Stress-Free Retirement with Estate Planning

If you are a boomer, then retirement is calling out to you. You may be dreaming about more travel, more time with the grandkids, more golf, more time to do the things you like to do.

What we never think about is getting sick, to the point where we can’t travel or play golf. We never focus on how much money it will cost us to hire someone to take care of us when we can’t do it any longer. We never think about who will help us manage our financial affairs if we are too frail to get out to the bank to get some cash or remember to re-balance our investments periodically, or get to the closing if we decide to sell our house. And we never make choices about what medical treatment we want or don’t want when the prognosis is the dragged out twilight of Alzheimer’s disease or small strokes that rob you of the ability to speak about how you would never want your life prolonged under certain conditions.

Some possible endings in life may never happen – for example, you may die young or you may never have a long, drawn-out illness. But you can make your retirement more stress-free by planning for the possibility of bad things happening down the road. Sit down with your family, your lawyer, and maybe your financial advisor and talk to them about how to make various scenarios less difficult. Most of us boomers have had experience with our own parents or have heard stories about our friends’ parents and how the lack of planning made every decision so much more complicated. Research your options, create a plan and get the necessary documents signed. Then go ahead – dream about the grandkids, the golf and the travel. Enjoy the rewards of planning ahead.

Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.GronskyLaw.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at RGronsky@Gronskylaw.com. Thank you!

What to Do Before You Visit Your Estate Planning Lawyer

If you took my advice in my last blog entry, you have found an estate planning lawyer with whom you feel comfortable. Is there anything you should do before you go to that first appointment?

If your lawyer sent you a planning questionnaire, you should definitely complete the questionnaire. A planning questionnaire will typically ask about who your family members are, including your spouse, parents, siblings, children, and grandchildren. It will also ask you about your assets, liabilities and how each are titled.

If your lawyer didn’t send you a planning questionnaire (some lawyers go over the questionnaire at your first meeting or send it to you after you agree to become a client), you should start making your own list of assets and liabilities. Your assets are your checking and savings accounts, certificates of deposit, stocks, mutual funds, bonds, jewelry, art, antiques, real estate, cars and retirement accounts. Your liabilities include your mortgages on all real estate that you own, your credit card debt, car loans, and any other loans.

If you have previously done your will, durable power of attorney or advance health care directive (it may also be called a living will or a health care proxy), you should get copies to bring to your lawyer. Add in a copy of all deeds to your real estate and copies of all insurance policies and annuities (along with the beneficiary designations).

Make a list of all banks where you have an account or a safe deposit box and all investment companies where you have an account. Add in the contact information for your accountant, your financial advisor and your doctor. If you have purchased a cemetery plot, write down the name of the cemetery.

Think about who your current beneficiaries are on any currently signed wills and decide how you want to change your estate plan. Are there new children in the picture? A new spouse? Grandchildren? Did one of your beneficiaries die? You should decide who you want to be your executor, trustee of any trusts you create in your estate plan, your agent to handle your financial affairs if you are incapacitated, and your health care proxy who will make medical decisions for you if you are unconscious or unable to speak for yourself.

Your estate planning lawyer will be asking you these questions, either at your first meeting or at a subsequent meeting. You will get more out of each meeting if you are prepared ahead of time.

Depending on their ages, you may or may not want to discuss your possible estate plan with your beneficiaries. You may want your loved ones to know why you are making the decisions that you are making or you may want to wait until after consulting your lawyer who may suggest other options. You may also want to keep your estate plan private until after you die so that you don’t have to face any arguments over your decisions that may anger your beneficiaries and others who believe they should be beneficiaries.

This is just a start and there may be more to do once you have met with your estate planning lawyer. But by following these steps, you will have made a good start.

Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.GronskyLaw.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at RGronsky@Gronskylaw.com. Thank you!

How to Pick a Lawyer

About 3 years ago, I wrote an article about “How to Pick a Lawyer” which can be found on the internet at http://ezinearticles.com/?How-to-Pick-a-Lawyer&id=164511. The article goes through some ways in which you can find a lawyer in any specialty (start with referrals from people you trust) and lists a few questions to ask each attorney that you may be hiring.

I’ve been a lawyer for over 25 years but no one has ever asked me the questions that I set out in that article. Mostly, I get asked about my fees. In some cases, that’s the only question that I’m asked.

Don’t hire a lawyer because he is the cheapest one around. Likewise, don’t assume that the most expensive lawyer is the best, just because he charges the most.

Make sure that the lawyer that you pick does a fair amount of the type of law that is your issue. Each area of law can be complicated and depending on what your problem is, you may need a fairly sophisticated. This lawyer may charge more, but may also save you a great deal in time and aggravation. Likewise, if you have a fairly simple problem, don't go to the largest firm in town who only works with the biggest clients. If you are a smaller client, they may not give you the attention you deserve.

But, regardless of how easy or difficult your legal problem is, you want a lawyer who treats you like a person, not like a number. What do I mean? You hire a lawyer, you want to be able to speak to your lawyer, not a secretary, not a paralegal. If the lawyer that you want to hire takes a couple of days to just return a phone call, find someone else. You want your lawyer to give you an idea of how long it will take to meet to discuss your problem, how long the process will take, and what you should expect along the way.

Lastly, you should feel comfortable talking to your lawyer. If you get the impression that he doesn’t seem interested in you and your problem, this isn’t the lawyer for you. You should be looking for a lawyer that you can work with for years, since a good lawyer knows other good lawyers in other legal specialties. Your lawyer should be able to refer you to another lawyer if he doesn't practice the type of law you need. You should want a lawyer whom you can consult about all of the legal issues in your life.

Find a lawyer who will make you feel at ease, confident that you have chosen someone that you can consult about your legal needs as your life changes.

Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.gronskylaw.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at RGronsky@Gronskylaw.com. Thank you!

What is a Life Insurance Trust and Why Would I Ever Need One?

Most people know about life insurance. If you don’t, here’s a quick summary of what you need to know. Life insurance is a contract between you as the buyer of a policy and the insurance company where the insurance company will pay a sum of money to your beneficiary (the person you designate to receive the proceeds of your life insurance policy) when you die. The beneficiary can be your spouse, your children, or your business partner, or whomever you want to receive the money when you die.

If you are a young, married man or woman, you need enough life insurance to support your family in the event you die early. You would need enough money to pay for your children’s college tuition, for a retirement fund for your spouse, and for the normal expenses of living – mortgage, utilities, food, car, gas, etc. Typically, that amount can be $500,000 or even $1,000,000 (it’s not cheap living in New Jersey).

