Caution: Writing Your Own Deed to Avoid Probate Can Lead to Unintended Consequences

One common way to avoid probate of real estate after the owner dies is to hold the title to the property in joint names with rights of survivorship with children or other beneficiaries.  This is accomplished by adding the names of the children and certain legal terms to a new deed for the property and then recording it in the applicable public land records.  

Many people believe that they do not need to pay an attorney to help them prepare and record the new deed.  Instead, they think that a deed form can simply be downloaded from the internet or obtained from a book that can then be easily filled out and recorded.  But deeds are in fact legal documents that must comply with state law in order to be valid.  In addition, in most states, property will not pass to the other owners listed in a deed without probate unless certain specific legal terms are used in the deed.

How is a Defective Deed or an Invalid Deed Corrected?  

If the problems with a defective deed or an invalid deed are discovered before the owner dies, then the problems can be addressed by preparing and recording a “corrective deed” in the applicable public land records.  This should only be done with the assistance of an attorney.

Unfortunately, many times the problems with a defective deed or an invalid deed are not discovered until after the owner dies.  If this is the case, then the problems cannot be fixed with a corrective deed since the deceased owner is unable to sign the corrective deed.  Instead, the property will most likely need to be probated in order to fix the problems with the title.  Aside from probate taking time and costing money for legal fees and court expenses, until the problems with the title are sorted out in probate court, heirs will not be able to sell the property.  Or, worse yet, the property may be inherited by someone the owner had intended to disinherit when they prepared and recorded their own deed. 

What Should You Do?

If you want to add your children or other beneficiaries to your deed in order to avoid probate, and you think you can save a few bucks by using a form you find on the internet or in a book, think again.  Deeds are legal documents that have very specific requirements and are governed by different laws in each state (in other words, a deed that is valid in New York may not necessarily be valid in Florida).  

If you want your home or other real estate to pass to your children or other beneficiaries without probate, then seek the advice of an attorney who is familiar with the probate and real estate laws of the state where your property is located. This will insure that the deed will be valid and your property will in fact avoid probate and pass to your intended heirs.

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.  

Should You Disinherit a Child?

Most parents choose to leave their estates equally to their children. But sometimes, parents intentionally choose to not leave anything to a child. There may be what the parents consider to be a legitimate reason: one child has been more financially successful than the others; not wanting a special needs child to lose government benefits; or not wanting to leave an inheritance to an irresponsible or drug-dependent child. Sometimes a parent wants to disinherit a child who is estranged from the family, or to use disinheritance as a way to get even and have the last word.

Regardless of the reason, disinheriting a child is hurtful, permanent, and will affect that child’s relationship with his or her siblings. The courts are full of siblings who sue each other over inheritances but even if they don’t sue, it is highly unlikely they will be having family dinners together. Money aside, there is symbolic meaning to receiving something from a parent’s estate. 

Disinheriting a child may be short-sighted and even completely unnecessary. For example:

• A child who appears to be more successful financially may have trouble behind the scenes. The inheritance may be needed now or in the future: finances can change, marriages can collapse, and people can become ill. And unless specific provision is made for them, grandchildren from this child will also be disinherited.
• A spouse, child, sibling, parent or other loved one who is physically, mentally or developmentally disabled—from birth, illness, injury or even substance abuse—may be entitled to government benefits now or in the future. Most of these benefits are available only to those with very minimal assets and income. But you do not have to disinherit this person. A special needs trust can be carefully designed to supplement and not jeopardize benefits provided by local, state, federal or private agencies.
• A child who is irresponsible with money or is under the influence of drugs or alcohol may not be the ideal candidate to receive an inheritance of any size. But this child may need financial help now or in the future, and may even become a responsible adult. Instead of disinheriting the child, establish a trust and give the trustee discretion in providing or withholding financial assistance; you can stipulate any requirements you want the child to meet.

How we choose to include our children in our estate plans says a good deal about our values and faith. Not disinheriting a child who has caused grief and heartache can convey a message of love and forgiveness, while disinheriting a child, even for what seems to be good cause, can convey a lack of love, anger and resentment.

If you have previously disinherited a child and you have since reconciled, update your plan immediately. If your decision to disinherit a child is final, your attorney will know the best way to handle it. Consider telling your child that you are disinheriting him or her so it doesn’t come as a complete surprise. Explaining your reasons will allow for honest discussion, may help deter the child from blaming siblings later and may prevent a costly court battle.

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.  

Is a Revocable Living Trust Right for You?

Revocable Living Trusts have become the basic building block of estate plans for people of all ages, personal backgrounds, and financial situations. But for some, a Revocable Living Trust may not be necessary to achieve their estate planning goals or may even be detrimental to achieving those goals.

What Are the Advantages of a Revocable Living Trust Over a Will?

Revocable Living Trusts have become popular because when compared with a Last Will and Testament, a Revocable Living Trust offers the following advantages:

1. A Revocable Living Trust protects your privacy by keeping your final wishes a private family matter, since only your beneficiaries and Trustees are entitled to read the trust agreement after your death.  On the other hand, a Last Will and Testament that is filed with the probate court becomes a public court record which is available for the whole world to read.
2. A Revocable Living Trust provides instructions for your care and the management of your property if you become mentally incapacitated.  Since a Last Will and Testament only goes into effect after you die, it cannot be used for incapacity planning.
3. If you fund all of your assets into a Revocable Living Trust prior to your death, then those assets will avoid probate.  On the other hand, property that passes under the terms of a Last Will and Testament usually has to be probated. A probate could add thousands of dollars of costs at your death.

Why Shouldn’t You Use a Revocable Living Trust?

Although Revocable Living Trusts offer privacy protection, incapacity planning, and probate avoidance, they are not for everyone.

For example, if your main concern is avoiding probate of your assets after you die, then you may be able to accomplish this goal without the use a Revocable Living Trust by using joint ownership, life estates, and payable on death or transfer on death accounts and deeds.  However, those strategies aren't a perfect fit for everyone.

