funding the appropriate type of trust will reduce the possibility of this happening.

Not Saving Enough

Suddenly getting a large amount of money can make it easy to think about all the things you can do with it now instead of how you can save and invest for your future. After paying off debts, create an emergency fund with enough money to live on for about six months. Once you have done these two things, start increasing your contributions to your retirement accounts.

Not Getting Expert Advice

An inheritance, especially a big one, can help you achieve financial security and allow you to pursue a dream career or some other life goal. However, an inheritance can vanish surprisingly quickly if not managed well. Before doing anything with your inheritance, consult with a financial advisor, an accountant, and an estate planning attorney. Each of these professionals will help you manage your inheritance wisely and plan for a financially healthy future.

This article offers a summary of aspects of estate planning law. It is not legal advice, and it does not create an attorney-client relationship. For assistance, please contact our Ruston, LA office by calling us at (318) 255-1760.

I Have a Will, Do I Need an Estate Plan Too?

I Have a Will, Do I Need an Estate Plan Too? 50% of American adults have written a will, and a significant amount of these individuals believe this means they don’t need an estate plan. Although this belief is untrue, it may be the leading reason why only 33% of US adults have an estate plan.

It’s a common misconception that an estate plan and a will are the same. A will is just a single component of an estate plan designed to cover much broader actions while a person is living and after death. A will is a single tool, whereas an estate plan uses multiple documents and legal strategies.

What is a will?

A will is a legal document providing instructions on how to manage your assets after your death. It encompasses names of beneficiaries, guardianship for dependents or minors, and distribution of assets. It also provides an executor for the estate. The executor is responsible for carrying out all actions stated by your will, such as paying debts, estate management, and the distribution of assets.

What is an estate plan?

Estate planning includes thinking through situations beyond basic legal documents. It can be as detailed or as simple as you want. However, there are four essential components that should be included in addition to a will.

  1. A living will details your wishes for end-of-life medical care. If you can’t communicate or make decisions while in a vegetative state or with a terminal condition, a living will specifies what medical treatments, care, life-sustaining measures, and organ donation preferences you want.
  2. A health care power of attorney, or health care proxy, is a legal document that appoints an entity or individual to make medical decisions on your behalf if you can’t. This can be used regardless of whether you are at the end of your life. The appointed person makes decisions about procedures, diagnostic exams, medications, long-term or rehab care, surgical intervention, and end-of-life care.
  3. A financial power of attorney designates someone to act in your place for matters relating to finances. The authorized individual or entity will manage all financial issues if you can’t independently handle financial affairs. This may include paying bills, preparing taxes, making real estate decisions, and managing investments. The power of attorney can be effective immediately or “spring” into effectiveness upon your incapacity.
  4. A trust is a type of fiduciary relationship where property is held by a trustee for the benefit of the beneficiary. For certain trusts, you can still retain control when living. However, at the time of death, the trustee will distribute the property to the beneficiary. This can be beneficial for distributing assets if privacy is important since it doesn’t involve probate court, and it can significantly reduce succession and probate legal fees and costs after death.

Do you need an estate plan if you have a will?

In short, the answer is yes. While a will is important, it’s only the first step in creating an estate plan. A comprehensive estate plan is necessary. Ensure that your wishes are honored and to leave your loved ones in the best position once you die.

Estate planning is a detailed and complex process. Seeking professional guidance is the best way to ensure that you are fully informed and properly executing your estate plan. Contact our Ruston, LA office by calling us at (318) 255-1760 to speak to one of our experienced estate attorneys about your estate plan.

Government programs for seniors

Government Programs for Seniors

AdditioNot knowing government programs for seniors and inflationary pressures are leading to financial insecurity for many US seniors. Besides reducing unnecessary expenses, many retirees or near-retirees should consider contacting the government to see if they qualify for assistance. It can reduce the anxiety many Americans feel living on a fixed income.