How does a life insurance trust enter into the picture? A life insurance trust provides a means of avoiding estate tax. Although you may be aware that the federal estate tax kicks in above estates of $3,500,000 (if you die in 2009), New Jersey has a state estate tax that starts with estates of more than $675,000. If you have some equity in your house, a retirement account, and a bank account, you might be over the $675,000 threshold. In that case, you would be a good candidate for some tax planning. Let’s say you bought a $500,000 life insurance policy and made your estate the beneficiary of your policy. Now, the $500,000 is considered part of your estate for estate tax purposes. If you own a house with $200,000 in equity, have $50,000 in your retirement account, and $10,000 in the bank and add in the proceeds of the life insurance policy of $500,000, you will die with an estate of $760,000. Your federal estate tax is $0 but your NJ estate tax is just under $21,000. Do you want to give away almost $21,000 to the state? If you die 5 years from now, it is more likely that your estate will be larger (hopefully you saved more money and the real estate market went back up a bit). Then you will owe more estate tax.

If you put the life insurance policy in a trust, and you don’t own it anymore, then your estate is worth only $260,000. Your federal estate tax is $0 and your NJ estate tax is $0. That’s why you might need a life insurance trust.

You should talk to an estate planning lawyer to learn about whether you owe any federal or New Jersey estate tax. Would you spend $3,000 to save $21,000?

Listen to Your Mama When She Tells You about Her Medications

Estate planning is about so much more than documents. It’s about making your family’s end of life issues less difficult for you and for them.

If you have elderly parents, chances are they are taking at least one daily medication. My father had perhaps a dozen medications. He had one of those weekly pill boxes for the morning and a separate one for the evening. Every Sunday, my sister or I would go over to his apartment and fill the pillboxes for the following week. We also had a box to store all the original pharmacy pill boxes with a sheet of paper listing each drug, how many times per day it was taken, and the dosage. We took that paper with us every time we went to a new doctor or to the hospital.

Do you know what medications each of your parents are on? Have they tried to tell you and you’ve told them that you don’t need to know yet? Do you know whether they are taking the medications that have been prescribed?

It’s very hard to switch from being your parents’ child to their caregiver. You feel like it’s not your place to tell your parents what they should be doing. Yet, you know that you would feel guilty if they had been trying to get you to help them and you couldn’t deal with the change in roles so you ignored their problems. If your parents are trying to tell you about their medications, where their wills are located, whether they want a “Do Not Resuscitate” order on their medical chart under certain circumstances, you must listen and keep that information written down for when it is needed. Doctors rely on their patients telling them what medications they are taking so they do not prescribe additional medications that duplicate what they are already taking or have bad consequences when they are taken with certain other medications. If your parents can’t tell their doctor every medication that every doctor has prescribed, then you must step in and make it your business to get the doctors that information. Or you can keep your head in the sand and wait for a crisis to happen to the ones you love.

Why YOU Need to Get Organized

Autumn starts tomorrow and the weather will be getting colder and wetter. In New Jersey, we can get hit by huge storms that knock out power lines and that flood houses. If your house were hit by a disaster, would your important documents get soaked? Do you have an inventory of your assets? Do you remember where you put your will, your durable power of attorney, and your advanced health care directive?

Most of us say we'll get around to it when we have more time. But the reality is that we never have more time. And most of us are not good at organizing. It's a skill set that we never developed because it was never that important to us.

But not being organized costs you money in the long run. You wind up duplicating what you have because you can't find the originals. You can't provide to the insurance company a detailed list of your assets and their value so the insurance company doesn't reimburse you properly.

I would be happy to send a copy of my form of Document and Asset Locator to anyone who asks. It's free and you only have to call my office at 201-251-8001 or send me an email at RGronsky@Gronskylaw.com and I will send it right out. This weekend, take a half-hour with the whole family and make it a game to videotape all of your belongings. The next week, have a scavenger hunt and give a reward to the child who can find your will, your durable power of attorney, and your advanced health care directive. If you don't have these documents drafted and signed yet, call your estate planning lawyer immediately for an appointment. Don't stop to think about when you have time to schedule these things. Just make the appointment. You'll force yourself to juggle everything around the appointment and that's a good thing. As the Girl Scouts say, "Be prepared."

Do Your Loved Ones Have Your Passwords?

I’ll bet you never even thought to ask that question. I have a lot of my life on my computer right now – financial statements, bank statements, online bills, photos, email boxes (several of those), and membership on social networking sites. For each of these different places, I need a separate user name and password. On some of these sites, I need to keep changing my password for security purposes.

If I got hit by a bus tomorrow, would my family know how to access my computer life? Yes, for the most part. I have a list (that I need to check to make sure that it’s up-to-date) of what my user names and passwords are. If you got hit by a bus tomorrow, would your family know how to get to your online accounts?

Are you aware that Facebook, Twitter, and Yahoo and other sites that create accounts for you will make it very difficult for your loved ones to access your account after you die if they do not have your user name and password? One family had to go to court to get Yahoo to release the emails in their son’s mailbox.

The more we use cyberspace to store information, conduct our financial lives, and interact with our friends, the more we need to make sure that our family can gain access to that information in the event of our untimely death. Don’t make your family have to go to court to get something to which you can easily gain access. When you create your list of persons to contact when you die, add in the information for your online accounts. Save your loved ones that headache.

Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.Gronskylaw.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at RGronsky@Gronskylaw.com. Thank you!

Is Your Estate Big Enough to Need a Will?

The answer is probably yes. If you own any assets in your own name, the only way to ensure that the persons who you want to inherit your property upon your death will get your property is to make a will and have it executed in accordance with New Jersey law.

Depending on the size of your estate, your heirs may not need to go through probate, the legal process for the court to order the transfer of your property to your heirs. In New Jersey, if your spouse is alive when you die, an estate of less than $20,000 does not require probate. If there is no surviving spouse, then the estate must be less than $10,000.

Regardless of whether your estate needs to go through probate or not, the issue that you must address is whether you want the state of New Jersey to dictate who will receive your assets or whether you want to make that decision. If you want to make that decision, then you must make a will.

Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.Gronskylaw.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at RGronsky@Gronskylaw.com. Thank you!

Do You Know How to Manage Your Family’s Finances If A Disaster Struck?

In my family, I pay the monthly bills that are still done manually (you know, write out a check, put it in an envelope with a stamp and mail it). My husband takes care of setting up the online payment of bills. Twice a year, we go through our statements from the banks and brokerage firms to create a spreadsheet of our assets, liabilities, retirement accounts and the kids’ college funds to see how we are progressing (most of our spreadsheets show that we are progressing but we did take a hit to some of our investments last year).

What does your family do so that if something were to happen to you or your spouse, the other one would know what your financial picture looks like? Do both of you review your financial decisions? Do both of you reconcile bank statements? Do you know where all of the family money is invested and who to call if you need to make any changes?