In addition, if you are concerned about protecting your assets in case you need nursing home care, then an Irrevocable Living Trust, instead of a Revocable Living Trust, may be the best option for preserving your estate for the benefit of your family. The rules governing Irrevocable Living Trusts can be very complex, and you should only create an Irrevocable Living Trust after a thorough discussion with a qualified trust attorney.

Do You Still Need a Revocable Living Trust?

While some estate planning attorneys advise their clients against using a Revocable Living Trust under any circumstance, others advise their clients to use one under every circumstance.  Either approach fails to take into consideration the fact that Revocable Living Trusts are definitely not “one size fits all.”  Instead, your family and financial situations must be carefully evaluated on an individual basis and the advantages and disadvantages of using a Revocable Living Trust must be weighed against your personal concerns and estate planning goals.  In addition, these factors must be re-evaluated every few years since your family and financial situations, concerns, and goals will change over time.

If you have a Revocable Living Trust and it has been a few years since it has been reviewed, then we can help you determine if a Revocable Living Trust is still the right choice for you and your family.

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.  

Three Liability Planning Tips for Physicians Anyone Can Use

Whether you are a physician or not, you probably know that the practice of medicine is a profession fraught with liability.  It’s not just medical malpractice claims either – employment related issues
, careless business partners and employees, contractual obligations, and personal liabilities add to the risk assumed by a physician in private practice.  Unfortunately, in our litigious society, these liability risks are not unique to physicians.  Business owners, board members, real estate investors, and retirees need to protect themselves from a variety of liabilities too. 

Below are three liability planning tips anyone – physicians and non-physicians alike – can use to protect their hard earned money.

Tip #1 – Insurance is the First Line of Defense Against Liability

Liability insurance is the first line of defense against a claim.  Liability insurance provides a source of funds to pay legal fees as well as settlements or judgments. Types of insurance you should have in place include (as applicable):

• Homeowner’s insurance
• Property and casualty insurance
• Excess liability insurance (also known as “umbrella” insurance)
• Automobile and other vehicle (motorcycle, boat, airplane) insurance
• General business insurance
• Professional liability insurance
• Directors and officers insurance

Tip #2 – State Exemptions Protect a Variety of Personal Assets From Lawsuits

Each state has a set of laws and/or constitutional provisions that partially or completely exempt certain types of assets owned by residents from the claims of creditors.  While these laws vary widely from state to state, in general you may be able to protect the following types of assets from a judgment entered against you under applicable state law:

• Primary residence (referred to as “homestead” protection in some states)
• Qualified retirement plans (401Ks, profit sharing plans, money purchase plans, IRAs)
• Life insurance (cash value)
• Annuities
• Property co-owned with a spouse as “tenants by the entirety” (only available to married couples; and may only apply to real estate, not personal property, in some states)
• Wages
• Prepaid college plans
• Section 529 plans
• Disability insurance payments
• Social Security benefits

Tip #3 – Business Entities Protect Business and Personal Assets From Lawsuits

Business entities include partnerships, limited liability companies, and corporations.  Business owners need to mitigate the risks and liabilities associated with owning a business, and real estate investors need to mitigate the risks and liabilities associated with owning real estate, through the use of one or more entities.  The right structure for your enterprise should take into consideration asset protection, income taxes, estate planning, retirement funding, and business succession goals.

Business entities can also be an effective tool for protecting your personal assets from lawsuits.  In many states, assets held within a limited partnership or a limited liability company are protected from the personal creditors of an owner.  In many cases, the personal creditors of an owner cannot step into the owner’s shoes and take over the business.  Instead, the creditor is limited to a “charging order” which only gives the creditor the rights of an assignee.  In general this limits the creditor to receiving distributions from the entity if and when they are made.

Final Advice for Protecting Your Assets

Liability insurance, exemption planning, and business entities should be used together to create a multi-layered liability protection plan.  Our firm is experienced with helping physicians, business owners, board members, real estate investors, and retirees create and—just as important—maintain a comprehensive liability protection plan.  Please call our office if you have any questions about this type of planning.  

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.  

Blended Families and the Need for Estate Planning

Anyone with children or modest assets should seriously consider some minimal estate planning, but the increasing number of blended families underscores the need for proper estate planning.

Blended families can involve children from a prior marriage as well as joint children, sometimes joking referred to as “his, hers and theirs.”  And blended families involve both younger and older couples, and nearly everyone in between.

When the new spouse is significantly younger, this sometimes means that the older spouse’s children are close in age to the younger.  These relationships can cause more than friction between the step-parent and step-children.

Most parents want to ensure that their assets will pass to their children, not their stepchildren.  However, absent good estate planning, there is no guarantee that their children will inherit their assets.  In fact, if the couple creates common “I love you” wills such that their assets pass to the survivor of them, there is a significant likelihood their children will be totally disinherited.

This is because all of their assets will pass to the surviving spouse to do with as he or she pleases. More often than not this means excluding the stepchildren, who then receive nothing. 

The fact that Americans are living longer, and sometimes remarrying much later in life, means that blended family issues come into play there too. A recent USA Today article, titled With more blended families, estate planning gets ugly, highlights some of these issues.  The full article is available online.

As this article states, “[a]dd the gaping generational divide between Depression-era parents, who valued frugality above all else, and their Baby Boomer children, who relish self-reward, and the dynamics can be explosive.”

Thus, baby boomer children expecting an inheritance may have to wait much longer than expected. But perhaps more difficult, who should pay for the cost of the surviving spouse’s care? Should the stepchildren be forced to use their inheritance to pay for an aging step-parent’s care, particularly after only a short-term marriage?  Or should this burden fall on the children?

There is no one right answer here, but these questions epitomize the many questions that arise with blended families. These questions should be answered with the help of counsel and proper planning.

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.  

Why Does a Living Trust Cost More than a Will?

It will probably cost more initially to set up a well-drafted living trust than to have a will prepared. A true cost comparison should include not only the expense to establish the will or trust, but also what it will cost should you become incapacitated and after you die.