Government Programs for Seniors

The National Council on Aging (NCOA) works with thousands of national and local partners to provide tools, resources, advocacy, and best practices for every aging American to have health and financial security. Checking out if you qualify for senior benefits through government programs is easy to do with NCOA’s online BenefitsCheckUp tool.

Wasted Benefits

Every year billions of available dollars in US benefits programs are not claimed. Older adults (55 or more) are unsure if they are eligible. And, if so, how to apply. No registration is necessary, and requests for information are minimal. Personal data entered into the website will remain confidential, and accessing the database costs nothing. If you hate filling out forms and get confused by all the questions, estate planning and elder law attorneys go through this process every day. Contact them for help. There is rarely an upfront cost for legal help. You will be in a much better financial position once you begin receiving assistance.

The Online Benefits Check Up

If you complete the benefits check-up online, NCOA will send a confidential report to your mailing address. It will list the help available to you and how to apply for it. Since 2001 this NCOA program has helped millions of older adults receive help. This includes paying for medicine, food, utilities, and more. More than 2,000 benefits programs are in the check-up system, including categories such as:

  • Food and nutrition
  • Health care and medication
  • Housing and utilities
  • Income
  • In-home care and aging in place
  • Disability services
  • Skilled nursing facilities and other long-term care environments
  • Tax help
  • Legal, crisis, and general assistance
  • Veterans’ programs
  • Discounts and activities

The online BenefitsCheckUp site helps older individuals identify the federal and state assistance programs for which they can qualify. This NCOA website is newly revamped and permits error corrections and the addition of information if you feel the need to revise your answers. The resulting online individualized Eligibility Results report can be saved in a PDF format to email to yourself, your lawyer, or a trusted family member.

Providing this eligibility information to your elder law or estate planning attorney is a smart strategy. Suppose you already receive disability benefits through SSDI, SSI, or other programs. In that case, adding other government assistance programs may result in unintended and negative consequences. It may render you ineligible for benefits you already receive. Your lawyer will know the strategies already in place and how additional programs may affect your current planning.

The chart above shows how many older adults struggled to manage basic expenses. This even before the inflationary circumstances of late 2021 – 2022 (and predicted beyond). Participation rates in government assistance programs are at a historic low, with a mere low to mid sixty percent of eligible individuals participating.

Benefit take-up rates are low due to program enrollment barriers. Many older adults lack awareness that these benefits exist. When they do, the application process for many programs can be cumbersome and complex. Additionally, perceived stigma about receiving government assistance and other program misconceptions contribute to lower participation rates.

Ramsey Alwin, NCOA CEO and President, admits, “In today’s economy, inflation is taking a bigger and bigger bite out of people’s incomes.” He adds, “We completely redesigned BenefitsCheckUp to make it even easier … no one should have to choose between paying for medications or food.”

 

In Summary

To worry less and age better with more resources at your disposal, explore the NCOA’s BenefitsCheckUp website and learn what is available to you. Before you use the contact information to take the next step to apply consult with your elder law or estate planning attorney. Also, all assistance you receive should not interfere with existing plans and help you age successfully. More than 2,000 government benefit programs are available to help you. It can make the difference between thriving or just surviving. For assistance and information on government programs for seniors please contact our Ruston, LA office by calling us at (318) 255-1760.

Getting to know probate

Getting to Know Probate

Getting to Know Probate

You can minimize or avoid probate entirely by getting to know probate and working with an estate planning attorney. Probate proceedings are part of the public record and can be very time-consuming and expensive. However, in nearly every case, some probate is necessary, so it is important to understand how to navigate the process.

Probate proceedings seek to validate the decedent’s last will and retitle the estate’s assets into the name of heirs according to the deceased’s wishes. These court-supervised proceedings ensure estate debts are paid and oversee the distribution of assets to heirs.

After losing a loved one, the family will generally come together and hopefully encounter a properly written will and other crucial estate planning documents. Without a well-organized plan, the probate process can take much longer. Family members will be tasked with gathering information necessary for court.

