Should I Update My Estate Plan? – Annapolis and Towson Estate Planning

An estate plan exists to accomplish three things.

  1. Preserving your accumulated wealth
  2. To specify who will inherit your assets after your death; and
  3. To indicate who will make health care and financial decisions on your behalf if you are unable.

Real Daily’s recent article entitled “4 Good Reasons to Update Your Estate Plan” says that as you age, you should consider updating your estate plan. Why? Well, your feelings may change over time, or you may experience a significant life event that requires you to update things. These are events such as a marriage or divorce, a new child or grandchild, or a significant change in your health, wealth and outlook on life.

In addition to your will and trusts, you need to review your power of attorney, healthcare directive, living will and HIPAA waiver.

It is critical to recognize the life events that may necessitate updating your estate plan.

For example, if you are recently married or divorced, according to some state laws, existing wills are nullified when someone gets married or divorced.

It is also possible that your wealth has increased significantly, which may affect the way you view how your assets should be distributed to your beneficiaries.

Another reason to update your plan, is if you want to give more (or less) to charity or to your heirs.

Your executor or trustees may change their minds about their roles, no longer live nearby, or they themselves have died. If an individual is no longer interested in assuming those responsibilities, no longer alive, or no longer in good health or of repute, then there is a need to revise the document.

Some other reasons to update your plan include if you are in the process of retiring, moving to another state, or buying or selling real estate.

Each of these events calls for a comprehensive estate plan review.

Finally, your goals may evolve over the years as a result of changes to your lifestyle or circumstances, such as an inheritance, career change, marriage, house purchase, or a growing family.

Reference: Real Daily (June 13, 2022) “4 Good Reasons to Update Your Estate Plan”

 

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Can I Make Decisions for My 18-Year-Old ‘Kid’ If She Becomes Incapacitated? – Annapolis and Towson Estate Planning

The Press-Enterprise’s recent article entitled “Legal documents for young adults” describes some of the important legal and estate planning documents your “kid” (who is now an adult) should have.

HIPAA Waiver. This form allows medical personnel to provide information to the parties you have named in the document. Without it, even mom would be prohibited from accessing her 19-year-old’s health information—even in an emergency. However, know that this form does not authorize anyone to make decisions. For that, see Health Care Directives below.

Health Care Directive. Also known as a health care power of attorney, this authorizes someone else to make health care decisions for you and details the decisions you would like made.

Durable Power of Attorney. Once your child turns 18, you are no longer able to act on their behalf, make decisions for them, or enter into any kind of an agreement binding them. This can be a big concern, if your adult child becomes incapacitated. A springing durable power of attorney is a document that becomes effective only upon the incapacity of the principal (the person signing the document). It is called a “springing” power because it springs into effect upon incapacity, rather than being effective immediately.

A durable power of attorney, whether springing or immediate, states who can make decisions for you upon your incapacity and what powers the agent has. The designated agent will typically be able to access bank accounts, pay bills, file insurance claims, engage attorneys or other professionals, and in general, act on behalf of the incapacitated person.

They will always be your babies, but once your child turns 18, he or she is legally an adult.

Be certain that you have got the legal documents in place to be there for them in case of an emergency.

Remember a spring break, when they are home for summer after their 18th birthday, or a senior road trip are all opportunities when these documents may be needed.

Reference: The Press-Enterprise (April 2, 2022) “Legal documents for young adults”

 

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Do College Kids Need Estate Planning? – Annapolis and Towson Estate Planning

The topic of estate planning is frequently overlooked in the craze to get kids to college.

When your child leaves home, it is important to understand that legally you may not hold the same rights in your relationship that you did for the first 18 years of your child’s life.

Wealth Advisor’s article entitled “Estate Planning Documents Every College Student Should Have in Place” says that it is crucial to have these discussions as soon as possible with your college student about the plans they should put into place before going out on their own or heading to college. An experienced estate planning attorney can give counsel on the issues concerning your child’s physical health and financial well-being.