The Key Takeaways:

• A living trust document has more provisions than a will because it deals with issues while you are living and after you die, while a will only deals with issues that occur after your death.
• A properly prepared and funded living trust will avoid court proceedings at incapacity and death. A will provides no such protection and can, in fact, ensure court intervention at both events, which can be very costly (in time, privacy and dollars) to your family.

Instructions at Death and Incapacity

Both a will and a living trust contain instructions for distributing your assets after you die. But a living trust also contains your instructions for managing your assets and your care should you become incapacitated.

A Living Trust Avoids the Costs of Court Interference at Incapacity and Death

A properly prepared and funded living trust (one that holds all of your assets) will avoid the need for a court guardianship and/or conservatorship if you become incapacitated. The person(s) you select will be able to manage your care and your assets privately, with no court interference.

A will can only go into effect at your death, so it can provide no instructions regarding incapacity. In that case, your family would almost certainly have to ask the court to establish a guardianship and/or conservatorship for your care and your assets—a process that is public, time consuming, expensive and difficult to end.

What You Need to Know.  The same living trust document that can keep you out of a court guardianship at incapacity can also keep your family out of probate court when you die. But a will must go through probate. Depending on where you live, this can be costly and time consuming.

                                                        

Costs to Transfer Assets…Pay Now or Later

There may be some minor costs to transfer assets into your living trust when you set it up, and then from your trust to your beneficiaries after you die. But these will be minimal if you and your successor trustee do much of the work yourselves. With a will, the probate court (with its costs and attorney fees) is the only way to transfer your assets to your heirs after you die. So you can pay now to set up your trust and transfer titles, or you can pay the courts and attorneys to do this for you after you die.

Actions to Consider

• Find out what probate costs are where you live. If your state has a fee schedule based on the value of probate assets, this will be fairly easy. If it has “reasonable” fees, ask an attorney to estimate what these fees would be if you die tomorrow and, if you are married, if your spouse dies the next day.
• Similarly, ask your attorney to estimate what the costs would be if you become incapacitated tomorrow and, if you are married, if your spouse becomes incapacitated the next day. (Practically speaking, this will be impossible to estimate because no one will be able to predict how long the incapacity will last or what complications might arise. The mere uncertainty of these costs should give you pause—and propel you to plan for incapacity.)
• Add these estimates to the cost of having a will prepared—and compare that to the cost of a living trust. When you make a true comparison, you may conclude that having a living trust actually costs less than a will.

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Does Your Estate Plan Protect Your Adult Beneficiaries?

If you think you only need to create discretionary lifetime trusts for young beneficiaries, problem
beneficiaries, or financially inexperienced beneficiaries, then think again.  In this day and age of frivolous lawsuits and high divorce rates, discretionary lifetime trusts should be considered for all of your beneficiaries, minors and adults alike.

What is a Discretionary Lifetime Trust?

A discretionary lifetime trust is a type of irrevocable trust that you can create while you are alive – in which case you will gift your assets into the trust for the benefit of your beneficiaries – or after you die – in which case your assets will be transferred into the trust for the benefit of your beneficiaries after death.  

The trust is discretionary because you dictate the limited circumstances when the trustee can reach in and take trust assets out for the use and benefit of the beneficiaries. For example, you can permit the trustee to use trust funds to pay for education expenses, health care costs, a wedding, buying a home, or starting a business.  If the trust is funded with sufficient assets that are invested prudently and you choose the right trustee to carry out your wishes, the trust funds could last for the beneficiary’s entire lifetime.  

How Does a Discretionary Lifetime Trust Protect an Inheritance?

With a discretionary lifetime trust each of your beneficiaries will have a fighting chance against lawsuits and divorcing spouses because their inheritance will be segregated inside of their trust and away from their own personal assets.  By creating this type of “box” around the inherited property, it shows the world that the inheritance is not the beneficiary’s property to do with as they please.  Instead, only the trustee can reach inside the box and, based on your specific instructions, pull funds out for the benefit of the beneficiary.  Creditors, predators, and divorcing spouses are generally blocked from reaching inside the box and taking property out.  

When the beneficiary dies, what is left inside their box will pass to the heirs you choose. You could decide, for example, to have the assets pass to your grandchildren inside their own separate boxes and on down the line, thereby creating a cascading series of discretionary lifetime trusts that will protect the inherited property and keep it in your family for decades to come. 

What Should You Do?

Does all of this sound too good to be true?  It’s not.  Our firm is available to discuss how you can incorporate discretionary lifetime trusts into your estate plan.  Your family will certainly be glad you did.

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Organize Information for Your Family

Think for a few moments about what would happen if you suddenly became incapacitated or died. Would your spouse or family know what to do? Would they know where to find important records, assets and insurance documents? Would they be able to access (or even know about) online accounts or files on your computer? Would they know whom to ask if they need help?  Putting the effort in now to establish a formal document inventory can alleviate unnecessary anxiety and turmoil in the future.

The Key Takeaways

• If you should suddenly become incapacitated or die, your family would need to know where to find the information they would need.
• Let your key relationships know where to find your document inventory.
• Do not assume your process will be readily understood by others; have a trial run to make sure they can find and understand your records.
• Keep your inventory current with an annual review.

What Information Would They Need?

There is a large volume of documents and information that your family would need during a calamitous event such as incapacitation (even temporary) or death. This basic list will help you start thinking of the critical information you would want your family to have.

• legal documents (will, living trust, health care documents);
• list of medications you are taking;
• list of your advisors (attorney, CPA, banker, insurance agent, financial advisor, physicians);
• insurance policies (health and life);
• year-end bank and investment account statements;
• storage facility location, access method, and inventory;
• list of other assets, including location, account numbers, date purchased and purchase price;
• safe deposit box location, list of contents and location of key;
• list of people to whom you owe money (mortgage, credit cards, etc.);
• list of people who owe you money;
• death or disability benefits from organizations;
• past tax returns.