It is good for the family if both of you are knowledgeable about your money matters. That way, both of you can contribute your ideas as to how to manage your money, invest for the future and strengthen your relationship. You will never be caught unprepared in an emergency and will ensure that one partner does not have all of the power in the relationship. Yes, at the beginning, you may make mistakes that may cost you in money or dignity. But, you need to know how to ensure that a disaster can never take everything away from you.

It is also a good idea to teach your children how to manage money. They need to know how to use a checking account, to learn the self-discipline to save money for future goals, and how to manage credit. These are skills that they will need when they go off on their own. Most parents would like to give their children an inheritance but do you want your children to squander what you have worked so hard to save?

Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.Gronskylaw.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at RGronsky@Gronskylaw.com. Thank you!

Sending My 18-Year Old to College

I have 2 children and I am sending my older son to college in 3 weeks. I still remember his first day of kindergarten and soon I will drive him to college with all of his “stuff” and leave him to be on his own.

We’ve created lists of thing to buy from clothing, sheets and mattress toppers (but no dorm furnishings since he’s a boy), and a new laptop computer to laundry bags and shower caddies. I’m sure that those of you who passed this milestone are nodding your head in remembrance of doing the same rituals yourselves. He has dropped off his medical forms to be filled out by his pediatrician and had to talk to the people in his engineering school with his questions about different courses. I have stepped back and made him take on his responsibilities when he was not so eager to do it on his own.

Before we actually take that drive to college, I intend to prepare a durable power of attorney and health care proxy/living will and have him sign these documents. I’m hoping that he never is so incapacitated that we need to use them but I’d rather have them in place in case we do. And I’ve also made him give us access to his school records. Now that he is an adult, we don’t have an automatic right to see his grades. But, if we (my husband and I) are paying for most of his college costs, he has an obligation to keep his grades up; I want to make sure at the end of each semester, that he is keeping his end of the bargain.

So, to all of you parents who are like me and going through this rite of passage with your first child, I salute you for reaching this milestone. It’s a big adjustment for the entire family and it will take us some time to adjust. But, hopefully, we’ve all done our jobs well and our kids find that they can cope, adapt, and thrive on their own.

Please feel free to forward this blog post to your colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.Gronskylaw.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at RGronsky@Gronskylaw.com. Thank you!

Why You Need an Estate Planning Checkup

Good for you, you have a will! How long has it been since you looked at it? Do you even remember where you’ve stored it?

Dig it up now. Take a look at when it was signed. Was it two years ago, five years ago, ten years ago, even more?

Now read it. Was the will signed in a different state? You need to consult with an estate planning lawyer to determine whether your existing will complies with New Jersey law. If it does not, it is not valid.

Is this still the way you want your estate distributed? If you have acquired a larger estate since when you signed your will (yes, even with the latest financial crisis), your estate may be large enough so that your estate might be subject to New Jersey estate taxes. Since the threshold is $675,000, a lot of people who thought they were not subject to any estate taxes should talk to their estate planning lawyer.

If you have minor children, did you name a guardian? Do you still want that person to act as guardian? Is the guardian still willing to take on this responsibility?

Have you become married, divorced, or widowed since you signed your will? If you are married, your spouse is entitled by law to a percentage of your estate, even if the spouse isn’t mentioned. But, do you want your spouse to inherit everything? Then you need to revise your will. If you have become divorced, did you change your will to ensure that your ex-spouse gets only the amount you wish to give him – or do you want to cut him out completely?

Is your power of attorney more than five years old? Although a durable power of attorney does not have an expiration date, as a practical matter, banks and other financial institutions have a reluctance to rely on an old document. This means your agent (the attorney-in-fact) may have difficulty using the powers that you gave her. You might want to re-execute a new durable power-of-attorney and think about whether you want to appoint the same agent.

Likewise, is your health care proxy more than five years old? Does it give your health care agent permission to review your medical records? Do you still want to name the same agent? Do you give your agent instructions in a living will as to your wishes for medical treatment if you are terminal or in a coma? These are all very good reasons to call your estate planning lawyer to re-do your health care proxy and living will.

Your estate plan changes as your life changes. Revisions in the tax laws are also a reason for a change in your estate plan. Don’t think that because you had your estate plan created once that you are done forever. You should have an estate plan check-up every 2-3 years.

Do You Think You Don’t Need Estate Planning Just Because You Are Single?

When estate planning is talked about, most people visualize the old-style American family – either the Cleavers or Ozzie and Harriet and the boys. You may think as a single person that you don’t need estate planning. But you’d be wrong.

There are many of you out there who never married, got divorced, or are widowed. All of you need estate planning documents. In some respects, you need them more than married people do. After all, if you have a sudden heart attack, the doctors and nurses would ask your spouse about what your wishes would be, even without a health care proxy. And without a will, your spouse would inherit at least a portion of your estate.

But, if you are not married, the laws of New Jersey intestacy (dying without a will) dictate who will inherit your estate. This law may create heirs that you never intended. If you have no children, siblings, nieces, nephews, and their children can inherit your estate. What if you wanted everything to go to your favorite charity? Or to your significant other of five years whom you have no intention of marrying? Without a will, the charity never gets a dollar of donation and your significant other receives nothing. Also, there are fewer ways to save on New Jersey estate taxes when you are single so you want to consult with an estate planning lawyer to ensure that you become informed about every technique that is out there to save on taxes.

You need a durable power of attorney to appoint someone that you trust to handle your financial affairs if you cannot do so for any reason. Many times, married couples will have joint bank accounts so one spouse can handle the finances even if the other one is out of town or in the hospital. Do you have any joint accounts? As a single person, probably not. And I’m not recommending that you set up a joint account for emergencies. I suggest that you sign a durable power of attorney, appointing someone that you trust to handle your money. This will allow an adult child, trusted relative, or a cherished friend to pay your bills, ensure that you have enough cash in your accounts to make those payments, and to maybe handle any job benefits that you may be entitled to because you are incapacitated. But, if you don’t appoint someone yourself through a durable power of attorney, the person who cares about you must go into court and spend the time and money to get appointed as your guardian.

Just as you need someone to handle your financial affairs, you need to appoint someone to handle your medical issues. You want to discuss your medical choices with a person that you trust and voice how you would want different scenarios handled on your behalf. For example, if you were in an irreversible coma, would you want a breathing tube, nourishment, or heroic measures if your heart stopped. Or would you want the doctors to do everything in their power to keep you alive since you believe that God will take you when you are supposed to go? By appointing someone to act for you as your health care proxy, and letting them know what you would want, you will get the medical treatment that you wanted and don’t get the treatment that you would have refused if you could talk.

Please feel free to forward this blog to friends, family, colleagues, listserv members or other bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include Robin Gronsky’s name and URL: www.Gronskylaw.com. No prior permission needed. To inquire about Robin's availability to speak to your group or write an article for your publication, please email her at RGronsky@Gronskylaw.com. Thank you!

Can Using an Online Will Form COST Your Loved Ones Money?