When your child turns 18, you are no longer your child’s legal guardian. Therefore, issues pertaining to his or her health cannot be disclosed to you without your child’s consent. For instance, if your child is in an accident and becomes temporarily incapacitated, you could not make any medical decisions or even give consent. As a result, you would likely be denied access to his or her medical information. Ask your child to complete a HIPAA release. This is a medical form that names the people allowed to get information about an individual’s medical status, when care is needed. If you are not named on their HIPAA release, it is a major challenge to obtain any medical updates about your adult child, including information like whether they have been admitted to a hospital.

In addition, your child also needs to determine the individual who will manage their healthcare decisions, if they are unable to do so on their own. This is done by designating a healthcare proxy or agent. Without this document, the decision about who makes choices regarding your child’s medical matters may be uncertain.

Your child should ensure his or her financial matters are addressed if he or she cannot see to them, either due to mental incapacity or physical limitations, such as studying abroad. Ask that you or another trusted relative or friend be named agent under your child’s financial power of attorney, so that you can help with managing things like financial aid, banking and tax matters.

Reference: Wealth Advisor (Sep. 24, 2021) “Estate Planning Documents Every College Student Should Have in Place”

 

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Why Do You Need a Health Care Directive? – Annapolis and Towson Estate Planning

Healthy adults often make the mistake of thinking they do not need a health care directive. However, the pandemic has made clear everyone needs this estate planning document, at any time of life, according to a recent article “Health care directive beneficial for anyone” from The Times-Tribune.

Anytime a person becomes severely incapacitated, even if just for a short time, and any time a young person becomes a legal adult, a health care directive is needed. In other words, everyone over the age of 18 needs to have a health care directive.

Several health care directives are prepared by an estate planning attorney as part of a comprehensive estate plan.

A Living Will or Advance Directive is used to express wishes for medical treatments, if you are not able to express them yourself.

A Power of Attorney for Health Care (also known as a Durable POA for Health Care or a Health Care Proxy) lets you name a trusted person who will make health care decisions on your behalf, if you cannot make the decisions or communicate your wishes.

A HIPAA Privacy Authorization makes it possible for health care providers to share medical information with a person of your choice. Otherwise, the health care providers are not permitted to discuss your medical history, medical status, diagnostic reports, lab results, etc., with family members.

Short term incapacity can result from illness or recovery from surgery or intense medical treatments. Having these documents in place permits a person you trust to have important conversations with your health care providers and to make decisions on your behalf.

Physicians will be permitted to discuss medical care with a named agent, who, in turn, will be able to discuss care or status with family members.

This documentation will also allow an authorized person to help you with insurance companies, billing departments at hospitals, pharmacies and to schedule medical appointments on your behalf.

If you are not married, this is especially important. Even a partner of many years has no legal right to act on your behalf.

For parents of young adults, having these documents in place will allow them to stay involved in an adult child’s healthcare. It is not a scenario that any parent wants to contemplate, but having these documents prepared in advance can save a great deal of stress and anguish, if and when they are needed.

Reference: The Times-Tribune (Aug. 15, 2021) “Health care directive beneficial for anyone”

 

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How Important Is a Power of Attorney? – Annapolis and Towson Estate Planning

People are often surprised to learn a power of attorney is one of the most urgently needed estate planning documents to have, with a last will and health care proxy close behind in order of importance. Everyone over age 18 should have these documents, explains a recent article titled “The dangers of not having a power of attorney” from the Rome Sentinel. The reason is simple: if you have a short- or long-term health problem and cannot manage your own assets or even medical decisions and have not given anyone the ability to do so, you may spend your rehabilitation period dealing with an easily avoidable nightmare.

Here are other problems that may result from not having your incapacity legal planning in place:

A guardianship proceeding might be needed. If you are incapacitated without this planning, loved ones may have to petition the court to apply for guardianship so they can make fundamental decisions for you. Even if you are married, your spouse is not automatically empowered to manage your financial affairs, except perhaps for assets that are jointly owned. It can take months to obtain guardianship and costs far more than the legal documents in the first place. If there are family issues, guardianship might lead to litigation and family fights.

The cost of not being able to pay bills in a timely manner adds up quickly. The world keeps moving while you are incapacitated. Mortgage payments and car loans need to be paid, as do utilities and healthcare bills. Lapses of insurance for your home, auto or life, could turn a health crisis into a financial crisis, if no one can act on your behalf.