Also, many of your records are probably on a computer or stored online. If you scan documents or receive financial statements electronically, someone else may not even know they exist. If you use a computer accounting program such as Quicken, QuickBooks or Mint, those records would be on your computer. Family photos may be stored digitally or online. Much of this information is password protected.

What You Need to Know

Your document inventory requires a methodical listing of both hard copy and digital forms.  While the effort will be more challenging at the start, the maintenance of the inventory is much simpler.  Be mindful that your digital footprint will likely grow much faster in the future than it has in the past. 

Actions to Consider

• Give current copies of your health care documents to your physicians and designated agent(s). 
• Keep your original documents in one safe place, like a fireproof safe or safe deposit box. Make copies for the notebook described next.
• Buy one or two three-ring binders to organize your personal and financial information. You can enter it by hand or create spreadsheets on your computer, but having it all in one or two binders will make it easy for your family to find and use. (If you leave it on your computer, they may never find it.) Include locations, contact information, account numbers and amounts.
• Include a list of online accounts and how to access them (including passwords).
• Clean up your computer desktop and put important files in an easy-to-find desktop folder.
• Have a trial run. Ask your spouse or other family member (or your successor trustee or executor) to pretend that he or she needs to access needed information.
• At least once a year, review and update your notebook, computer desktop files and passwords for online accounts.

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Paying for College . . . and Accomplishing Estate Planning Too

With higher education costs outpacing inflation by 5-6% per year, and the average cost of a four-year public school at nearly $20,000 per year (double that for private schools) it’s no surprise that many parents and grandparents are deeply concerned about how they will pay for higher education. Many of these clients are similarly concerned about estate planning.

One tool that can accomplish both is a college savings plan commonly known as a 529 plan (named after the Internal Revenue Code section that creates them). Contributions to 529 plans are generally not subject to gift, estate or GST tax, gains are not subject to income tax if used for qualified higher education expenses (QHEEs), and these assets are not owned by the student for financial aid purposes, making them an excellent tool for saving for college.  

Furthermore, you can “front-load” a 529 plan by contributing five years’ worth of gift tax annual exclusions (currently $13,000 per year, or $65,000 per person) free of gift and estate tax as long as the contributor lives at least five years. Thus, a married couple can contribute up to $130,000 per child or grandchild!

The downsides to 529 plans are gains are subject to tax if not used for QHEEs and there are generally limited investment options, similar to mutual funds. There are also high fees with some state’s 529 plans, so it’s worth some research. An excellent resource in this area is the website savingforcollege.com.

One key consideration is the particular 529 plan’s impact on state income tax: is the client eligible for a state income tax deduction for investing in his or her state’s 529 plan?

A good client-focused article on 529 plans’ utility for estate planning is Pros, Cons Of 529 Plans For Sophisticated, Affluent Parents, available here. 

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

How to Stop Worrying About Running Out of Money in Retirement

Many retirees today worry about having enough money for their retirement. Of special concern is if there will be enough money to provide for the surviving spouse. This is called “shortfall risk,” and it is a valid concern. People are living longer and health care costs continue rising, especially long-term care which many seniors will need. In addition, the recent recession has given us setbacks in investments and record low interest rates. When combined, these issues can have a serious effect on retirement savings and projected income. But there are some things you can do now to help manage your shortfall risk and protect your assets.

The Key Takeaways

• The fear of running out of money in retirement is a valid concern due to increased longevity, increasing health care costs, low interest rates and the recent recession.
• Using experienced advisors who specialize in certain areas can help you increase your retirement income as well as preserve, grow and protect your assets.

The Role of Specialists

A retirement specialist can help you determine the best strategy for taking distributions from an IRA, 401(k) and other retirement accounts; the tax implications involved; how to continue to grow your savings; when to start taking Social Security benefits; and how to plan for out-of-pocket medical and long-term care costs. An estate planning attorney can help you shield your family and your assets from probate court interference at incapacity and death, unintended heirs, unnecessary taxes and lawsuits. Other specialists can be brought in as needed, for example when life insurance is used to provide an inheritance for a child who does not work in the family business.

What You Need to Know

The financial advisor who helped you grow your retirement nest egg may not be the best choice to help you determine how to take your money out. Likewise, your business attorney is probably not the best choice to do your estate plan. An innocent error by a well-meaning but inexperienced advisor can result in a costly and often irreversible mistake. 

Actions to Consider

• Be open to new products and strategies that you may not have considered in the past. For example, consider trusts combined with investments and property to manage the conflicting demands of income, spending, taxes, distributions and transfers.
• Explore new long-term care options from insurance companies. These include:
• Asset-based long-term care (a single deposit premium; if not needed for long-term care, the benefit amount is paid tax-free to your beneficiary);
• Life insurance accelerated death benefit (allows you to access the death benefit before you die for long-term care expenses);
• Home health care doublers (a guaranteed lifetime income contract that doubles your income for up to five years if you need long-term care).
• Delay taking Social Security benefits. If you delay benefits until age 70 and live past age 79, your lifetime income will be more than if you start taking benefits at Full Retirement Age (66-67). 
• A revocable living trust will avoid court interference at both incapacity and death. This is why more people prefer a living trust over a will.

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Estate Planning for Women

While estate planning is important for everyone, women especially need to understand estate planning and have a plan of their own in place. Here are some issues that are of particular interest to women and their estate planning.

Incapacity. 

Because women, on average, live longer than men, there is an increased need to plan for physical and/or mental incapacity that can occur in later years. Long-term care insurance, purchased in advance, can help cover these costs and can even help women remain in their homes for as long as possible. It is also important to plan now to prevent the court from taking control of finances and of personal care at incapacity. At a minimum, durable powers of attorney (for both assets and health care decisions) are needed. A revocable living trust provides excellent protection for assets at incapacity and contains distribution instructions at death.

Children, Grandchildren, Parents and Pets. 

Those raising minor children need to name a guardian in their will; otherwise, a judge will decide who will raise them without your input. Provisions need to be included for aging parents, a child or relative with special needs, pets and other dependents. (Special planning can provide needed care without jeopardizing valuable government benefits.) Additional life insurance may be needed to provide for these loved ones. A gifting program or trust can provide for the education of grandchildren and future generations.

