What You Need to Do after a Loved One Dies – Annapolis and Towson Estate Planning

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 is 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 are 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 are 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 The decedent’s power of attorney is no longer in effect, and the executor designated in the will does not have any authority to act, until the will is admitted to probate and the executor is appointed by the probate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 are permitted to do. The probate of a will takes time.

It is best to get started promptly, so that there is 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”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Your Children Wish You Had an Estate Plan – Annapolis and Towson Estate Planning

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 cannot always come out and tell you, 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 do not 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 do not 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 do not 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”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Do I Need a Revocable Living Trust? – Annapolis and Towson Estate Planning

A revocable living trust is created with a written agreement or declaration that names a trustee to manage and administer the property of the grantor. If you are a competent adult, you can establish an RLT. As the grantor, or creator of the trust, you can name any competent adult as your trustee, or you can use a bank or a trust company for this role. The grantor can also act as trustee throughout his lifetime.

Investopedia’s article from last fall entitled “Should You Set up a Revocable Living Trust?” explains that after it is created, you must retitled assets—like investments, bank accounts, and real estate—into the trust. You no longer “own” those assets directly. Instead, they belong to the trust and do not have to go through probate at your death. However, with a revocable living trust, you retain control of the assets while you are alive, even though they no longer belong to you directly. A revocable living trust can be changed, and any income earned by the trust’s assets passes to you and is taxable. However, the assets themselves do not transfer from the trust to your beneficiaries until your death.

Avoiding probate is the big benefit of a living trust, but other benefits like privacy protection and flexibility make it a good choice. A living trust can be used to help control a guardian’s spending habits for the benefit of minor children. It can also instruct another individual to act on your behalf, if you become incapacitated and need someone to make decisions for you. Should you become impaired or disabled, the trust can automatically appoint your trustee to oversee it and your financial affairs without a durable power of attorney.

Although there are several advantages to establishing a revocable living trust, there also some drawbacks:

Expense. Establishing a trust requires legal assistance, which is an expense.

Maintaining Records. Most of the time, you need to monitor it on an annual basis and make adjustments as needed (they do not automatically adapt to changed circumstances, like a divorce or a new grandchild). There is the trouble of ensuring that future assets are continuously registered to the trust.

Re-titling Property. When your RLT is established, property must be re-titled in the name of the trust, requiring additional time. Fees can apply to processing title changes.

Minimal Asset Protection. Despite the myth, a revocable living trust offers little asset protection beyond avoiding probate if you retain an ownership interest, such as naming yourself as trustee.

Administrative Expenses. There can also be additional professional fees, such as investment advisory and trustee fees, if you appoint a bank or trust company as the trustee.

There’s No Tax Break. Your assets in the RLT will continue to incur taxes on their gains or income and be subject to creditors and legal action.

Compared to wills, revocable trusts have more privacy, more control and flexibility over asset distribution. With a revocable living trust, you do most of the work up front, making the disposition of your estate easier and faster. However, an RLT requires more effort, and there is an expense in creating and maintaining it.

Work with an experienced estate planning attorney, if you are considering a revocable living trust.

Reference: Investopedia (Oct. 31, 2019) “Should You Set up a Revocable Living Trust?”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

No Will? Don’t Count on a Happy Ending for Your Family – Annapolis and Towson Estate Planning

The gentleman at the heart of this article is not the first, and sadly he will not be the last, to start and not finish the process of preparing a will and all of the other documents that go into having an estate plan. People say they do not need to do this just yet, or they are having trouble deciding who should be their executor, etc. Regardless of the reason, the end result of an unfinished estate plan is almost always a disaster for the family. It certainly is in the article “Thy will be done (and you really should get it drawn up right now)” from the San Antonio Express-News.

One week after a woman spoke to her dad about his estate plan, he became ill and was hospitalized. The man’s girlfriend became verbally abusive to family members. The sisters of the man had previously sued him, accusing him, as trustee of the father’s trust, of taking more than his fair share of the family money. The daughter was trying to pay for his care during a two-month stay in the hospital. However, without a power of attorney and in the middle of a costly lawsuit from the man’s sisters, the only way forward was declaring a “conservatorship” of her father’s assets. The father died, with no will, and with his estate under attack from his sisters.

It took two years to settle the probate case and the lawsuit between the sisters and the estate of their brother. That is a long time to mix mourning, family strife and court actions.

The value of the father’s estate was drained by the long litigation and probate process. The daughter estimates that her father’s estate paid 13 times more than necessary, because there was no power of attorney and three times more than necessary because of the lack of a will. And making matters worse, more than 30 percent of the estate vanished because of the unfinished estate plan and poor communication between family members.