Probate Court Proceedings

The petitioner, usually the estate executor or succession representative, will begin the process by filing a death certificate and a last will to the probate court. It is also useful to produce a list of know creditors and names and contact data of the decedent’s heirs. Smaller estate probate processes and those estates not contested by heirs can usually work through probate fairly quickly and efficiently.

Laws regarding probate are state-specific, and most states set valuation thresholds. In Louisiana an estate value is less than $125,000 may allow your lawyer to reduce court filing fees or even avoid probate court altogether.

For larger value estates, there is a substantial amount of necessary paperwork to validate the will, determine asset distribution, settle disputes, pay off remaining debts, and ultimately close the estate by paying the decedent’s final taxes. A checklist of documents to gather getting to know probate include :

  • Death certificates
  • Final will
  • Revocable trust documents
  • Heir and beneficiary contact data
  • Beneficiary designations
  • Pre or post-nuptial agreements
  • Previous three years of federal and state income and gift tax returns
  • Life insurance policies
  • Real estate deeds
  • Vehicle titles
  • Statements of financial accounts
  • Contracts and business agreement documents
  • Appraisals for high-value art, collectibles, or jewelry
  • Other known assets
  • Known debts
  • Ongoing bills
  • Medical and funeral expenses

Probate Proceedings Without a Will

The decedent’s residence states intestacy laws will apply if your loved one dies without a last will (intestate). All personal property without a beneficiary designation will be subject to the probate process at the court’s direction.

But some assets will avoid the probate process under state property title, state contract, or state trust law. These assets may include:

  • Beneficiary designate life insurance policies
  • Beneficiary designate retirement funds
  • Beneficiary designate annuities
  • Pay-on-death or transfer-on-death accounts
  • All trust property (in most circumstances).

Cost of Probate

Complex probate processes can be costly and take years to finalize, which is why many individuals retain an estate planning attorney to minimize probate proceedings. Lengthy proceedings can be frustrating for heirs getting to know probate who are rightful beneficiaries but must comply with the probate process. The average cost of probate varies by state; however, five to ten percent of an estate’s value in administrative costs and legal fees is not atypical. Some estates may lose as much as twenty percent of their value.

Other fees may include executor compensation, court fees for filings and paperwork, and a probate bond. After the probate proceedings are complete, a probate bond may be refunded. The most common reason for high probate costs occurs when beneficiaries contest the will, as ongoing litigation can be expensive. Issues relating to preparing and filing the decedent’s last federal estate tax return and any ensuing audit may also increase the cost of the probate process.

Most individuals will create an estate plan with their lawyer that allows assets to pass outside the probate process, typically through creating a revocable living trust. Depending on your situation, your estate planning attorney may recommend other types of trusts as well as ensure that named beneficiaries on accounts that pass outside of probate are up to date. Regularly reviewing your estate plan with your attorney can help minimize probate court interactions and streamline your heir’s inheritance process. For assistance, please contact our Ruston, LA office by calling us at (318) 255-1760.

Essential legal documents

Essential Legal Documents

Essential legal documents for those who wish to protect their families and themselves should develop an estate plan. Making sound decisions regarding finances and healthcare can become challenging as you age due to diminished mental capacity or declining health. Putting these five must-have essential legal documents in place before life becomes too difficult to handle is crucial for your protection and wishes. It is not legally permissible for you to create these documents if you are too far into ill health, and guardianship will become necessary for decision-making on your behalf. Retaining a trusted elder law attorney is the first step to setting these legal guidelines to carry out your wishes.

Will

The will is a legal document that outlines who receives your assets after death. A valid will is critical for adults to possess regardless of age. It is especially true if you have dependent children since your will identifies guardians for them. Without a will, the courts decide who is responsible for raising your children and what happens to your assets. Each state has statutes that prescribe the formalities to observe in making a valid will. Writing, signature, witnesses, acknowledgment, and attestation may vary slightly depending on where you live.