Charitable Causes. 

Those who want some or all of their assets to go to a favorite charitable, religious or educational organization must include this in their estate planning. Without a valid plan in place, assets will be distributed by state law—and a charity will not be among the heirs. Also, proceeds from a life insurance policy can be used to fund various types of charitable giving at your death.

Protecting a Business and Other Assets. 

Professional women in medicine, law and real estate must be concerned about protecting their assets from lawsuits. Many women are also business owners, and they need to plan for what will happen to their business when they are no longer involved due to incapacity, retirement or death. Asset protection planning and business succession planning can and should be included in the estate planning process.

Married Women. 

Women who marry tend to choose husbands who are older, which means they are likely to become widowed. Without proper estate planning while married, many will see their standard of living reduced during their retirement years. Those in second marriages need estate planning that provides for the surviving spouse but does not disinherit children from a previous marriage. Also, because most married women survive their husbands, they often have final say over who will ultimately receive the couple’s assets. Women must take an active role in the couple’s estate planning. Knowledge is key—an unknowledgeable widow will likely be confused and uncertain, while one who has participated in the planning process will more easily understand it and even feel empowered.

Unmarried Women (Never Married, Divorced and Widowed). 

Without valid instructions, state law will apply and that means friends, charities and unmarried partners will not be among your heirs. On the flip side, if you are divorced or separated, you need to update documents (including beneficiary designations) as soon as possible to prevent your ex from making life and death decisions for you or inheriting your assets.

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Incorporating Faith and Values in Estate Planning

For many, passing along religious beliefs and values to the next generation is just as important as passing along financial wealth and tangible assets. Estate planning creates many opportunities to do this, including:

End-of-Life Care 

A health care power of attorney (Advance Directive in some states) lets you name someone to make medical decisions for you in the event you cannot make them yourself. This can be someone who shares your faith and values about end-of-life issues or someone who will honor your wishes. In either case, it is a good idea to provide written instructions about things like organ donation, pain medication (some may want to remain conscious at the end of life), hospice arrangements, even avoiding care in a specific facility. A visit by a priest, rabbi or other member of clergy may be desired. Pregnant women may want to include their preference on medical decisions that would impact the mother and her unborn child.

Funeral and Burial Arrangements  

Faith can influence views on burial, cremation, autopsy, even embalming. Faith may also influence certain details in a funeral or memorial service. Some people pre-plan their services and include a list of people to notify (which can be helpful for a grieving family). Some even pre-pay for the funeral and burial plots to prevent their loved ones from overspending out of grief and/or guilt.

Charitable Giving

Giving to others who are less fortunate is common among people of all faiths. Making final distributions to a church or synagogue, university, hospital and other favorite causes will convey the value of charitable giving to family members.

Distributions to Children and Grandchildren

Taking the time to plan how assets are left to family members lets them know how much they are loved, and is another way to convey faith values. For example, providing for the religious education of children and/or grandchildren speaks volumes. Parents of young children can select someone who shares their religious views to manage the inheritance. A letter of instruction to the guardian can include views on the care and upbringing of young children, which are often influenced by faith.

If the children are older and a son- or daughter-in-law is not fully trusted, an attorney can assist with providing for a son or daughter in a way that will prevent an inheritance from falling into the wrong hands. However, making an inheritance conditional or disinheriting a child or grandchild who marries outside the faith or doesn’t share their parent’s faith can backfire. We cannot really force someone to believe as we do, and trying to do so by withholding an inheritance will only create discord in the family and may not be recognized. The emotional scars on the family, especially if a bitter legal fight results, are probably not what parents want for their family.

Transferring faith and values to family members is best done over time, by letting them see your faith at work in your life, taking them to religious services, and letting them see you being charitable. But it’s never too late. Talk to your family while you can. Explain what your faith means to you and how it has helped you through difficult moments in your life. You can also write personal letters or make a video that they can keep and review long after you are gone.

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

The Truth About Personal Risk Management Part 2 - Using Trusts in Estate Planning

Paying insurance premiums to protect against potential losses frees us mentally to enjoy driving a car, leave our house empty while on vacation and receive medical treatment for an injury or illness. In the same way, the use of trusts acts like insurance and can shift anxiety to comfort, turmoil to peace, and complexity to understanding.

The Key Takeaways

• Trusts provide a protective cure for many of the financial anxieties, concerns, frustrations and hassles we fear for ourselves and loved ones.
• Trusts also provide similar assurances for business owners and for those with considerable assets.
• The benefit of planning is peace of mind for you and your family now.

What Are Risks Related to Estate Planning?

Proper estate planning can protect you against awful things that can happen to you, your family and your assets. These can include: a costly and public court guardianship/conservatorship if you or your spouse becomes incapacitated; being kept in a vegetative state; a potentially costly and time consuming probate process after you die; federal and state estate taxes; a will contest or heirs fighting over your assets; your surviving spouse not having enough money to live on; irresponsible spending by a beneficiary; an inheritance becoming part of a beneficiary’s divorce proceedings; an inheritance not making it to the intended beneficiary (i.e., left to an adult for the benefit of a minor); and an inheritance not being used according to your values and beliefs.

What You Need to Know: Not addressing these risks can cause you pain, worry, frustration, anxiety, fear and anguish. And, if any of these awful things should happen to you or a loved one, your quality of life can suffer.

Why Use Trusts for Your Broader Financial and Wealth Planning?

There are many different trusts that can be used to address a wide range of your circumstances, needs, anxieties, and aspirations. Take a simple but important example of trusts’ capabilities:  the living trust. Most people want to avoid court interference at incapacity (i.e., disability) and at death, and a living trust solves this worry. When you establish a living trust, you transfer your assets to it and select someone to step in and manage them for you when you are not able to do so. Because the assets are no longer in your name, the court has no reason to get involved at either incapacity or death; your successor can manage your assets according to your instructions for as long as necessary. 