More than $500,000 remained in probate, and then was drained by a third over the course of the two years.

However, the worst part cannot be measured in money. It is the emotional cost of siblings who grew to hate one another. The sisters did not say goodbye to their brother, or even attend his funeral.

A Gallup poll in 2016 found that only 44% of Americans have a will. Thirty-two percent of Americans over age 65 still do not have a will. What are they waiting for? Some think they are saving their families money by not having a will, but the above example is clear proof of how wrong that thinking is.  Doing an online will is not much better. One attorney said it best: when wills are not prepared by estate planning attorneys and they go wrong, they go very wrong.

Speak with an estate planning attorney and make sure that your family is protected from the fights, the costs and the lost time that cannot be regained.

Reference: San Antonio Express-News (March 9, 2020) “Thy will be done (and you really should get it drawn up right now)”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

If I’m 35, Do I Need a Will? – Annapolis and Towson Estate Planning

Estate planning is a crucial process for everyone, no matter what assets you have now. If you want your family to be able to deal with your affairs, debts included, drafting an estate plan is critical, says Wealth Advisor’s recent article entitled “Estate planning for those 40 and under.”

If you have young children, or other dependents, planning is vitally important. The less you have, the more important your plan is, so it can provide as long as possible and in the best way for those most important to you. You can not afford to make a mistake.

Talk to your family about various “what if” situations. It is important that you have discussed your wishes with your family and that you have considered the many contingencies that can happen, like a serious illness or injury, incapacity, or death. This also gives you the chance to explain your rationale for making a larger gift to someone, rather than another or an equal division. This can be especially significant, if there is a second marriage with children from different relationships and a wide range of ages. An open conversation can help avoid hard feelings later.

You should have the basic estate plan components, which include a will, a living will, advance directive, powers of attorney, and a designation of agent to control disposition of remains. These are all important components of an estate plan that should be created at the beginning of the planning process. A guardian should also be named for any minor children.

In addition, a life insurance policy can give your family the needed funds in the event of an untimely death and loss of income—especially for young parents. The loss of one or both spouses’ income can have a drastic impact.

Remember that your estate plan should not be a “one and done thing.” You need to review your estate plan every few years. This gives you the opportunity to make changes based on significant life events, tax law changes, the addition of more children, or their changing needs. You should also monitor your insurance policies and investments, because they dovetail into your estate plan and can fluctuate based on the economic environment.

When you draft these documents, you should work with a qualified estate planning attorney.

Reference: Wealth Advisor (Jan. 21, 2020) “Estate planning for those 40 and under”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Preparing for the Inevitable: The Loss of a Spouse – Annapolis and Towson Estate Planning

Becoming a widow at a relatively young age, puts many people in a tough financial position, says the article “Preparing for the Unexpected Death of a Spouse” from Next Avenue. At this point in their lives, they are too young to draw Social Security benefits. There is no best time, but this is a hard time to lose the prime breadwinner in the household.

Women are more likely than men to lose a spouse. They are typically left in a worse financial position if their spouse dies before they are old enough to take retirement benefits.

One of the best ways to plan for this event, is for both spouses to have life insurance. This can replace income, and term life insurance, if purchased early in life, can be relatively affordable. The earlier a policy is purchased, the better. This can become a safety net to pay bills and maintain a lifestyle.

Another key component for surviving early widowhood, is being sure that both members of the couple understand the couple’s finances, including how household bills are paid. Usually what happens is that one person takes over the finances, and the other is left hoping that things are being done properly. That also includes knowing the accounts, the log in and password information, and what bills need to be paid at what dates.

Having that conversation with a spouse is not easy, but necessary. There are costs that you may not be aware of, without a thorough knowledge of how the household works. For instance, if the husband has done all of the repairs around the house, maintaining the yard and taking care of the cars, those tasks still need to be done. Either the widow will become proficient or will have to pay others.

Couples should work with an estate planning attorney and a financial advisor, as well as an accountant, to be sure that they are prepared for the unexpected. What survivor’s benefits might the surviving spouse be eligible to receive? If there are children at home age 16 or under, there may be Social Security benefits available for the child’s support.

Discuss what debt, if any, either spouse has taken on without the other’s knowledge. Any outstanding medical bills should also be discussed. The last thing a loved one should have to cope with when a spouse passes, is a tangle of debt. However, this often happens.

If the spouse was a veteran, the surviving spouse might be eligible for benefits from the Veterans Administration. Find out what information will be needed to apply for benefits.