Times are hard, you don’t want to spend money for a lawyer, you think you don’t have too many assets. So you figure you’ll just go on the internet or maybe get a book out of the library and get a will form really cheap. You fill in the blanks, sign it, you believe that you have the correct number of witnesses, and feel very proud of yourself for doing your estate planning. Then, you die, and you don’t realize that your do-it-yourself will has serious problems with it. You will never know that your loved ones are in court spending money on lawyers to fix the mistakes that your will contains.

What kinds of mistakes can internet and wills and trust forms from a book create? Do you know if the form you are using incorporates the latest changes to the law? You don’t want to use an out-of-date document but how do you know if it is out-of-date?

Did you decide that because you’ve heard so much about those revocable living trusts that you should have one? Did you get an online form and create your own trust? Did you put any of your assets in the trust? Did you know you even needed to put your assets in the trust? If there are no assets in the trust, it is the same as if it never existed. If you are an expert in estate planning, you may know exactly what you are doing when you draft legal documents. But, more likely, you are following instructions from a website or a book and you have no idea if you are doing things correctly. Would you do surgery on yourself? Most of us would consult a doctor and for good reason. An expert knows what to do. You should consult an expert, not the internet.

Are you sure that the forms follow your state’s laws and requirements? How do you know for sure? Forms on the internet and in books may not be good for your state. Each state has its own requirements of how many witnesses are required and whether a notary public is required. If you don’t get everything exactly perfect, the court will throw out your will and your relatives will be in court fighting over who gets your estate.

Does your will form state that the executor does not need to post a bond? If you do not specify this requirement, your executor needs to buy a bond which costs hundreds or thousands of dollars. This bond insures that your executor will act in accordance with the terms of your will. You can state in a will that your executor does not need to post a bond, but if this language does not appear in your will, it is not implied. It must be explicitly stated.

Are you different from your neighbor, from your best friend? Do you think a will from the internet or a book should create a different estate plan from your neighbor's or your best friend's? Everyone has her own special set of circumstances. A cookie-cutter will can’t necessarily cover your situation and you won’t know that your will is deficient until the court throws it out.

Lessons that You Can Learn from Michael Jackson's Will

When Michael Jackson died, there was a great deal of conversation in the media about who would inherit his estate. It was believed that he had over $400 million in debts but that when his assets were sold or invested, that he would have about $500 million in his estate. Most of the “experts” on television thought that he would not have a will and that there would be a court fight between his mother, who quickly proceeded to get herself appointed as the administrator of his estate, and Debbie Rowe, who is the mother of two of his children (and his children would be his heirs under California law). It was something of a surprise when a will that was signed in 2002 surfaced and was admitted to probate. This will ended all of the speculation of how his estate would be distributed. In addition, the will named who he wished the court to appoint as the guardian of his children and named a back-up guardian in case his first choice would not or could not serve.

Since the will was submitted for probate, it became a public document and can be viewed here: http://www.docstoc.com/docs/8016703/Michael-Jacksons-Will

The will is fairly short and gives Jackson’s entire estate to the trustee of the Michael Jackson Family Trust. Since the trust agreement was not attached to the will, the world will never know exactly how the estate will be distributed.

What does the Michael Jackson will teach you about estate planning? First, there will be no squabbling among your relatives and others if you have a will. A properly signed, witnessed and notarized will that is submitted for probate will dispose of your assets as you wish, not as your family, or ex-relatives, or the lover that you never married, or a probate judge wishes.

Secondly, if you do choose to create a trust, the rest of the world will never find out how you wished to have your estate distributed. For some of us, that is an important consideration, for others, they don’t care because they believe they have nothing to hide. This will also shows us that if you set up a trust, you must re-title all of your assets into the trust. This is because if you have no assets that you own as an individual, then you don’t need to probate a will. Unfortunately, most people who create trusts do not remember to put all of their assets into the name of the trust. So they must have a will and submit that will so the assets that were not in the trust can be distributed the way that you want.

And thirdly, someone, hopefully the executor that you have chosen, knows where the will is located so that it can be probated. If you have had a will signed but cannot remember where you have stored it, then it is as if you had never signed the will. Once you have signed your will, keep it in a safe place and tell your executor and successor executor where you are putting it so that they will know where to look when the time comes.

So, here are three estate planning lessons to learn: 1) have a properly drafted, signed, witnessed, and notarized will; 2) if you have a living trust, make sure that all of the assets that you own, either as an individual or as a tenant in common, are re-titled into the name of the trustee of the trust; and 3) make sure that your executor and successor executor know where your will is located and can get the original to submit to the court.

Please feel free to forward this blog post to friends, family, colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.mortgagelicensesolutions.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at RGronsky@Gronskylaw.com. Thank you!

Lessons from Michael Jackson’s Death – the Guardian Issue

Michael Jackson died a week ago and provided the world with a great lesson in estate planning. There was a lot of speculation from “experts” and anyone with an opinion on who should be the guardian of Michael Jackson’s three children. The opinions ran one way before Michael Jackson’s will was filed for probate and ran slightly differently afterwards. But there was a certain amount of agreement which should make every parent who has children think or re-think who they have appointed as a guardian for their children if they die young.

Michael Jackson had a very unusual situation with his children. He was divorced, his second ex-wife, who may or may not be the biological mother of his two eldest children (but is legally their mother because she gave birth to those children) possibly gave up her custody rights when she divorced Jackson, and there is a third child, whose mother is unknown. If Jackson didn’t have a will, it was predicted that there would be a huge fight for custody of the three children among the biological mother of the two eldest children, Michael Jackson’s mother, and the nanny who spent many years with the children. The three children could conceivably have been sent to live with different guardians. Because Jackson had a will, naming his mother as the guardian of all three children, the discussion has shifted.

Now, the speculation is whether the mother of the two eldest children will ask the court to be appointed as the guardian of her two children, even if she signed away her rights as a parent. Custody of the third child does not seem to be up for grabs. Michael Jackson’s mother, who was named as the guardian of all three children in the will, will remain as guardian of that child. So, if Michael Jackson named his mother as guardian of all three children, why is there any question as to whether she will remain as guardian of all three?

The answer is that the courts grant custody to the natural parent of a child unless the parent does not want custody or the court finds that the parent is unfit to be a parent. The standard is normally “the best interests of the child” but the natural parent still gets the benefit of the doubt.

What is the lesson for all parents? It is better to name a guardian in your will than to die without a will naming a guardian. Although Michael Jackson’s situation is very unusual, it is common for guardian issues to arise in blended families. Your children with your former spouse will live with him even if your current husband is very willing to raise those children. This is true, even if your ex-husband has barely been involved in his children’s lives. But, if your ex-spouse does not wish to assert his parental rights, the person you name as your children’s guardian will get appointed by the court and will raise your children, as you had wished.