More broadly, trusts can hold investments, property and insurance policies, with benefits of reducing various taxes and protecting your wealth from lawsuits and creditors. A trust can continue beyond your lifetime—assets can be kept in a trust until your beneficiaries reach the age(s) you want them to inherit, to provide for a loved one with special needs, or to protect an inheritance from beneficiaries’ creditors, spouses and future death taxes. A trust will also let you provide for your surviving spouse without disinheriting your children.

What You Need to Know: Trusts, in their various forms, offer you a robust package of dollar and quality-of-life benefits. And, trusts are fully compatible with your various investments and assets, from mutual funds to stocks (both public and private) to insurance policies to property.

Actions to Consider

• Become aware of the financial, wealth and estate planning risks you and your family face, and how they can be managed or completely avoided with the use of trusts. 
• An advisor and trust/estate planning attorney will be able to help you become an informed consumer.
• List the fears and anxieties you have for yourself and your loved ones concerning your wealth.
• Compare the costs associated with planning and implementation to the financial and emotional value you will receive. 
• Keep in mind that while trusts have set-up costs, overall costs can be less over time by avoiding court expenses and delays, saving on a variety of taxes, eliminating exposure to legal costs, and so forth.
• Life insurance inside a trust is an excellent way to provide a larger inheritance for your loved ones.
• If you are a business owner, investigate the many benefits that trusts can provide for your business wealth.
• Don’t procrastinate. Trusts have as much application for the living as for those who pass on. Put your plan into effect now based on your current circumstances, and then make changes as needed. Acting now will give you the peace of mind you desire.

Taking Care of a Valuable Resource (You)

The combination of your talents, experience and skills represents an asset. Like any asset, it should be managed and protected. This includes keeping yourself healthy, having sufficient insurance protection, planning for both the near term and the future, investing in yourself, and having contingency plans if a sudden turn occurs. 

The Key Takeaways

• You—your talents, experience and skills—are your most valuable asset.
• Properly managing and protecting this asset can make you more valuable and prepare you for future changes and opportunities.

Caring f or Yourself as an Asset

Too often, we let ourselves slip to the bottom of the priority list. But when you start to think of yourself as your most valuable asset and begin to nourish and protect this asset, you will perform at your best and increase your value. For example:

• Keep yourself healthy. You can’t perform at your best if you don’t take care of yourself. Start with the simple things you already know you should do: eat the right foods, drink water, exercise regularly, get enough restful sleep, etc. See your doctor and take care of small issues before they become big problems.
• Have sufficient insurance to manage risk. Coverage usually includes health insurance; long-term care insurance; life insurance; property and casualty insurance; liability insurance; and professional insurance.
• Invest in yourself to stay valuable, both for the short term and long term. Work on ways to be consistently productive in your work. Learn new skills or take training that will help in your current job/career or that will prepare you for a future one. Consider additional education or an advanced degree to help expand your abilities and potential.
• Have contingency plans. Plan for the unexpected. Start paying off debts and building an emergency fund. Keep your resumé updated. Expand your professional contacts in your current industry or one you would like to pursue by attending networking functions and using social media like LinkedIn.

What You Need to Know

When you take care of yourself, protect yourself and invest in yourself, you will perform better, become more valuable, and will be more prepared if your future takes an unexpected turn or a golden opportunity comes your way.

Other Actions to Consider

• Stress can affect you physically, mentally and emotionally. Having a comprehensive plan, and a team of professionals looking after its execution, brings far greater value in financial benefits, peace of mind, and confidence in the future than the upfront costs.  
• Don’t expect to make all the changes at one time. Take small but consistent steps. Set some goals and start working toward them.
• Everyone has different talents and abilities. Consider what you do well and work on being as good as you can be in those areas. At the same time, be conscious of things you could do better and work on some improvement in those areas.

For help and guidance on getting started on protecting yourself and the resources you have, contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com.

Year End Estate Planning Tip #1 - Check Your Estate Tax Planning

With the end of the year fast approaching, now is the time to fine tune your estate plan before you get caught up in the chaos of the holiday season.  One area that married couples should revisit is their estate tax planning. 

Do You Still Have “AB Trust” Planning in Your Estate Plan?

If you’re married and you haven’t had your estate plan reviewed since before January 2, 2013, by an experienced estate planning lawyer, then pull your documents out of the drawer, dust them off, and take a closer look at their trust provisions.  Do they contain terms such as “Marital Trust,” “QTIP Trust,” “Spousal Trust,” “A Trust,” “Family Trust,” “Credit Shelter Trust,” or “B Trust”?  

If so, then your revocable trust contains estate tax planning provisions that were required in most estate plans before January 2, 2013.  Now, you may not need this type of planning since the federal estate tax exemption has been fixed at $5 million per person adjusted for inflation (the exemption is $5.34 million in 2014 and expected to increase to $5.42 million in 2015).  

Aside from this, the federal estate tax exemption is also “portable” between married couples (including legally married same-sex couples), meaning that when one of a married couple dies, the survivor may be able to get the right to use their deceased spouse’s unused estate tax exemption and so, without any complicated estate tax planning, pass $10 million+ to the deceased spouse’s heirs and the survivor’s heirs federal estate-tax free.

Do You Still Need “AB Trust” Planning in Your Estate Plan?