Nursing home bills and Medicaid eligibility denials. Even one month of paying for a nursing home out of pocket, when you would otherwise qualify for Medicaid, could take a large bite out of savings. The Medicaid application process requires a responsible person to gather a lot of medical records, sign numerous documents and follow through with the appropriate government authorities.

Getting medical records in a HIPAA world. Your power of attorney should include an authorization for your representative to take care of all health care billing and payments and to access your medical records. If a spouse or family member is denied access to review records, your treatment and care may suffer. If your health crisis is the result of an accident or medical malpractice, this could jeopardize your defense.

Transferring assets. It may be necessary to transfer assets, like a home, or other assets, out of your immediate control. You may be in a final stage of life. As a result, transferring assets while you are still living will avoid costly and time-consuming probate proceedings. If a power of attorney is up to date and includes a fully executed “Statutory Gift” authorization, your loved ones will be able to manage your assets for the best possible outcome.

The power of attorney is a uniquely flexible estate planning document. It can be broad and permit someone you trust to manage all of your financial and legal matters, or it can be narrow in scope. Your estate planning attorney will be able to craft an appropriate power of attorney that is best suited for your needs and family. The most important thing: do not delay having a new or updated power of attorney created. If you have a power of attorney, but it was created more than four or five years ago, it may not be recognized by financial institutions.

Reference: Rome Sentinel (July 25, 2021) “The dangers of not having a power of attorney”

 

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Should I Discuss Estate Planning with My Children? – Annapolis and Towson Estate Planning

US News & World Report’s recent article entitled “Discuss Your Estate Plan With Your Children” says that staying up-to-date with your estate plan and sharing your plans with your children could make a big impact on your legacy and what you will pay in estate taxes. Let us look at why you should consider talking to your children about estate planning.

People frequently create an estate plan and name their child as the trustee or executor. However, they fail to discuss the role and what is involved with them. Ask your kids if they are comfortable acting as the executor, trustee, or power of attorney. Review what each of the roles involves and explain the responsibilities. The estate documents state some critical responsibilities but do not provide all the details. Having your children involved in the process and getting their buy-in will be a big benefit in the future.

Share information about valuables stored in a fireproof safe or add their name to the safety deposit box. Tell them about your accounts at financial institutions and the titling of the various accounts, so that these accounts are not forgotten, and bills get paid when you are not around.

Parents can get children involved with a meeting with their estate planning attorney to review the estate plan and pertinent duties of each child. If they have questions, an experienced estate planning attorney can answer them in the context of the overall estate plan.

If children are minors, invite the successor trustee to also be part of the meeting.

Explain what you own, what type of accounts you have and how they are treated from a tax perspective.

Discussing your estate plan with your children provides a valuable opportunity to connect with your loved ones, even after you are gone. An individual’s attitudes about money says much about his or her values.

Sharing with your children what your money means to you, and why you are speaking with them about it, will help guide them in honoring your memory.

There are many personal reasons to discuss your estate plans with your children. While it is a simple step, it is not easy to have this conversation. However, the pandemic emphasized the need to not procrastinate when it comes to estate planning. It has also provided an opportunity to discuss these estate plans with your children.

Reference: US News & World Report (Feb. 17, 2021) “Discuss Your Estate Plan With Your Children”

 

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

What Estate Planning Documents Should I Have when I Retire? – Annapolis and Towson Estate Planning

Research shows that most retirees (53%) have a last will and testament. However, they do not have six other crucial legal documents.

Money Talks News’ recent article entitled “6 Legal Documents Retirees Need — but Don’t Have” says in fact, in this pandemic, 30% of retirees have none of these crucial documents — not even a will — according to the 20th annual Transamerica Retirement Survey of Retirees.

In addition, the Transamerica survey found the following among retirees:

  • 32% have a power of attorney or medical proxy, which allows a designated agent to make medical decisions on their behalf;
  • 30% have an advance directive or living will, which states their end-of-life medical preferences to health care providers;
  • 28% have designated a power of attorney to make financial decisions in their stead;
  • 19% have written funeral and burial arrangements;
  • 18% have filled out a Health Insurance Portability and Accountability Act (HIPAA) waiver, which allows designated people to talk to their health care and insurance providers on their behalf; and
  • 11% have created a trust.