Revocable Trust

This type of trust allows the settlor to amend, add assets to, or terminate the trust for as long as they like or until they can’t manage the trust competently. The grantor names a trustee who will eventually make daily decisions regarding certain assets on behalf of the trust and transfers these assets to beneficiaries upon the settlor’s death. Assets in the trust generally pass outside of a will and outside of probate. A revocable trust can make a potential guardianship process unnecessary.

revocable trust is an estate planning tool used to reduce probate fees and delays in asset distribution and protect assets from becoming a matter of public record. You don’t need to have significant assets to benefit from this trust. You can place your home, checking account, life insurance policies, jewelry, or other valuable assets into your trust. Your estate planning lawyer can design your revocable trust to reduce federal estate taxes. A revocable living trust is one of the most important documents for nearly anyone to have in their estate plan.

Medical Directives or Advanced Directives

This document, also known as an Advanced Directive, is a comprehensive and specific document outlining the wishes of a person’s healthcare choices in anticipation of incapacitation, illness, or end-of-life care. Some individuals want medically heroic measures to remain alive. Others might opt for a peaceful passing and less invasive care. For example, if you want artificial support to breathe or eat via a ventilator or feeding tube, that is an individual choice. A medical directive allows you to state these types of choices.

Most often, individuals prefer to weigh the benefits of medical intervention as it affects their quality of life. One can be alive yet hardly “living.” A medical directive provides clarity and guidance in decision-making for medical teams and family members regarding your ill health, incapacitation, and end-of-life choices for care.

Durable Healthcare Power of Attorney

This document permits the legal transfer of authority to make medical decisions on your behalf. The designee, known as the agent, can determine what medical procedures are allowable on the principal’s behalf in the event of incapacitation. This document differs from a medical directive that only explains your health care wishes. A healthcare power of attorney assigns decision-making power to act on your behalf when you are no longer capable.

The combination of a medical directive and healthcare power of attorney assures you will receive the care you desire. The medical directive serves as the blueprint for your health care decision preferences. The healthcare power of attorney gives the legal authority to effect decisions based on this blueprint..

Power of Attorney for Finances

Depending on how the document is written, this designated agent can make many financial decisions for the principal. They may include overall financial affairs, bill pay, property sale, bank safe deposit boxes, contract for services, property rental, tax audits, and more. There are four basic types of power of attorney:

  • Limited– This power of attorney type is narrow or limited in scope. An agent may act on your behalf for a specific purpose. This can include signing a property deed in your name while you are out of town. Usually, a date will terminate the agent’s power, or it is contingent upon completing the outlined task.
  • General– This is a comprehensive power giving your attorney-in-fact all rights and authority you have. A general power of attorney may sign documents, pay your bills, and conduct financial transactions on your behalf. People with complex business affairs and hectic travel schedules often use a power of attorney for conducting financial matters. This agent’s legal designation and power will end upon your death or incapacitation unless you rescind it before that time.
  • Durable – This power of attorney type can be limited in scope or general but will remain in effect after your incapacitation. Absent a durable power of attorney; if you become incapacitated, there is no legal representation to act on your behalf unless a court appoints a guardian or conservator. A durable power of attorney will remain in effect, managing your financial affairs until your death or choice to rescind it while mentally sound. In Louisiana, all powers of attorney are automatically durable, unless the document says otherwise.
  • Springing – Much like a durable power of attorney, a springing power of attorney can act as your attorney-in-fact. However, this only becomes effective when you become incapacitated. If you choose to employ this power of attorney type, it is critical to determine the standard that identifies your incapacity. This identifying trigger that enables power of attorney must be clearly written in the document.

Essential Legal Documents

Before making a selection, it is important to understand the different types of power of attorney. Your attorney will be most effective for your situation. Your attorney-in-fact (agent) will control your finances, so the agent you select must be someone you trust implicitly. If you do not have a viable candidate for a financial power of attorney, you may consider using your attorney or a licensed fiduciary company.