With that said, do you still need to include “AB Trust” estate tax planning in your estate plan?  The answer to this question depends on several factors, including:

• Are the combined estates of you and your spouse under $5 million?  If the combined value of the estates of you and your spouse is under $5 million, then you will not need to worry about federal estate taxes (at least for now).  Nonetheless, there may be other reasons to keep your “AB Trust” planning in place as discussed below.
• Does your state still collect a state estate tax?  – If your state still collects a state estate tax and your state’s exemption is less than the federal exemption, then “AB Trust” planning (or perhaps “ABC Trust” planning) may be required to defer payment of both state estate taxes and federal estate taxes until after the death of the surviving spouse.  (Note that this will not be the case in Delaware and Hawaii since the exemptions in these states currently match the federal exemption.  The exemptions in Maryland and New York will also match the federal exemption in the future, but not until 2019.)
• Do you and your spouse have different final beneficiaries of your estates?  If you and your spouse have different final beneficiaries of your estates (for example, you want your estate to ultimately pass to your children while your spouse wants their estate to ultimately pass to their siblings or their children), then “AB Trust” planning may be necessary to insure that the final estate planning goals of each spouse are met.
• Do you and your spouse want to create a dynasty trust that will continue for many generations?  Even if the combined value of the estates of you and your spouse is under $10 million, if you want to take advantage of both spouses’ generation-skipping transfer tax (“GSTT”) exemptions to create a lasting legacy for future generations, then “AB Trust” planning may be appropriate because the GSTT exemption is not portable between married spouses.  In other words, if the combined values of the estates of you and your spouse is $10 million or less, then you may want to keep “AB Trust” planning in your estate plan so that you can fully use each spouse’s GSTT exemption for a dynasty trust for the benefit of your children, their children, and their children’s children.

In addition, there are many other factors and options to consider that an experienced estate planning attorney can explain.

What Should You Do?

If you’re married and your current estate plan includes “AB Trust” planning but you’re not sure if you should keep it in your plan, then make an appointment with an experienced estate planning attorney to discuss all of your options.

VA Benefits For Long-Term Care of Veterans and Their Surviving Spouses

Many wartime veterans and their surviving spouses are currently receiving long-term care or will need some type of long-term care in the near future. The Veterans Administration has funds that are available to help pay for this care, yet many families are not even aware that these benefits exist.

Pension with Aid and Attendance pays the highest amount and benefits a veteran or surviving spouse who requires assistance in activities of daily living (dressing, undressing, eating, toileting, etc.), is blind, or is a patient in a nursing home. Assisted care in an assisted living facility also qualifies.

Pension with Housebound Allowance is for those who need regular assistance but would not meet the more stringent requirements for Aid and Attendance, and wish to remain in their own home or the home of a family members.  Care can be provided by family members or outside caregiver agencies.

Basic Pension is for veterans and surviving spouses who are age 65 or older and are disable, and who have limited income and assets.

Qualifying for Benefits

A veteran does not need to have service-related injuries to qualify for these pension benefits, but must meet certain wartime service and discharge requirements. A surviving spouse must also meet marriage requirements to the qualified veteran. Certain requirements must be met for a disability claim if the claimant (the veteran or surviving spouse filing for benefits) is less than age 65. 

When determining eligibility, the VA looks at a claimant’s total net worth, life expectancy, income and medical expenses. A married veteran and spouse should have no more than $80,000 in “countable assets,” which includes retirement assets but does not include a home and vehicle. This amount is a guideline and not a rule.

Income for VA Purposes (called IVAP) must be less than the benefit for which the claimant is applying. IVAP is calculated by subtracting “countable medical expenses” (recurring out-of-pocket medical expenses that can be expected to continue through the claimant’s lifetime) from the claimant’s gross income from all sources.

Note: It is possible to reduce assets and income to a level that will be acceptable to the VA. For example, excess liquid assets (such as cash or stocks) could be converted to an income stream through the use of an annuity or promissory note. However, because the claimant may need to qualify for Medicaid in the future, it is critical that any restructuring or gifting of assets be done in a way that will not jeopardize or delay Medicaid benefits. An attorney who has experience with Elder Law will be able to provide valuable assistance with this.

Applying for Benefits

It often takes the VA more than a year to make a decision, but once approved, benefits are paid retroactively to the month after the application is submitted. Having proper documentation (discharge papers, medical evidence, proof of medical expenses, death certificate, marriage certificate and a properly completed application) when the application is submitted can greatly reduce the processing time.

Because time is critical for these aging veterans and their surviving spouses, application should be made as soon as possible. For more information, visit http://www.va.gov.

Online and Do-It-Yourself (DIY) Estate Planning

With the number of online and do-it-yourself (DIY) legal providers continuing to grow, some of individuals may be wondering if they could do their estate planning themselves. The advertising is seductive: attorneys use similar forms, the cost is significantly less than hiring an attorney, and many of these websites and kits are created by attorneys. In addition, most people think their estates are not complicated, and many think they are just as smart as (or smarter than) professionals.

Most professionals know that DIY estate planning can be very dangerous. While completing the forms may seem easy and straightforward, a single mistake or omission can have far reaching complications that only come to light after the person has died. With that person not here to explain his or her intentions, the heirs could end up disappointed and confused, and could end up paying much more in legal help to try to sort things out after the fact than it would have cost in the first place.

Those contemplating the DIY route should consider the following:

• Legal Expertise: Experienced estate planning attorneys have the technical expertise to draft documents correctly. Yes, they may use pre-drafted forms to start from, but they know what to change and how to change it to make your plan work the way you want. They also understand the technical terms and legal requirements in your state. Laws vary greatly from state to state, and a DIY program or kit may not tell you everything you need to know to prevent your plan from being thrown out by the court.

• Counseling: Attorneys are called “counselors at law” for a reason. Most estate planning attorneys have counseled many families and they have seen the results of proper and improper planning. An experienced attorney can guide you with delicate decisions, including who should be the guardian of your minor children; how to provide for a child or elderly parent who has special needs without interrupting valuable government benefits; how to provide for your children fairly (which may not be equally); and how you can protect an inheritance from creditors and irresponsible spending.

• Explanation of Intentions: If there is any confusion as to what your intentions were after you are gone, the attorney who counseled you will be able to explain them. This unbiased interpretation from someone who does not stand to benefit from your plan can help to avoid costly litigation by your beneficiaries and even maintain the validity of your documents.

• Coordination of Assets: A will only controls assets that are titled in your name. You probably have other assets that are controlled by a contract, joint ownership and/or beneficiary designations; these include IRAs, 401(k)s, joint bank accounts, real estate and life insurance. A will does not control these assets. An experience estate planning attorney will know how to coordinate these so that your assets are distributed the way you want to those you want to have them.