The study shows there is a big gap that retirees need to fill, if they want to be properly prepared for the end of their lives.

The coronavirus pandemic has created an even more challenging situation. Retirees can and should be taking more actions to protect their health and financial well-being. However, they may find it hard while sheltering in place.

Now more than ever, seniors may need extra motivation and support from their families and friends.

The Transamerica results should not shock anyone. That is because we have a long history of disregarding death, and very important estate planning questions. No one really wants to ponder their ultimate demise, when they can be out enjoying themselves.

However, planning your estate now will give you peace of mind. More importantly, this planning can save your heirs and loved ones a lot of headaches and stress, when you pass away.

Talk to an experienced estate planning attorney today to get your plan going.

Reference: Money Talks News (Dec. 16, 2020) “6 Legal Documents Retirees Need — but Don’t Have”

 

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What Kind of Estate Planning Mistakes Do People Make? – Annapolis and Towson Estate Planning

Estate planning for any sized estate is an important responsibility to loved ones. Done correctly, it can help families flourish over generations, control how legacies are distributed and convey values from parents to children to grandchildren. However, a failed estate plan, says a recent article from Suffolk News-Herald titled “Estate planning mistakes to avoid,” can create bitter divisions between family members, become an expensive burden and even add unnecessary stress to a time of intense grief.

Here are some errors to avoid:

This is not the time for do-it-yourself estate planning.

An unexpected example comes from the late Chief Justice Warren Burger. Yes, even justices make mistakes with estate planning! He wrote a 176 word will, which cost his heirs more than $450,000 in estate taxes and fees. A properly prepared will could have saved the family a huge amount of money, time and anxiety.

Do not neglect to update your will or trust.

Life happens and relationships change. When a new person enters your life, whether by birth, adoption, marriage or other event, your estate planning wishes may change. The same goes for people departing your life. Death and divorce should always trigger an estate plan review.

Do not be coy with heirs about your estate plan.

Heirs do not need to know down to the penny what you intend to leave them but be wise enough to convey your purpose and intentions. If you are leaving more money to one child than to another, it would be a great kindness to the children’s relationship, if you explained why you are doing so. If you want your family to remain a family, share your thinking and your goals.

If there are certain possessions you know your family members value, making a list those items and who should get what. This will avoid family squabbles during a difficult time. Often it is not the money, but the sentimental items that cause family fights after a parent dies.

Understand what happens if you are not married to your partner.

Unmarried partners do not receive many of the estate tax breaks or other benefits of the law enjoyed by married couples. Unless you have an estate plan and a valid will in place, your partner will not be protected. Owning property jointly is just one part of an estate plan. Sit down with an experienced estate planning attorney to protect each other. The same applies to planning for incapacity. You will want to have a HIPAA release form and Power of Attorney for Health Care, so you are able to speak with each other’s medical providers.

Do not neglect to fund a trust once it is created.

It is easy to create a trust and it is equally easy to forget to fund the trust. That means retitling assets that have been placed in the trust or adding enough assets to a trust, so it may function as designed. Failing to retitle assets has left many people with estate plans that did not work.

Please do not be naïve about caregivers with designs on your assets or relatives, who appear after long periods of estrangement.

It is not pleasant to consider that people in your life may not be interested in your well-being, but in your finances. However, this must remain front and center during the estate planning process. Elder financial abuse and scams are extremely common. Family members and seemingly devoted caregivers have often been found to have ulterior motives. Be smart enough to recognize when this occurs in your life.

Reference: Suffolk News-Herald (Dec. 15, 2020) “Estate planning mistakes to avoid”

 

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What Happens when Mom Refuses to Create an Estate Plan? – Annapolis and Towson Estate Planning

This is a tough scenario. It happens more often than you would think. Someone owns a home, investment accounts and an inheritance, but does not want to have an estate plan. They know they need to do something, but keep putting it off—until they die, and the family is left with an expensive and stressful mess. A recent article titled “How to Get a Loved One to Visit an Estate Planning Attorney Before It’s Too Late” from Kiplinger, explains how to help make things right.

Most people put off seeing an estate planning attorney, because they are afraid of death. They may also be overwhelmed by the thought of how much work is involved. They are also worried about what it all might cost. However, if there is no estate plan, the costs will be far higher for the family.