Talk with your estate planning attorney to make sure that all proper documents have been prepared. This includes a last will and testament, power of attorney, health care proxy and any trusts.

Reference: Next Avenue (Dec. 18, 2019) “Preparing for the Unexpected Death of a Spouse”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Creating an Estate Plan Should Be a New Year’s Resolution – Annapolis and Towson Estate Planning

Many people think of estate planning as a way to save on taxes as their hard-earned assets are passed from one generation to the next. That is certainly a part of estate planning, but there are many other aspects of estate planning that focus on protecting the person and their family. They are detailed in the article “An estate planning checklist should be a top New Year’s resolution” from the Houston Business Journal.

Now is a good time to start the new year off right to put an estate plan in place. For those who have an estate plan, it is a good time to revisit living documents that need to be updated to reflect changes in a person’s life, family dynamics, changes in exemption limits and the recently passed SECURE Act.

Here are the top four items to make sure that your estate plan is ready for 2020.

Take a look at your financial situation. No matter how modest or massive your assets, just about everyone has an estate that is worth protecting. Most people have something they want to pass along to their children or grandchildren. An estate plan simply formalizes these wishes and minimizes the chances that the family will fight over how assets are distributed.

Many people meet with their team at least once a year to get a clear picture of their financial status. This allows the estate planning attorney to review any changes that may impact how the estate is structured, including tailoring gifting strategies to reduce the tax burden.

Put your wishes on paper, and your affairs in order. Without a will, there is no way for anyone to know what your wishes are and how you would want your assets passed to others. A will spells out who gets what and avoids having the estate administered by state laws. A living will is also needed to establish medical power of attorney and state wishes about life support and what medical care you may or may not want to receive. That can include everything from blood transfusions, palliative care, diagnostic tests or the use of a respirator. A financial POA is needed to give someone the legal authority to make decisions on your behalf, if you become incapacitated.

With these estate planning documents, you relieve family members of the burden of guessing what you might have wanted, especially during emergency situations when emotions are running high.

Asset estate and gift tax exemptions for 2020. The exemption for 2020 has increased to $1.58 million. This eliminates federal estate taxes on amounts under that limit that are gifted to family members during a person’s lifetime or left to them upon a person’s death. This is a significant increase from prior years. In 1997, the exemption was $600,000. It rose to $5.49 million in 2018, and as a result of the Tax Cuts and Jobs Act, was $11.4 million in 2019.

Understand the “claw back.” The exemption amount will increase every year until 2025. There was some uncertainty about what would happen if someone uses their $11.58 million exemption in 2020 and then dies in 2026, when the number could revert back to the $5 million range. Would the IRS say that the person used more of their exemption than they were entitled to? The agency recently issued final regulations that will protect individuals who take advantage of these exemption limits through 2025. Gifts will be sheltered by the increasing exemption limits when the gifts are actually made.

Continuing changes in the tax laws are examples of why an annual review of an estate plan is necessary. The one thing we can all be certain of is change, and keeping estate plans up to date makes sure that the family benefits from all available changes to the law.

Reference: Houston Business Journal (Jan. 1, 2020) “An estate planning checklist should be a top New Year’s resolution”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What Estate Planning Documents Does My Child Need Now That She’s an Adult? – Annapolis and Towson Estate Planning

Your child may graduate from high school and head off to college or start a full-time job or vocational training program.

Although they’re still your children, the law sees them as adults. As a result, parents’ “right” to protect their adult children or make decisions for them immediately becomes quite limited.

The Tewksbury Town Crier’s recent article, “Is your child turning 18? Here’s what you need to know,” explains that people often have an estate planning attorney draft the appropriate documents, so they will be legal and binding. Let’s look at a list of documents to consider and discuss with your young adult:

  • HIPAA Authorization: if your 18-year-old has a job in another state or will be attending college and needs medical records or assistance making appointments, ask her to go to the doctor’s and dentist’s office and sign forms that designate agents to act on her behalf. Due to HIPAA laws, information can’t be released without the adult child’s permission.
  • Healthcare Proxy: Have your 18-year old complete this document, make a copy, put a copy on each parent or guardian’s phone and put a copy on your child’s phone. This is for an emergency, like when the child can’t speak for herself. However, don’t wait for an emergency. If your child is at college, the school will only contact you as the emergency contact, but the proxy is between you and the hospital and includes mental health issues. A healthcare proxy lets you to participate in life and death decisions, should your child not be able to advocate for herself.
  • Durable Power of Attorney: A general durable power of attorney or financial power of attorney must also be signed by the 18-year old, designating his parents, guardians, or others as agents authorized to act on his behalf. This allows the agent access to financial information, so that he can participate in the financial issues with a university or business in the event that the child cannot.
  • FERPA: This is an educational records release, which allows the educational institution to share grades, transcripts and other related materials with parents or designated agents. Without it, the school will not provide you with access to any information.