• Tax Planning: The federal estate tax exemption has been a moving target in recent years. The current $5 million exemption is set to expire at the end of 2012 and, if Congress does nothing, it will reduce to $1 million in 2013. Also, many states have their own death or inheritance tax, often at much lower exemptions than the federal tax. Careful professional planning is a must in order to avoid paying too much federal and/or state tax.

• Same Sex and Other Relationships: Because laws are frequently changing and vary greatly from state to state, it is vital to have updated advice from a competent professional. Without proper planning, many rights may be limited for unmarried cohabitants. Providing for your pets may also be very important to you.

• Complexity and Cost: Most people think their estate planning will be simple. But the reality is, most of us discover we do need some personalized planning…and you may not know that without the guidance and counseling of an experienced attorney. It is far better to spend a little more now and make sure your plan is created correctly than to try to save a few dollars and have things turn out badly later. You won’t be around then to straighten things out. Don’t you think you owe it to those you love to do this the right way?

Here are some things all of us can do to help keep costs down:

• Become educated consumers. The more we learn and understand about estate planning, the less time an attorney will need to spend educating us as to the process.
• Prepare a list of assets and liabilities; gather relevant documents (deeds, titles, beneficiary designations, etc.); consider beneficiaries and any special needs they may have.
• Shop around a bit. Ask friends and acquaintances for referrals. If costs are a concern, let the attorney know up front that you are concerned about costs; he/she may be willing to work with you to keep them as low as possible.
• Consider what you think you want, but be open to the attorney’s suggestions.

How to Minimize Legal Fees After Death

Death is a costly business.  Aside from funeral expenses, legal fees can take a big chunk out of how much is left for your loved ones after you’re gone. 

But it doesn’t have to be this way.  Careful planning can minimize the legal fees your loved ones will pay after you die.  Here’s how:

1.         Make an estate plan – The cost of creating an estate plan will be far less than the legal fees your loved ones will have to pay if you don’t have one.  But be careful – don’t try to write your own will or revocable living trust.  Do-it-yourself or online plans often fail to include valuable cost, tax, and legal fee saving opportunities. You need the advice and assistance of an experienced estate planning attorney to create an estate plan that will work when it’s needed and minimize legal fees after your death.

2.         Maintain your estate plan – Once you’ve created your estate plan, don’t stick it in a drawer and forget about it.  Instead, fine tune your plan as your life and your finances change.  Otherwise, when your plan is needed, it will be stale and out of date and will cost your beneficiaries time and legal fees to fix it. In a worst case scenario, a stale plan could lead to expensive and emotionally draining litigation between your family members. Regular maintenance of your estate plan makes it easier to carry out when needed.

3.         Have a debt plan – Make a plan for paying off your debts and taxes after you die.  This should include setting aside funds that your loved ones will have easy access to (for example, set up a joint bank account or a payable on death account) so that they won’t have to use their own assets to pay your bills until your will can be probated or the successor trustee of your trust can be appointed.  If your estate is taxable, then make sure you have enough assets that can be easily liquidated to pay the estate tax bill.  Life insurance can be another option for providing easy access to cash and paying estate taxes, but it’s important that you align your life insurance plan with your estate plan to get the maximum benefit.

4.         Let your loved ones know where your estate plan and other important documents are located – If your loved ones don’t know where to find your health care directive, durable power of attorney, will, or revocable living trust, then their hands will be tied if you become incapacitated or die.  While you don’t need to tell your loved ones what your estate plan says, at the very least you should tell someone you trust where your estate plan and other important documents are being stored.  You should also make a list of the passwords for your computer and accounts you manage online and a contact list for all of your key advisors (such as your attorney, accountant, life insurance agent, financial advisor, banker, and religious advisor).

Following these practical tips will save your family valuable time and money during a difficult time. 

So, What is a Trust Anyway?

A more "legal-sounding" definition is below, but I find this analogy does a better job of putting the definition in plain English.

Think of a trust as a red wagon.  Without a trust, as you walk through life, you carry everything in your arms, figuratively speaking: your house, IRAs, life insurance, bank accounts, etc.  If you trip (i.e., become incapacitated or pass away), all you stuff ends up on the sidewalk and for everyone else to see.  Your family and loved ones are left to pick everything up and figure out what to do.  

Now imagine that your stuff was in a red wagon instead of your arms.  When you trip, your stuff stays in the wagon, and all that happens is you drop the handle.  Your stuff remains safe, and there are written instructions on what is supposed to happen to your stuff.  Perhaps best of all, not everyone can see what is in your wagon - only the people you want to see.

A Revocable Living Trust is created while you are alive. Your property and assets are transferred into and owned by the Trust, over which you retain full ownership and control.  When properly drafted and executed, your Trust allows your assets to be efficiently distributed upon your death according to your instructions, while avoiding the costly and time-consuming probate process and the mandatory attorney fees associated with probate.

A Trust also contains your instructions for your own care and the care of your loved ones should you become disabled.  And, it keeps your instructions and your financial affairs private, unlike a will.  However, it can only accomplish these objectives if you properly draft, execute, and fund your Trust.

Below are 10 advantages of creating a Revocable Living Trust:

1. Provides one planning document with complete, comprehensive instructions for your care and the care of your loved ones.
2. Provides continuity in the handling of your affairs by efficiently transferring your property to your loved ones.
3. Avoids probate on your disability or death with respect to its assets if your trust is funded properly.
4. Easily moves with you from state to state.
5. Creates protective trusts for your loved ones that are free from the supervision of the probate court.
6. Can be easily changed, should you desire to do so.
7. Enables you to rely on your Trustees, should you wish to travel or otherwise delegate the day-to-day management of your financial affairs.
8. Is difficult for disgruntled heirs to attack.
9. Ensures your family’s privacy following your disability or death.
10. Achieves your death tax objectives.

If  you would like more information on how a Family Legacy Plan uses a trust, feel free to contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com.