Please feel free to forward this blog post to friends, family, colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.Gronskylaw.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at RGronsky@Gronskylaw.com. Thank you!

Choosing a Guardian When You Don’t Like Your Choices

I speak to a lot of parents who don’t have a will. When I ask them the reason why they don’t have a will, the predictable answer is “We can’t decide on who to choose as a guardian for our children.”

Yes, this is the most common dilemma that parents face when confronting the will issue. The usual scenario is that you disagree about the parenting styles of your siblings, your parents are too old and you don’t want to burden your friends with the responsibility of raising your children. So, how do you break the logjam and reach a compromise?

By recognizing that the solution is a compromise and that there presently is no perfect solution. The perfect solution may become apparent in a few years, but you can’t wait to see if that perfect solution will present itself. You really need to act NOW to protect your children. After all, do you have that crystal ball that tells you when you will die?

So, how do you choose a guardian when you don’t like your choices? Make a list of all possible persons and what qualities they have that would make them a good guardian. Think about parenting styles, emotional makeup, age, relationship with your children, location, and whether that person has other children. Have your partner make a similar list. Then sit down together and go over both lists. Is there anyone who is named on both lists? If not, then rank each person on your list from best to worst and have your partner do the same with his/her list. Whoever is closest in rank on both lists is your best candidate.

You should speak to the top candidates to find out whether they would have any objection to becoming your children’s guardian if the worst happened. If one of the candidates is unwilling to act as guardian, cross that person off the list and move on to the next one.

Remember that your will is not engraved in stone. You can change your mind about whom the guardian will be even after you sign your will and create a new will. But if you don’t act to sign a will and something happens to you, it will be a judge who doesn’t know you or your family who will decide your children’s fate. Now was that unknown judge making the choice for you part of your decision-making process? Making a will and naming a guardian for your children is one of the best ways to give you peace of mind about your children’s future. Protecting your children is your main job as a parent.

Please feel free to forward this blog post to friends, family, colleagues, listserv members or favorite bloggers. Or if you would like to run it (in whole or in part) in any publication or quote from it, simply include my name and URL: http://www.Gronskylaw.com. No prior permission needed. To inquire about joining my list to receive my blog posts or my availability to speak to your group or write an article for your publication, please email me at RGronsky@Gronskylaw.com. Thank you!

What is a Probate Asset and What is a Non-Probate Asset?

When talking to your lawyer about creating a will and how you will distribute your estate, your lawyer should ask about all of your assets and categorize some of them as “probate assets” and others as “non-probate” assets. What does she mean when she says this?

A probate asset is one that is held in your name or in a tenancy in common with another person (or persons). These are the assets that are distributed through your will and the distribution is supervised by the court through the probate process.

A non-probate assets is one that is held in a joint tenancy with a right of survivorship, an account that has a “payable on death” or “transferable on death” designations, life insurance, and retirement accounts (IRAs and 401K accounts). These assets have specific rules as to who will inherit these assets from you and are not subject to the terms of your will.

Many clients that I have counseled wish to leave their estates in equal shares to their children. I have to ask them about all of their assets and how they are titled to show them if their desire to leave equal shares to their children is being accomplished. For example, if you have a joint bank account with the child that lives near you and helps you with your banking and there is $100,000.00 in that account, the money in that account goes directly to that local child, outside of probate. If you own another account that is transferable on death to a second child who lives across the country and that account has $25,000.00, that $25,000.00 goes to the second child. Then, you propose to put in your will that you will leave your estate of $500,000.00 to your two children in equal shares. Will your two children receive the same amount of money?

No they won’t. The first child has the $100,000.00 from the joint bank account plus $250,000.00 from the assets that are distributed through the will, for a total of $350,000.00. The second child who lives far away gets $25,000 from the “transferable on death” account plus $250,000.00 from the assets that are distributed through the will, for a total of $275,000.00. That’s not equal.

Of course, you may not want to distribute your assets to your heirs equally. Maybe you wish to give one child more because the other child is financially wealthy and only one child needs your money. Or, perhaps, one child has been taking care of you for the last 10 years and you feel that this child should inherit the majority of your estate.

By knowing how whether your assets are “probate” assets or “non-probate” assets, your estate planning lawyer can help you achieve your goals.

Married Women and Money

Women make many of the day-to-day decisions about how their family spends money. Yet, many women don’t take the time to learn about financial management. Nor do they take the lead in creating an estate plan. With the falling economy, rising health care prices, and growing need for long term care insurance, it's more necessary than ever for you to take responsibility for your own retirement and estate planning.

Why is it so critical for you to become financially savvy? Women live longer lives, on average, than men. A married woman might outlive her husband by 20 years. If she is a stay-at-home mom, she may not have her own social security history and may not have her own retirement funds. Women tend to earn less than men, leaving them with fewer resources later in life.

So in the long run, ladies, you will bear the burden of not knowing what your and your husband’s financial status is. Where should you start?

Although it is not as common as it used to be, there are still women who do not know even how to write a check. Do you? Do you know in which banks all the checking and savings accounts are? Do you review bank statements or does just your husband access them to make sure the bank hasn’t made any errors?

Do you look at the credit card statements? Do you know how much you owe and how much your husband owes? Do you have a budget so that you know whether you are living beyond your means?

Have you and your husband sat down to discuss how much money you have accumulated and how to invest it? If he were to die tomorrow, would you know who your investment advisor is or what your money is invested in?

Have you made arrangements with life insurance on the lives of you and your husband to protect you and your children? Have you researched the costs of care in your old age and whether long-term care insurance or some other means would be needed to pay for those costs?

Do you have a will, a financial power of attorney, and a health care advanced directive? Even if you would appoint your husband to handle all of these matters for you, have you thought about and written down who would act as a back-up if both of you were in an accident together?

If you have minor-age children, have you written a will that appoints a guardian for them? Even if you don’t love your choices, would you rather that a judge that doesn’t know your family choose your kids’ guardian for you?

Yes, you are busy, you don’t have time, these subjects are too dry and morbid, your husband is very happy to take care of everything so why should you worry about money? Death, divorce, disability – you can be alone and hopelessly bewildered about your financial situation without any warning. Don’t let this happen to you. Take some time now, a little bit at a time, to learn about money, in general, and the money that you and your husband have. Read books or magazines, talk to your friends, and consult with experts. You will never regret it.

Have You Made These Estate Planning Mistakes?

If you don’t have a will, durable power of attorney and health care proxy (or advanced health care directive), you’ve made the first estate planning mistake. You need these three (3) documents to protect your family and your assets in the event you are incapacitated and for when you die.
Have you made any of these other mistakes?