Finally, encourage your young adult family member to register to vote.

Reference: Tewksbury Town Crier (December 8, 2019) “Is your child turning 18? Here’s what you need to know”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Tips for Choosing a Fiduciary – Annapolis and Towson Estate Planning

One of the important tasks in creating a complete estate plan is selecting people (or financial institutions) to represent you, in case of incapacity or death. Most people think of naming an executor, but there are many more roles, advises the article “What to consider when appointing a fiduciary?” from The Ledger.

Here are the most common roles that an estate planning attorney will ask you to select:

  • Executor or personal representative, who is named in your will and appointed by the court to administer your estate.
  • Agent-in-fact (under a durable power of attorney) who manages your financial affairs while you are living, if you are unable to do so.
  • Health care surrogate who makes health care decisions on your behalf while you are living, if you are incapacitated.
  • Trustee of a trust document; administers the trust that you have created.
  • Guardian: a person who makes health care and financial decisions on your behalf, if the court determines that other roles, like health care surrogate or agent-in-fact, are not sufficient.
  • Guardian for minor children: person(s) who make decisions for your children, if you are not able to because of death or a loss of capacity before the children reach adulthood.

The individuals or financial institutions who take on financial roles are considered fiduciaries; that is, they have a legal duty to put your well-being first. Their responsibilities may include applying for government benefits, managing and investing your assets and income, deciding where you will live and working with your attorneys, financial advisors and accountants.

Many people name their spouse or eldest child to take on these roles. However, that’s not the only option. A few questions to consider before making this important decision include:

  • Does this person have the experience, skill and maturity to manage my financial affairs?
  • Does this person have the time to serve as a fiduciary?
  • Would this person make the same health care decisions that I would make?
  • Can this person make a difficult decision for my health care?
  • Does this person live near enough to arrive quickly, if necessary?
  • How old is this person, and will they be living when I may need them?
  • What kind of response will my family have to this person being named?
  • Are my assets substantial enough to require a financial institution or accountant to manage?

These are just a few of the questions to consider when choosing fiduciaries or health care agents in your estate plan. Speak with your estate planning attorney to help determine the best decision for you and your family.

Reference: The Ledger (Oct. 16, 2019) “What to consider when appointing a fiduciary?”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What Estate Planning Documents Do You Need? – Annapolis and Towson Estate Planning

Wouldn’t your children be relieved to learn that you’ve done all the necessary advance planning so that if you should become incapacitated, someone has been properly appointed to help with health care and financial decisions? The Tennessean suggests that you “Give your loved ones peace of mind with legal documents” so that your spouse and your family will be able to take the necessary steps to give you the care and dignity you (and they) deserve.

Here’s a checklist of the documents that everyone should have in place:

Power of Attorney for Health Care. When you have mental capacity, you can make your own decisions. When you do not, you need someone to be appointed who knows your beliefs and wishes and has the ability to advocate for you. Ideally, you should name one person to be your agent to minimize arguments. Talk with your family to explain who has been named your power of attorney for health care, and if need be, explain why that person was chosen.

Power of Attorney for Finances. There are different kinds of POA for finances. The goal of the POA for finances is so they can make decisions on your behalf, when you become incapacitated. Some states use “springing” POA—but that may mean your family has to go through a process to prove you are incapacitated. Check with an estate planning or elder law attorney in your state to see what the laws are.

Advance Directive. This describes what kind of life sustaining treatment you do or do not want if you are in a coma, are terminally ill or have dementia. You can direct whether you want CPR, tube feeding, and other life-sustaining procedures to be withheld, if your quality of life is diminished and there is no hope of improvement. This will help your family to know what you want in a time when emotions are running high.

Last Will and Testament. Have a will created, if you don’t already have one. This directs distribution of your assets to your wishes and does not leave them to the laws of your state. Not having a will means your family will have to go through many more court proceedings and people you may not want to receive your worldly possessions may get them.

Trusts. Talk with your estate planning attorney about placing assets in trust, so they are not subject to the public process of probate. Your wishes will be followed, and they will remain private.

Reference: Tennessean (Nov. 16, 2019) “Give your loved ones peace of mind with legal documents”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys