Does an Elder Orphan Need an Estate Plan? – Annapolis and Towson Estate Planning

Estate planning for the future is even more important for elder orphans than for those with a spouse or family members, according to this recent article “Savvy Senior: How to get help as an elder orphan” from The Virginia Gazette. There is no one single solution, but there are steps to take to protect your estate, health and provide for long-term care.

Start with the essential estate planning documents. These documents will protect you and ensure that your wishes are followed, if you become seriously ill or when you die. These documents include:

A durable Power of Attorney to designate someone to handle financial matters in the event of incapacity.

An Advanced Health Care Directive, including a Living Will, to tell your health care provider what kind of care you want if you become incapacitated.

A Health Care Power of Attorney, naming a person of your choice to make medical decisions on your behalf, if you are unable to do so.

A Will to direct how you want your property and assets to be distributed upon your death and to name an Executor who will be in charge of your estate.

Your best option to prepare these documents is an experienced estate planning attorney. Trying to do it yourself is risky. Each state has its own laws for these documents to be valid. If the documents are not accepted, the court could declare your will invalid and your directions will not be followed.

People with families typically name a responsible adult child as their power of attorney for finances, as executor or for health care decisions. If you do not have adult children, you may ask a trusted friend or colleague. Name a person who is younger than you, organized and responsible and who will likely be available and willing to service.

If the person you name as executor lives in another state, you will need to check with your estate planning attorney to see if there are any special requirements.

If you do not have a friend or even a distant relative you feel comfortable assigning this role to, your estate planning attorney may be able to suggest alternatives, such as an aging life care manager. These professionals are trained in geriatric care and often have backgrounds in social work or nursing.

If you are reluctant to complete the legal documents mentioned above or start having them prepared and then fail to complete them, you may face some unpleasant consequences. A judge may appoint a guardian to make decisions on your behalf. This guardian is likely to be a complete stranger to you. They will be legally empowered to make all decisions for you regarding your health care, end-of-life care and even your burial and funeral services.

Unless you are comfortable with a court-appointed person making health care and other decisions for you, call an estate planning attorney and start making plans for the future.

Reference: The Virginia Gazette (April 1, 2022) “Savvy Senior: How to get help as an elder orphan”

 

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Why Do I Need a Will? – Annapolis and Towson Estate Planning

Some people mistakenly think that not having a will allows their probate assets to bypass the time and expense of probate. No, that is not true.

Probate assets are those assets with no surviving joint owner, designated beneficiary, or are not titled in a revocable living trust.

If you die without a will, your probate property still must go through probate, says Fed Week’s recent article entitled “Expressing Your Will with a Will.”

Therefore, you should have a will. If probate avoidance is a concern, you can ask an experienced estate planning attorney about utilizing various non-probate transfer methods, to include creating a trust. If you have a revocable living trust, you can keep control over the trust assets while you are alive.

The assets placed in revocable living trust during your lifetime can be distributed at your death, under the terms of the trust, without the requirement of probate.

When you draft a will, you cannot simply forget about it. Special life events, such as births, adoptions, deaths, marriages, and divorces, all may require you to revisit your will. After each change, make certain that your current will is both safe and accessible. You can leave a copy of your will with your executor.

If you decide to keep your will somewhere else, your executor and other loved ones should know that location. The estate planning attorney who prepared your will should have a copy, as well as a memo revealing the location of the original.

Regardless of where you put your will, you should create a separate document for your funeral and burial instructions. That is because wills typically are not read until days or weeks after death.

It will not help your survivors make prompt decisions about a funeral or a memorial service.

A separate letter should be used to specify your final wishes and your executor should know where these instructions are located.

These arrangements include seeing if there is a pre-arranged funeral plan, meeting with a funeral director to make arrangements for the funeral services, confirming cemetery arrangements and choosing the necessary casket or urn, grave marker and funeral stationery.

Reference: Fed Week (Feb. 22, 2022) “Expressing Your Will with a Will”

 

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What Happens to Parents’ Debt when They Die? – Annapolis and Towson Estate Planning

There are two common myths about what happens when parents die in debt, says a recent article “How your parents’ debt could outlive them” from the Greenfield Reporter. One is the adult child will be liable for the debt. The second is that the adult child won’t.

If your parents have significant debts and you are concerned about what the future may bring, talk with an estate planning attorney for guidance. Here is some of what you need to know.

Debt does not disappear when someone dies. Creditors file claims against the estate, and in most instances, those debts must be paid before assets are distributed to heirs. Surprisingly to heirs, creditors are allowed to contact relatives about the debts, even if those family members do not have any legal obligation to pay the debts. Collection agencies in many states are required to affirmatively state that the family members are not obligated to pay the debt, but they may not always comply.