1. You have not updated your will in 20 years and are not even sure where it is located.

Most people’s life circumstances change and their estate planning needs are no different. You should at least have your estate planning lawyer review your estate planning documents every 2-3 years to make sure that the documents still carry out your wishes and to ensure that changes in the estate tax laws do not mean that you will be paying federal or state estate taxes that were not in effect when your will was originally drawn up and you owned fewer assets. If you don’t know where your will is located, it is as if you never wrote one. Get a new one done and place it in a secure place. Make sure your executor knows where the will is kept.


2. You rely on joint tenancy as an estate planning tool, especially adding your children to your deed or bank accounts.

Joint tenancy can create problems you have not thought of. Frequently, you think of adding a joint tenant as a way to avoid probate. It does accomplish that goal when you die, but there are immediate consequences while you are alive. Although you may have added a child or all of your children as a convenience but they have full ownership interests and can thwart your needs and desires while you are alive.

3. You did not provide for a successor in interest if one of your fiduciaries dies before you or cannot serve.

If you have not named successor executors, trustees, health care proxies, and agents-in-fact, you may wind up having named none of those critical fiduciaries. Suppose you named your spouse as your executor, if you are both in a car crash, you die and he is unconscious, then he cannot act as your executor. If you haven't named a back-up, then the court can appoint whoever it thinks is most appropriate, even if you would have hated that choice. If your son is named as a trustee for your grandchildren’s trusts and he dies before you, then when you die, any interested person can petition the court to act as trustee. You must name at least one and maybe two backups in case there is a nasty surprise when you need these persons to act on your behalf.

4. You have a will but no advanced health care directive or durable power of attorney.

With all of us living longer than ever, many of us are also living in an incapacitated state longer. There are more Alzheimer’s disease patients, more cases of senior dementia, and more years of just slowly getting more frail and unable to take care of ourselves. We can’t pay our bills, decide whether we are unable to live on our own, or make the proper health care decisions. You may unexpectedly suffer an early heart attack, stroke, or be in an accident. Every person over the age of 18 needs a will, durable power of attorney, and advanced health care directive. You don’t have to be an old person to need someone to help you out when you can’t act for yourself.

There are many other estate planning mistakes that can cost you in time, stress, and money. Consult an estate planning lawyer to help you create your estate plan, have your estate planning documents signed, and have them reviewed every few years. That way, you will protect yourself and your family the way you would want to.

Long-Term Care Insurance

After the Baby Boomers take care of their parents’ in their last years, they start to focus on how they will pay for the care that they will need when they are old and infirm. Are you in your 50s or 60s? Do you have a plan for paying for the care that you and your spouse will need in your later years? Do you have any idea how much it will cost?

Health insurance or Medicare will not pay for someone to help you get dressed or bring you to the bathroom. Medicaid will not pay for those types of services unless you are absolutely poverty-stricken. Assisted-living in New Jersey can cost over $100,000. If you or your spouse get Alzheimer’s disease, you can be looking at 5-10 years of needing care. Do you have that kind of nest egg?

Long-term care insurance is usually obtained when you are healthy and don’t need it. As a matter of fact, you must pass a physical exam for an insurance company to offer you the insurance. If you can’t pass the physical or you are past the age limit, the insurance company may not want to insure you. Or they may charge you such a high premium that you cannot afford it. That is why the insurance agents urge you to start thinking about it when you are in your 50s.

Long-term care insurance is not for everyone but it is worth it to talk to an insurance agent who specializes in this type of insurance. You want to ask them about what type of coverage you are buying (nursing home only or it will also pay for care in your home or adult day care centers). Will the coverage start immediately or will you have to wait before the insurance starts paying. Typically, different waiting periods mean different premiums like getting a high deductible on your car insurance. How much per day does the policy pay out and will that amount pay for the total costs? This issue is hard to evaluate since you are buying coverage that you may not use for 20 or 30 years. Who knows how much your care will cost so far in the future. Many policies come with inflation riders. If you don’t get an inflation rider, you may be paying a large chunk of the long-term care out of your own pocket. How long will your policy pay out? You can choose a set number of years or until you pass on. Obviously, the longer the insurance policy pays out, the higher the premium. Will you need to be hospitalized before the insurance coverage starts? Many times, you need help when you can’t remember things and walking or feeding yourself becomes too difficult.

Compare policies to see which offers the coverage you want and has the best premium to pay for the coverage. It is possible that you will never need long-term care insurance. But there are many scenarios in which this type of policy will be very needed. And assume that, unless you are very wealthy, you will not be able to save enough to pay for your care. For those of you thinking that your children will take care of you, please think through the scenario of your child taking you into the shower and washing you, taking you to the bathroom and wiping your bottom. Many of us don’t want our children to see us that close and personal. Until another alternative comes along, long-term care insurance should be at least considered, even if you decide that it’s not right for you and your family.

Why Do I Need to Know About Asset Protection and How Do I Use It In My Estate Planning?

We love our children and want to make sure that they are taken care of even after we’re gone. That’s why so many of us want to leave an inheritance to our children. But how do we protect them from spending it on expensive cars, extravagant vacations, and extended shopping sprees?

Even if you don’t have a large estate to hand down to your children, how do you think an extra $50,000 or $100,000 would change their lives? Do you think that they would all invest the money wisely so that your grandchildren will have college funds and your kids will have comfortable retirements? Or do you think one or more of them will immediately run out to buy a fancy car or several pairs of expensive shoes?

Asset protection is the legal way to put assets beyond the reach of those who would like to take them away from their owners. Your estate planning lawyer knows of different ways to shield money from your children’s wasteful spending habits. In other words, you can protect your kids from themselves. That’s one reason for asset protection.

Another reason that you may want to explore asset protection tools is that your child’s spouse can go after your child’s inheritance in the event of a divorce. Typically, assets inherited by one spouse during the marriage cannot be claimed as a marital asset to be divided during a divorce settlement. However, typically, while the marriage is going well, your child will want to share his inheritance with his spouse and kids (your grandchildren) and will spend part or all of it for the good of his family. Or maybe he will commingle his inheritance with his family’s other investments so that the inheritance can no longer be considered a separate and distinct asset of your child. All of your children may seem to be in happy marriages right now but who can say what will happen in 5 years? In 10 years?

Another possible concern that you may have about your child losing the money you pass on to him is if he is sued. Does one of your children own his own business? People sue businesses all the time and your child has to follow all the rules of limited liability to ensure that only the company assets are at risk and not his personal assets as well. How does a business owner make sure that his personal assets aren’t at risk if his business is sued? Is the business a corporation or a limited liability company? These forms of running a business are the starting point for ensuring that your child’s personal assets don’t get seized by someone suing his business. Is your child a doctor or lawyer who could be sued for malpractice? Then, he may possibly get sued individually for malpractice and his personal assets are at risk.

Even if your children don’t own their own businesses, they can get sued for any number of reasons. If your child is in a car accident and the judgment is bigger than the amount of insurance he carries, the judgment can be satisfied from your child’s personal assets (including the money you leave to him). If someone slips and falls on his lawn and then sues, the injured person can collect against any of your child’s personal assets.