Speak with your lawyer today to implement these five critical essential legal documents in your estate plan. An unexpected adverse health event can happen anytime and at any age. These essential legal documents will protect your wishes, well-being, and assets at a time when you and your family are at the most vulnerable.

For assistance, please contact our Ruston, LA office by calling us at (318) 255-1760.

Revise Your Estate Planning

Divorce Will Require You to Revise Your Estate Planning

Revise Your Estate Planning

It is usually a difficult emotional experience to go through a divorce (especially if children are involved) along with a difficult financial outcome. While your estate plan may be the furthest thing from your mind during a divorce, without updating your documents, your ex-spouse may receive assets in ways you neither want nor expect upon your death. If you are going through a divorce or are already divorced without revising your estate plan, reviewing and making changes that reflect your current wishes is essential. Divorce will require you to revise your estate planning.

Your will is an excellent place to begin. Your estate planning attorney can update your will with a codicil that alters, changes, or subtracts the provisions. However, the many changes resulting from your divorce probably make writing a new will your easiest option. Your more recent will supersedes those written earlier, and your lawyer will include language stating all prior wills are revoked.

Updating Your Will

You will name an executor (personal representative in some states) who pays the decedent’s final debts and taxes, conducts a discovery of assets to distribute to heirs after probate, and ensures any named guardian of minor children assumes their role. Your lawyer will construct your will’s guardianship of minors to complement the existing divorce decree’s child care arrangement. Your assets in a previous will may no longer be part of your estate and should be removed from the document, adding newly acquired assets where appropriate.

In most states, when you get a divorce after you make your will, any gifts to your former spouse are automatically revoked without affecting the remainder of your will. However, relying on state law to protect your ex-spouse from your inheritable assets is unreasonable. Also, if you do not want your former spouse to inherit your property, you probably don’t want them to be your will’s executor. It is wise to appoint a new executor and an alternate.

Beneficiary Designations

Many assets may pass outside your will through beneficiary designations. These account types include life insurance policies, retirement accounts like 401(k)s and IRAs, POD (payable on death) bank accounts, and TOD (transfer on death) brokerage accounts. Changing the beneficiary is usually fairly simple, but each account may have a different process, so do your research. You may also speak to a benefits consultant with the company holding the account to ensure you remove your ex-spouse and name a new beneficiary.

Certain qualified plans like pensions, 401(k)s, and employer-provided life insurance policies are governed by ERISA (The Employee Retirement Income Security Act). This federal law will override state law deeming a plan administrator must turn funds over to the plan’s documented named beneficiary. If your former spouse is still on the paperwork, they will inherit the account.

Trustees

If you are the settlor of a trust, review the trustee, and if it is your ex-spouse, you will likely want to remove them. There may be exceptions to this trustee removal. For example, some spouses run a business together and may continue to use the trust to manage business assets. A special needs trust for a child may be another instance where an ex-spouse may remain a trustee because of the shared child. Your estate planning attorney can advise you on when to keep an ex-spouse as a trustee.

Real Estate Property

Whether the family home, a vacation beach house, or a lake cabin, real estate property will likely shift ownership in the divorce. Your estate plan will have to remove those properties that you no longer own and change the designations of the remaining properties.

Advance Directive or Living Will

Appoint a new healthcare representative in your living will if your ex-spouse is your current designation. Your estate planning attorney must either revoke your prior living will or make formal changes reflecting your state’s regulations for it to be a legally binding document.

Powers of Attorney

If your ex-spouse is your designated durable financial or medical power of attorney, you will want to appoint a new individual(s). A financial power of attorney can designate a trusted family member or friend who you know to be competent and will best represent your interests. If you are ambivalent or unsure about who to turn to, you can select your lawyer or a licensed financial institution that routinely fills these roles.

The person you choose for your durable medical power of attorney must be assertive and strong-willed to advocate for your healthcare wishes when you are no longer able. This individual should live near you, or at least in the same state, as proximity can become critical. You can name the same person as financial and medical power of attorney, but this can represent a lot of time and effort for one individual. In some states, it is not permissible. You may name a family member, friend, or caretaker as your agent.