Some family members feel they need to dig into their own pockets and pay the debt. Speak with an estate planning lawyer before taking this action, because the estate may not have any obligation to reimburse you.

For the most part, family members do not have to use their own money to pay a loved one’s debts, unless they co-signed a loan, are a joint-account holder or agreed to be held responsible for the debt. Other reasons someone may be obligated include living in a state requiring surviving spouses to pay medical bills or other outstanding debts. If you live in a community property state, a spouse may be liable for a spouse’s debts.

Executors are required to distribute money to creditors first. Therefore, if you distributed all the assets and then planned on “getting around” to paying creditors and ran out of funds, you could be sued for the outstanding debts.

More than half of the states still have “filial responsibility” laws to require adult children to pay parents’ bills. These are old laws left over from when America had debtors’ prisons. They are rarely enforced, but there was a case in 2012 when a nursing home used Pennsylvania’s law and successfully sued a son for his mother’s $93,0000 nursing home bill. An estate planning attorney practicing in the state of your parents’ residence is your best source of the state’s law and enforcement.

If a person dies with more debts than assets, their estate is considered insolvent. The state’s law determines the order of bill payment. Legal and estate administration fees are paid first, followed by funeral and burial expenses. If there are dependent children or spouses, there may be a temporary living allowance left for them. Secured debt, like a home mortgage or car loan, must be repaid or refinanced. Otherwise, the lender may reclaim the property. Federal taxes and any federal debts get top priority for repayment, followed by any debts owed to state taxes.

If the person was receiving Medicaid for nursing home care, the state may file a claim against the estate or file a lien against the home. These laws and procedures all vary from state to state, so you will need to talk with an elder law attorney.

Many creditors will not bother filing a claim against an insolvent estate, but they may go after family members. Debt collection agencies are legally permitted to contact a surviving spouse or executor, or to contact relatives to ask how to reach the spouse or executor.

Planning in advance is the best route. However, if parents are resistant to talking about money, or incapacitated, speak with an estate planning attorney to learn how to protect your parents and yourself.

Reference: Greenfield Reporter (Feb. 3, 2022) “How your parents’ debt could outlive them”

 

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What Assets Should Be Considered when Planning Estate? – Annapolis and Towson Estate Planning

The numbers of Americans who have a formal estate plan is still less than 50%. This number has not changed much over the decade. However, the assets owned have become a lot more complicated, according to a recent article from CNBC titled “What happens to your digital assets and cryptocurrency when you die? Even with a will, they may be overlooked.”

Airline miles and credit card points, social media accounts and cryptocurrencies are different types of assets to be passed on to heirs. For those who do have an estate plan, the focus is probably on traditional assets, like their home, 401(k)s, IRAs and bank accounts. However, we own so much more today.

Start with an inventory. For digital assets, include photos, videos, hardware, software, devices, and websites, to name a few. Make sure someone you trust has the unlock code for your phone, laptop and desktop. Use a secure password manager or a notebook, whatever you are more comfortable with, and share the information with a trusted person.

You will also need to include what you want to happen to the digital asset. Some platforms will let owners name a legacy contact to handle the account when they die and what the owner wants to happen to the data, photos, videos, etc. Some platforms have not yet addressed this issue at all.

If an online business generates income, what do you want to happen to the business? If you want the business to continue, who will own the business, who will run the business and receive the income? All of this has to be made clear and documented properly.

Failing to create a digital asset plan puts those assets at risk. For cryptocurrency and nonfungible tokens (NFTs), this has become a routine problem. Unlike traditional financial accounts, there are no paper statements, and your executor cannot simply contact the institution with a death certificate and a Power of Attorney and move funds.

Another often overlooked part of an estate are pets. Assets cannot be left directly to pets. However, most states allow pet trusts, where owners can fund a trust and designate a trustee and a caretaker. Make sure to fund the account once it has been created, so your beloved companion will be cared for as you want. An informal agreement is not enforceable, and your pet may end up in a shelter or abandoned.

Sentimental possessions also need to be planned for. Your great-grandmother’s soup tureen may be available for $20 on eBay, but it is not the same as the one she actually used and taught her daughter and her granddaughter how to use. The same goes for more valuable items, like jewelry or artwork. Identifying who gets what while you are living, can help prevent family quarrels when you are gone. In some families, there will be quarrels unless the items are in the will. Another option: distribute these items while you are living.

If you can, it is also a good idea and a gift to your loved ones to write down what you want in the way of a funeral or memorial service. Do they want to be buried, or cremated? Do they want a religious service in a house of worship, or a simple graveside service?