In order to be effective, asset protection techniques must protect against liability, must not be in your child’s name, and must be done at the right time. Talk to your estate planning lawyer about how to help your children’s spending or losing their inheritance.

Per Stirpes and Other Legal Terms

When you consult an estate planning attorney, she might be using legal terms that you don’t know. It is best if you ask her to explain everything so that you know that you understand everything that she is telling you. However, here are a few legal terms that she might mention and what they mean.

Estate – the assets you own less the debts that owe at the time that you die.

Per stirpes – is a method for distributing your estate. It divides a family into branches. Typically, a share of the estate will go to one of the persons in each of the branches. If that person has already died when it comes time to inherit, that person’s children will inherit the share and divide it among themselves. For example, if you leave your estate of $450,000 to your 2 children, and Child A has 1 child and Child B has 3 children, if Child B dies before you do, the 3 children of Child B will divide Child B’s ½ share of $225,000 among themselves (so each child of Child B gets $75,000). Child A will inherit the other ½ share of $225,000.

Per capita – the other method for distributing the estate of a deceased individual. If we use the previous example of you and your 2 children, and Child B has died before you, when you die, there are 4 people to divide your estate – Child A and your 3 grandchildren from Child B. Child A and the three grandchildren from Child B each take a ¼ share of your estate.

Executor – the person whom you appoint to carry out the wishes that you state in your will. The job requires that person to submit the will to the court for probate, to find all of your assets, to pay your debts, and then to distribute the estate in accordance with the terms of the will.

Fiduciary – a person who acts for the benefit of others in a trust relationship. Examples of fiduciaries are your executor (or administrator if you died without a will), trustee, and guardian of your children.

Letters Testamentary – the formal court order issued by the probate judge giving the executor the power to act on behalf of the estate.

Estate taxes – there are federal estate taxes and New Jersey estate taxes. The taxes are assessed on your estate based on the size of your estate when you die. In 2009, you can die (in most cases) without paying any federal estate tax if your estate is $3.5 million or smaller. In New Jersey, the state estate tax is assessed if your estate is greater than $675,000.

Ancillary probate – a probate proceeding conducted in a state other than the one in which you lived and where you own property. For example, if you are a New Jersey resident and you have a vacation home in the Poconos, your primary probate will take place in New Jersey and your executor will need to start an ancillary probate in Pennsylvania to get the court order that allows the transfer of your vacation home according to the terms of your will.

There are other legal terms that your lawyer will reference. If you don’t know the meaning of any term of concept that she discusses, you should ask for an explanation. After all, it’s your estate plan and you want to be sure that it carries out your wishes.

Why You Need Estate Planning if You Belong to One of These Groups

Many of us think that estate planning is for very wealthy people only. You hear about the federal estate tax exemption of $3.5 million per person and think I don’t have that kind of money, why should I bother spending the money on estate planning?

No matter how much or how little money you have, you need a durable power of attorney, to have someone manage your bill-paying and banking affairs, and an advanced health care directive, which appoints someone to make medical decisions for you when you cannot make them for yourself. You also need to think about how you will be taken care of when you can’t take care of yourself. Is there a spouse who will have the strength and energy to take care of you when you are both old? Do you have children who can take care of you? Do they live on the other side of the country and have a job to help support their families? Do you have enough money to pay for assisted living or a nursing home? These are all questions that an estate planning lawyer can help you decide and plan for.

No matter how much or how little money you have, you need a will if you have minor-aged children. You need to appoint a guardian for your children and it must be in writing. Otherwise, you can have all of your relatives fighting over your children to be their guardian and a judge deciding which one of them will make the best substitute parent. Or you can have no one fighting over your children, and they have to go to foster care. Isn’t that a nightmare in either case?

If you have a blended family, you need a will to protect your assets from going to your spouse’s family and not to your children. Many couples struggle with the issues raised by having separate families. If you leave things to luck, you are almost guaranteed that chaos will follow after you die. It is smart to work through these issues now and get all your legal affairs in order.

Is one of your children a spendthrift? He spends more than he earns and has enormous credit card debt? Do you worry that any money that he inherits from you will just go to his creditors and he will not be able to keep any of it? An estate planning lawyer will talk to you about different trusts that can be set up so that your child will never lose the money he inherits from you to a spouse who is divorcing him, to a judgment creditor who sued him for an accident that he was in, or to pay his debts (especially when you know in your heart that the minute he clears his current debts with your money, he will just run up new debts again).

Even if you don’t have “wealth”, you could use the advice of an estate planning lawyer. It will be money well spent.

Leaving a Mess Behind

Many of us in the Sandwich Generation are encountering a dreadful scenario: your parent has suddenly died, if there is another parent still alive he/she does not know if there is a will or who the lawyer is. You have the unenviable job of combing through your parents’ house to find a will (if it exists), to find bank and financial statements to marshall the assets, and to distribute them according to the will (if it exists) or according to state law if there is no will.

How do you find out whether there is a will? If one of your parents is still alive, ask him/her if they had their wills done and where you would find them. If the remaining parent is unable to remember, you need to comb through their house and look at their papers, one by one, until you find a lawyer’s name or a financial advisor’s name. Hopefully, that person will know if there is a will.

If there is a financial advisor, ask about the assets that he is managing and if he knows if there are any other financial advisors in the picture. Frequently, people don’t trust all of their investments to just one advisor. Recent tax returns will list which banks paid interest to your parent and you should contact those banks to find out whether there is an existing bank account or certificate of deposit. The tax returns will also list stocks that paid dividends.

It is possible that you will not locate all of your parent’s assets. Each state has a department that takes possession of assets that revert to the state because the holder of that asset cannot find the owner. You need to check with that department in each state in which your parents lived and keep checking for at least 5 years after your parent’s death to see if any assets show up in their database. You can google “unclaimed property” to find the official websites. Don’t use the services of any company who can “find” money for you for a fee, they are just googling the same websites.

You also have to check for debts that your parent incurred. Were there medical expenses, credit cards, automatic deductions from a bank account for any expense? You must pay all of the legitimate debts and stop the automatic deductions before distributing to the beneficiaries. If the debts are greater than the assets, the estate is insolvent and the creditors will have to settle for less than full payment. If your parent was receiving Social Security or pension benefits, you need to inform the Social Security Administration or the pension provider of his/her death to stop the payments.

Finally, you may be cleaning out your parent’s house if this is your second parent to die. Frequently, this means disposing of years of accumulated mementos, old furniture that was never discarded, collections of items that your parent loved but which have little monetary value, clothing and other assorted junk. If there are items that have sentimental value, you may wish to keep them. But that still usually leaves tons of “stuff” to go through to find the few possessions that are worth keeping. It will take days and even weeks to go through everything.