Depending on your estate plan type, you can make some changes to your will before your divorce is final or immediately upon the divorce filing. Explain to your attorney how you envision the new estate plan. Details of asset and property transfers gained or lost in the divorce can be added. Beneficiaries, executors, guardianship of minor children, property, and powers of attorney all require review and are likely to change. Your estate planning attorney can readily make the changes you desire so that your legacy continues to reflect your wishes accurately. Divorce Will Require You to Revise Your Estate Planning. It is usually a difficult emotional experience to go through a divorce (especially if children are involved)For assistance, please contact our Ruston, LA office by calling us at (318) 255-1760.

Don't Make These Common Mistakes in Your Estate Plan

Don’t Make These Common Mistakes in Your Estate Plan

In the minds of many Americans, estate planning is something they do once, file away, and forget about. However, without being aware of the potential impact, people will make gifts during their lifetime or change listed beneficiaries on accounts. Which can have enormous unintended consequences on their will or trust. Review your estate plan regularly to help to prevent these common mistakes.

Gifting Money During Your Lifetime Without Changing Your Will

It is a common practice for people to include cash gifts in their will. Whether money for a favorite nephew or niece, childhood friend or household worker, there can be significant sums of cash for distribution to inheritors listed in your will. Often, family members learn these gifts were already satisfied during your lifetime. They hear the story about the joy it brings to the recipient.

Without modifying your will after gifting cash during your lifetime, the named individual will still get the gift when the will enters probate. Smaller gift amounts may not create issues in an estate but don’t match your intentions. More considerable sums of money can create situations that financially break an estate plan. A court will not know that a gift was satisfied during your lifetime either, and there is no one left to speak to the intention of the will, resulting in a second gifting of cash.

The cash gift is paid again if the inheritor chooses not to be forthcoming. While many in the family will view a lifetime gift as an advance on an inheritance, if the recipient does not agree, you may have to litigate, which can be costly. If you give lifetime gifts of cash and do not intend to give a secondary gift upon your death, change your will after the gift.

Too Few Assets to Fund a Trust

If your trust is years old and its overall assets have decreased in value, reviewing the gift provisions outlined in your trust is crucial. You may not have enough assets to pay for all of the gifts. It is not unusual that in flush financial times, people create grand estate plans. Leaving cash to family and friends and creating trusts for others’ benefit. These good intentions can fall far short of reality in leaner times, leaving some people to receive less than hoped or nothing at all.

Sadly, it will be the lawyer or trustee’s responsibility to advise these recipients of what they were supposed to receive from the trust, but unfortunately, they will not. Regular review of your trust and its goals can avoid this situation. Crafting a trust with realistic goals or making amendments to those goals during less abundant times will keep the trust’s intentions valid and achievable.

Thinking All Assets Pass Through Your Will

Some people leave a lot of money that they believe satisfies all the gifts listed in their will. They total all their assets, which seems large enough to address all beneficiaries. However, all assets may not pass under the will.

Probate assets will pass through the decedent’s name into their estate and be distributed according to the will. In contrast, non-probate assets pass outside the will, usually  through a beneficiary designation. Knowing the difference between the asset classes provides the true value in the estate and receives distribution according to your will. Also, be clear your estate will need to deduct any outstanding debts, expenses, and taxes. Which will reduce the probate asset number again.

Changes to Beneficiary Designations

Beneficiary designation changes can have unintended consequences on your estate plan. The most common problems occur with changes to beneficiaries in life insurance policies. The policy may be payable to your trust. To cover the cost of bequests, pay estate taxes, or shelter monies from estate taxes. Similarly, a retirement account due to an individual but changed to another may result in adverse income tax consequences. You may upend the intention of your estate plan by changing the beneficiary designation without thinking it through.