How do you get the person to understand that they need to move forward?

Talk with the financial professionals the person already uses and trusts, like a CPA or financial advisor. Ask them for a referral to an estate planning attorney they think would be a good fit with the person who does not have an estate plan. It may be easier to hear this message from a CPA, than from an adult child.

Work with that professional to promote the person, usually an older family member, to get comfortable with the idea to talk about their wishes and values with the estate planning attorney. Offer to attend the meeting, or to facilitate the video conference, to make the person feel more comfortable.

An experienced estate planning attorney will have worked with reluctant people before. They will know how to put the older person at ease and explore their concerns. When the conversation is pleasant and productive, the person may understand that the process will not be as challenging and that there will be a lot of help along the way.

If there is no trusted team of professionals, then offer to be a part of any conversations with the estate planning attorney to make the introductory discussion easier. Share your own experience in estate planning, and tread lightly.

Trying to force a person to engage in estate planning with a heavy hand, almost always ends up in a stubborn refusal. A gentle approach will always be more successful. Explain how part of the estate plan includes planning for medical decisions while the person is living and is not just about distributing their assets. You should be firm, consistent and kind.

Explaining what their family members will need to go through if there is no will, may or may not have an impact. Some people do not care, and may simply shrug and say, “It will be their problem, not mine.” Consider what or who matters to the person. What if they could leave assets for a favorite grandchild to go to college? That might be more motivating.

One other thing to consider: if the person has an estate plan and it is out of date, that may be just as bad as not having an estate plan at all, especially when the person has been divorced and remarried. Just as many people refuse to have an estate plan, many people fail to update important documents, when they remarry. More than a few spouses come to estate planning attorney’s offices, when a loved one’s life insurance policy is going to their prior spouse. It is too late to make any changes. A health care directive could also name a former brother-in-law to make important medical decisions. During a time of great duress, it is a bad time to learn that the formerly close in-law, who is now a sworn enemy, is the only one who can speak with doctors. Do not procrastinate, if any of these issues are present.

Reference: Kiplinger (May 11, 2020) “How to Get a Loved One to Visit an Estate Planning Attorney Before It’s Too Late”

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Why Is Estate Planning more Complicated with a ‘Gray Divorce’? – Annapolis and Towson Estate Planning

The increasing divorce rates among Americans over the age of 50 is a problem, because minimizing discord among beneficiaries is one of the top three reasons why people engage in estate planning.

The Clare County Review’s recent article entitled “Rising Gray Divorce Rates Are Making Estate Planning Problems More Complicated” notes that along with prolonged life expectancy and rising healthcare costs, this upward trend in couples divorcing after the age of 50 has created activity and interest in estate planning.

According to the CDC, the divorce rate in the United States is 3.2 per 1,000 people. The ‘first divorce rate,’ or the number of marriages that ended in divorce per 1,000 first marriages for women 18 and older, was 15.4 in 2016, according to research by the National Center for Family and Marriage Research at the Bowling Green State University. As noted earlier, black women experience divorce at the highest rate, 26.1 per 1,000, and the rate is lowest for Asian women at 9.2 per 1,000.  In Michigan, the current divorce rate is 9%, but Tennessee is way up at 43%.

Gray divorce is adding another level of complexity to estate planning that already happens with blended families, designation of heirs and changing domestic structures. Therefore, it is more crucial than ever to proactively review and discuss the estate plans with your estate planning attorney on an ongoing basis.

According to the TD Wealth survey, 39% of respondents said that divorce effects the costs of retirement planning and funding the most. Another 7% said that divorce impacts those responsible for enacting a power of attorney and 6% said divorce impacts how Social Security benefits will be determined.

It is important to communicate the estate plan with family members to reduce family conflict during the divorce process.

The divorce process is complicated at any age. However, for divorcing couples over the age of 50, the process can be especially tough because the spouse is frequently designated as a beneficiary on many, if not all, documents. Each of these documents will need to change to show new beneficiaries after the divorce has been finalized. It means that wills, trusts, retirement accounts, life insurance policies and listed assets will need to be revised.

Reference: Clare County Review (Feb. 10, 2020) “Rising Gray Divorce Rates Are Making Estate Planning Problems More Complicated”

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