If you are among those who have a will, you probably need it to be reviewed. If you do not have a will or a comprehensive estate plan, you should meet with an experienced estate planning attorney to address distribution of assets, planning for incapacity and preparing for the often overlooked aspects of your life. You will have the comfort of expressing your wishes and your loved ones will be grateful.

Reference: CNBC (Jan. 18, 2022) “What happens to your digital assets and cryptocurrency when you die? Even with a will, they may be overlooked”

 

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Write a Letter of Instruction for Loved Ones – Annapolis and Towson Estate Planning

A letter of intent is frequently recommended for parents of disabled children to share information for when the parent dies. However, letters of intent or a letter of instruction can also be a helpful resource for executors, says the article “Planning Head: For detailed instructions consider a letter of instruction” from The Mercury. This is especially valuable, if the executor does not know the decedent or their family members very well.

For disabled children, legal documents address specific issues and are not necessarily the right place to include personal information about the child or the parent’s desires for the child’s future. Estate plans need more information, especially for a minor child.

The goal is to create a document to make clear what the parents want for the child after they pass, whether that occurs early or late in the child’s life.

For a disabled child, the first questions to be addressed in the estate plan concern who will care for the child if the parent dies or becomes incapacitated, where will the child live and what funds will be available for their care. Once those matters are resolved, however, there are more questions about the child’s wants and needs.

The letter of intent can answer questions about the special information only a parent knows and is helpful in future decisions about their care and living situation.

The letter of intent concerning an estate should also include information about wishes for a funeral or burial and contain everything from directions for the music list for a ceremony to the writing on the headstone.

Once the letter of intent is created, the next question is, where should you put it so it is secure and can be accessed when it is needed?

Do not put it in a bank safe deposit box. This is a common error for estate planning documents as well. The executor may only access the contents of the safe deposit box after letters of administration have been issued. This happens after the funeral, and sometimes long after the funeral. By then, it will be too late for any instructions.

Keeping estate planning documents in a safe deposit box presents other problems. If the bank seals the safe deposit box on notification of the owner’s death, the executor will not be able to proceed. This can sometimes be prevented by having additional owners on the safe deposit box, if permitted by the bank . Any additional owners will also need to know where the key is located and be able get access to it.

The better solution is to keep all important documents including wills, financial power of attorney, health care powers, living wills, or health care directives, insurance forms, cemetery deeds, information for the family’s estate planning attorney, financial advisor, and CPA, etc., in one location known to the trusted person who will need access to the documents. That person will need a set of keys to the house. If they are kept in a fire and waterproof safe in the house; they will also need the keys to the safe.

If the parents move or move the documents, they will need to remember to tell the trusted person where these documents have moved. Otherwise, a lot of work will have been for naught.

Reference: The Mercury (Jan. 19, 2022) “Planning Head: For detailed instructions consider a letter of instruction”

 

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Why Is Estate Planning So Important? – Annapolis and Towson Estate Planning Attorneys

Big Easy Magazine’s recent article “Estate Planning Is Essential and Here’s Why” says that writing a Last Will and Testament is not limited to what happens to your house, car, company, or other assets after you die. It also states who will take care of your minor children, if they are orphaned.

Your instructions for burial and other smaller things can be included.

If you fail to provide specific instructions, the state intestacy laws will apply upon your death. Here is a glimpse of the consequences of not writing your last will:

  • Your burial preferences may not be honored.
  • Your properties may be managed by an individual you do not necessarily trust. Without a named executor to your Will, some other family member may be asked to file taxes, make transfers and manage your estate.
  • Family members may not get an inheritance. Under intestacy laws, same-sex relationships and common-law marriages may not be recognized. So, your partner may not get a portion of your estate.
  • Your favorite charity may be left out. If you are committed to leaving a legacy, your charity, religious organization, or other organization of choice should be mentioned in the Will.
  • The government will name the guardians for your minor children.

With a Will, you can designate a guardian for your children and avoid additional taxes. Ask an experienced estate planning attorney about developing a comprehensive estate plan.

Aside from this, estate planning can also save your loved ones considerable angst and money.

A detailed Will with your instructions will avoid complications and provide comfort, while your loved ones recover emotionally from their loss.

Reference: Big Easy Magazine (May 17, 2021) “Estate Planning Is Essential and Here’s Why”

 

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What is not Covered by a Will? – Annapolis and Towson Estate Planning

A Last Will and Testament is one part of a holistic estate plan used to direct the distribution of property after a person has died.  A recent article titled “What you can’t do with a will” from Ponte Vedra Recorder explains how Wills work, and the types of property not distributed through a Will.