These are some of the more common mistakes people make that can negatively affect your estate planning goals. Regularly review your intentions and legal documents with your estate planning attorney. Clarify changes in assets and asset types, lifetime gifts, beneficiary designations, and joint ownership additions. Doing so will keep your legacy as you intend it to be.

For assistance, please contact our Ruston, LA office by calling us at (318) 255-1760.

 

Planning an Estate for Non-Traditional Families

Planning an Estate for Non-Traditional Families

The practice of planning an estate for non- traditional families is evolving due to changing family structures. In the past, a traditional family consisted of a husband and wife who married young, bought a home, had children, and worked for financial stability and security. In 1949, 79.8 percent of American households were married couples, but in 2021 that number declined to 47.3 percent.

The rise of blended families, cohabitating couples, artificial reproductive technology, same-sex marriages, and other trends mean only one-third of American households are “traditional” families. The other two-thirds are non-traditional families experiencing unique needs that challenge current estate planning models.

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More complex family structures tend to avoid estate planning. But the absence of planning leads to an increase of needlessly squandered assets lost. Estate taxes and family infighting over an inheritance. Dying without a will (intestate) means your estate will go through probate. Then, it follows the state’s intestacy laws that currently don’t favor unmarried partners and step-children. Fortunately, proactive planning with an estate attorney to build a modern plan can provide the best outcomes for the legacy and security of your non-traditional family.

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Blended Families

In particular, if you divorce, remarry, have additional children and grandchildren, or experience other significant changes in your family dynamics, do not delay creating or updating your estate plan. While the decision-making about specific assets, beneficiaries, and transferring wealth during family changes sounds overwhelming. Your estate planning attorney is there to guide and support you. Updating your plan can avoid unintended consequences such as strained relationships, wasted financial resources, and more.

Conventional estate planning tends to favor traditional family structures and equal wealth bequests; however, this may not be your intention in a blended family with step-children. Creative solutions that reflect your contemporary family structure can successfully address these issues. Customizing your plan to meet unique needs makes more sense.

Pre- and Post-nuptual Agreements

Clarify your needs using pre and post-nuptial agreements if you intend to remarry. A new spouse needs to be aware of how you intend to distribute your assets to your children, mutual children, spouse’s children, and any other beneficiary. Early on, agreement on critical decisions about estate and gift tax exemptions can prevent future problems. A family law attorney can work with your estate planning attorney to ensure that the agreement structure complements your intentions regarding your estate.

Trusts and Other Strategies

In a blended family, you may consider alternative strategies to transfer wealth. If you choose to remarry, you may promote better family relationships with lifetime gifts to your children rather than after-death bequests. You can also use payable on death accounts which transfer directly to the beneficiary outside of your will and any trusts if necessary.

In the case of trusts, expand and clarify estate planning provisions and potential issues that may easily be overlooked, like:

  • Scenarios where your children enter into a committed relationship without marriage and have children
  • Representatives or trustees who may not share or understand your goals for future beneficiaries. For example, if you create a trust for grandchildren, will you include future step-grandchildren? Or those born from artificial reproductive technology? Will a biological trustee follow through with your wishes for non-biological children, or do you need a neutral third party?
  • Cultural and religious traditions that don’t align with your estate planning documents related to inheritance and end-of-life wishes. Do your trust provisions, investments, and discretionary distributions reflect your values? If you are against fossil fuels, will you limit trust equities to permit only green energy investments? Do you have specific political views or particular people you do not want receiving any of your assets second hand? Does your end-of-life plan reflect your spiritual beliefs?

If your family system is non-traditional, be aware that most US laws and estate planning practices tend to favor a traditional family structure. Which can leave some of your loved ones overlooked without careful planning. Knowing about these default favoritisms and standards should help you think carefully about specific provisions for your non-traditional family. Open discussions with your family and estate planning attorney will help you craft a better and more representative plan suited to your family.

For assistance, please contact our Ruston, LA office by calling us at (318) 255-1760.