Wills are used to inform the probate court regarding your choice of Guardians for any minor children and the Executor of your estate. Without a Will, both of those decisions will be made by the court.  It is better to make those decisions yourself and to make them legally binding with a will.

Lacking a Will, an estate will be distributed according to the laws of the state, which creates extra expenses and sometimes, leads to life-long fights between family members.

Property distributed through a Will necessarily must be processed through a probate, a formal process involving a court.  However, some assets do not pass through probate.  Here is how non-probate assets are distributed:

Jointly Held Property. When one of the “joint tenants” dies, their interest in the property ends and the other joint tenant owns the entire property.

Property in Trust. Assets owned by a trust pass to the beneficiaries under the terms of the trust, with the guidance of the Trustee.

Life Insurance. Proceeds from life insurance policies are distributed directly to the named beneficiaries.  Whatever a Will says about life insurance proceeds does not matter—the beneficiary designation is what controls this distribution, unless there is no beneficiary designated.

Retirement Accounts. IRAs, 401(k) and similar assets pass to named beneficiaries.  In most cases, under federal law, the surviving spouse is the automatic beneficiary of a 401(k), although there are always exceptions.  The owner of an IRA may name a preferred beneficiary.

Transfer on Death (TOD) Accounts. Some investment accounts have the ability to name a designated beneficiary who receives the assets upon the death of the original owner.  They transfer outside of probate.

Here are some things that should NOT be included in your Will:

Funeral instructions might not be read until days or even weeks after death. Create a separate letter of instructions and make sure family members know where it is.

Provisions for a special needs family member need to be made separately from a Will.  A special needs trust is used to ensure that the family member can inherit assets but does not become ineligible for government benefits.  Talk to an elder law estate planning attorney about how this is best handled.

Conditions on gifts should not be addressed in a will. Certain conditions are not permitted by law.  If you want to control how and when assets are distributed, you want to create a trust. The trust can set conditions, like reaching a certain age or being fully employed, etc., for a Trustee to release funds.

Reference: Ponte Vedra Recorder (April 15, 2021) “What you can’t do with a will”

 

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What to Do after a Family Member Dies – Annapolis and Towson Estate Planning

Consumer Reports’ article, titled “What to Do When a Loved One Dies,” outlines some good advice to keep a loved one’s death from becoming even more painful.

Immediately

Here is what you and your family should do right away:

  1. Obtain a legal pronouncement of death. If a doctor is not present, and the individual dies at home under hospice care, call the hospice nurse. He or she can declare the death and help facilitate the transport of the body. If the person dies at home unexpectedly without hospice care, call 911. If the person has a DNR or do-not-resuscitate document, show it to the first responders.
  2. Make the arrangements for transportation of the body. If no autopsy is required, the body can be released to a mortuary or crematorium.
  3. Notify the person’s physician or the county coroner.
  4. Notify family and friends.
  5. Make arrangements for the care of dependents and pets.
  6. Contact the person’s employer (if applicable). Ask for information concerning benefits and any pay due, as well as if there was a life-insurance policy through the company.

Within a Few Days After Death

After some of the dust has settled, and you are able to think clearly and make some bigger decisions, address the following:

  1. Arrange for funeral and burial or cremation. See if the individual had a prepaid burial plan. Take a friend or family member with you to the mortuary. You should also prepare an obituary.
  2. Determine if there are burial benefits. If the person was in the military or was a member of a fraternal or religious group, contact that organization because it may have burial benefits or conduct funeral services. A local VFW or American Legion may provide an honor guard, if requested.
  3. Secure the home. Make sure there is security or someone to keep an eye on the individual’s home. Have the phone forwarded, collect mail, throw food out, water plants and keep minimal heat on to keep pipes from freezing in a colder climate’s winter months.

Up to 10 Days After Death

Here is the next set of items to do in the 10 days after a loved one passes:

  1. Get copies of the death certificate. These are usually obtained from the funeral home. Get multiple copies because you will need them for banks, government agencies and insurance companies.
  2. Present the will to the appropriate government office for probate.
  3. Contact the following:
  • An experienced estate planning attorney;
  • Banks;
  • The life insurance company;
  • The Social Security Administration;
  • Agency providing pension services, to stop monthly checks and get claim forms;
  • Utility companies, to change or stop service;
  • The U.S. Postal Service;
  • The IRS, credit-reporting agencies and the DMV to prevent identity theft; and
  • Social media companies to memorialize or remove an account.

Reference: Consumer Reports (Jan. 5, 2021) “What to Do When a Loved One Dies”

 

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Save Your Family Stress and Plan Your Funeral – Annapolis and Towson Estate Planning

Making your way through the process of the death of a family member is an extremely personal journey, as well as a very big business that can put a financial strain on the surviving family.

Rate.com’s recent article entitled “Plan Your Own Funeral, Cheaply, and Leave Behind a Happier Family”  notes that on an individual basis, it can be a significant cost for a family dealing with grief. The National Funeral Directors Association found that the median cost for a traditional funeral, with a basic casket that also includes a vault (the casket liner most cemeteries require) can cost more than $9,000. With the cost of a (single) plot and the services of the cemetery to take care of the burial and ongoing maintenance and other expenses,  it can total more than $15,000.

Instead, if you opt for cremation and a simple service, it will run only $2,000 or less. That would save your estate or your family $13,000. Think of the amount of legacy that can grow from your last wishes.

If you want to research it further, it can be difficult. Without your directions, your grieving family is an easy mark for a death care industry that is run for profit. Even with federal disclosure rules, most states make it impossible to easily comparison shop among funeral service providers, and online price lists are not required. However, you can do the legwork to make it easier on your family, when you pass.

Funeral homes also are not usually forthright about costs that are required rather than optional. The median embalming cost is $750.However, there is no regulation requiring embalming. Likewise, a body need not be placed in a casket for cremation. The median cost for a cremation casket is $1,200 but an alternative “container” might cost less than $200.

The best thing you can do for your family is to write it down your wishes and plans and make it immediately discoverable.

It can be a great relief to tell your family everything you want (and do not want). However, if that is not feasible with your family dynamics, be certain that you detail of all your wishes in writing. You should also make sure that the document can be easily located by your executor.

Here is a simple option: Write everything out, place your instructions in a sealed envelope and let your children and the executor know the location of the letter.

This elementary step can be the start to helping their decision-making when you pass away, and potentially provide some extra money to help them reach their goals.

Reference: rate.com (June 21, 2020) “Plan Your Own Funeral, Cheaply, and Leave Behind a Happier Family”

 

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Having “The Talk” – Resources to Help You Talk About End of Life Needs – Annapolis and Towson Estate Planning

When it comes to thinking about the end of our lives, it can be uncomfortable. Perhaps you’ve thought a lot about how you want the end of your life to look, but you’re having trouble initiating a conversation with your loved ones. Perhaps you’re the adult child of aging parents who have not mentioned their end-of-life wishes. This is a conversation that should not be put off any longer. This article provides resources to get the conversation started, so that you and your loved ones are on the same page regarding end-of-life issues.

Preparing for the Conversation

We often don’t talk about difficult things with family, because we don’t know where to start or we don’t have the words to broach the subject. It can be helpful to sit down and outline what your goals are in the conversation. For example,

  • Putting finances in order
  • Ensuring a family member or pet is taken care of
  • Alerting loved ones to an important or upsetting health issue
  • Informing loved ones, as to who you want as your health care proxy

This list can get pretty long, so it’s essential to write things down in advance to help keep you on track. One resource we’ve found that is useful at this stage is The Conversation Project’s Conversation Starter Kit. This 11-page guide consists of fillable forms designed to help you plan and guide the conversation with your loved ones.

Educating Loved Ones

Sometimes, priming yourself and your loved ones can provide a starting point for the end-of-life conversation. Podcasts are a popular way for people to learn new things. -Why not end-of-life care options? Here’s a list of several popular podcasts addressing end-of-life issues that you can subscribe to and share with your friends and family:

Finding the Words

Whether you are thinking about your own future or the future of an aging loved one, it can be hard to find the right time and the right words to begin a conversation. The truth is, this doesn’t have to be one single, heavy conversation. You can lead up to longer, more in-depth discussions using a few smaller conversations that can happen at any time. Consider these conversation-starters:

  • “I was thinking about what happened to Aunt Sally, and it made me realize…”
  • “My friend Louis died suddenly last month, leaving his wife and daughter reeling. I’m worried that might happen to you and dad.”
  • “You know, I’m okay right now, but I’m worried that _____, and I want to be prepared.”
  • “I need your help thinking about the future.”
  • “Remember when Uncle Fred died and everyone said it was a ‘good death’? How can we make sure yours is too?”

Talking about end-of-life issues can be difficult. However, it’s a conversation worth having to ensure you face your last years, months, days and hours on your own terms.

Resources:

The Conversation Project. “Starter Kits.” (Accessed November 28, 2019)  https://theconversationproject.org/

ARRP. Org. “Caregiver Life Balance.” (Accessed November 28, 2019) https://www.aarp.org/caregiving/life-balance/info-2017/talk-end-of-life-care.html

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