Is this what you want for your family to go through? Think about it - if you were in a fatal car accident tomorrow, would your heirs know where to find your important legal documents? Would they know who to ask if they couldn’t find them? Organize your papers now. Create a document locator and list where your will is located, in which banks you have accounts or certificates of deposit, which company your financial advisors work for, whether you have life insurance and which company the policy is with. Create a list of important people in your financial life – your lawyer (if you have one), your accountant, your financial planner, your clergy, your bank, and your life insurance agent and put their phone numbers all on one sheet. Give copies of the document locator and list of important financial people to your executor and your back-up executor. If you haven’t written your will yet, give a copy of your document locator and important financial people to your spouse (especially if one of you is handling all the finances for the family), your parents (if they are not too frail), your children (if adults) and your siblings. Don’t leave a mess for your family to deal with if you unexpectedly die.

Why Joint Tenancy is a Bad Idea

If you own a house with your spouse, you probably own it as joint tenants or as tenants by the entirety (a form of joint tenancy that is only allowed between spouses). You can own any kind of property as joint tenants with anyone else – real estate, stocks, bonds, cars, or bank accounts. It’s easy to transfer property owned as joint tenants when one of the joint owners dies - you don’t need to go to court and you don’t need a will. The surviving owners automatically own the dead person’s share.

So why can joint tenancy be a bad idea? Suppose you and your siblings own the family summer cabin as joint owners and you die. Your share does not go to your spouse and children, it goes to your siblings.

Suppose you own a bank account with your child to make it easy for him to write out the checks for your bills. But he can write out a check for everything that is in the account and pay off his gambling debts. And you can’t stop him from writing that check. After all, he’s one of the owners of that account, even though he didn’t contribute a penny to it. Additionally, the tax code says that when you put you son’s name on that account, and he didn’t contribute to that account, you gave him a gift of one-half of that account. Depending on the size of that bank account, you gave him a large enough gift to be required to pay gift tax.

Many parents put their children’s name on the deed as joint tenants when the parents get older. They believe that this will make it easier for their children to inherit the house. But it creates problems during your lifetime that you never thought about. Suppose you want to sell the house and move into an assisted-living apartment. But your children don’t want to sign the deed. Without their signatures (because they are owners too), you can’t sell. You can’t get a home equity loan without their signatures on the loan documents. They have the right to live in the house even if you don’t want them living there. And if one of your children’s spouses is divorcing your child, that spouse can have a claim against your house (because the spouse that he/she is divorcing is one of the owners of your house).

Another problem that a parent does not consider is when a parent puts a child’s name on the parent’s property and the child loses a lawsuit and has a judgment filed against him. One of his assets is your property that you hold in joint tenancy with him. Now that creditor can own your property in satisfaction of the judgment against your child.

Another common situation is when one of the joint owners becomes mentally or physically disabled and cannot sign documents. If the incapacitated person has not appointed an attorney-in-fact using a durable power of attorney, you cannot sell, mortgage, or gift your property until you go to court to get a conservator appointed for the other joint owner. This is expensive and time consuming.

While placing property into joint tenancy is a common estate planning technique, it is often a very bad idea. There may be unintended tax consequences, loss of control and/or liability risks. Other methods exist to plan an estate, whether the estate is large or small. Call an estate planning lawyer to discuss the better estate planning tools.

What Happens When You Die Without a Will

The majority of people in the United States do not have a will. In most cases, this leaves a mess for the family to deal with after a loved one dies. Here’s what the scenario may look like.

If you die without a will (called “intestacy”), New Jersey law decides how your estate will be divided. The law may mirror your wishes but many times it will not. For example, if you die with a spouse and one or both parents still living but you have no children, your spouse will have to divide your estate with your living parents. If you die with a spouse and children (but some of your children are from a prior marriage), your spouse will get the first 25% of your assets (but not less than $50,000 nor more than $200,000) plus ½ of the balance and your children divide the remaining assets.

When you die with a will, you decide who will act as the executor (the person who carries out your wishes as expressed in your will). If you have no will, any relative can be appointed as the executor. And the court will require that person to pay a premium for a surety bond to ensure his honest performance. Your will can require that no surety bond is required.

If you die without a will and your children are minors, the court will appoint a guardian for your children and their assets. This may not be the person that you would want to raise your children and it might not be the person you would want to handle their money. The guardian appointed by the court needs the court’s permission to take certain actions, so he will be paying lawyers’ fees and court costs every time he needs to go into court. This can be time-consuming and expensive. This is true even if your spouse if the guardian of your children’s inheritance.

If you die without a will, your children will inherit their money when they turn
18. A will would allow you to postpone them getting their inheritance until they are older and more responsible about money.

When you do not consult an estate planning lawyer, you generally do not learn about different estate tax avoidance methods. Did you know that New Jersey law does provide for a state estate tax? The asset level for owing New Jersey estate taxes is $675,000 and up.

No one seems to like thinking about his/her death or spending the money on consulting a lawyer. But, in the end, not consulting a lawyer to write the will that you want and making sure it’s written in accordance with New Jersey requirements will cost your family thousands of dollars more than doing it the right way now.

Communicating with Your Beneficiaries

If your family has adult children, there is a possibility that you may decide to split your estate unevenly. After all, if one child is very successfully financially, and another child is taking care of you now that you need help, should you treat them the same when it comes time to pass on your assets?

It is up to you how you want to pass on your property, including your personal possessions. Your possessions might mean so much to one child but would only be looked at as a waste of space by another child. You may have plans to bring one or more of your children into the family business but they may have other ideas for their life. Your assets can be divided any way you want, including leaving nothing to one or more of your children. You can give your entire estate to charity if you choose.

If you do choose to treat your children differently in terms of what they inherit from you, I recommend that you communicate your plans to your family before you die. A family meeting can do so much to help lessen the feelings of anger and betrayal among family members that can occur if they find out your estate plan when they read the will. You can explain your thinking to them so they understand your actions. At a family meeting, you can also communicate your philosophy about money and possessions, you can smooth over any bad feelings from family members who feel they have been treated unfairly, and you can discuss health issues in the event you need additional care in your later years.

Such a meeting can be held at your lawyer’s office, in a neutral place like a restaurant, or in your home, at the kitchen table. The meeting should include your children, their spouses, and perhaps any older grandchildren. If there is a family business involved, you may also want to invite key employees and your accountant.

If there is any feedback that you find helpful, you can use it to make changes to your estate plan. It could be that everyone is in favor of your plan. Or you could find out that the child who you had hoped would run your business wants some other career entirely.

A family meeting every few years goes a long way to ensuring that your children are still speaking to each other after you are gone.

Revocable Living Trusts

A few years ago, everywhere you looked, there was a lawyer giving a seminar on revocable living trusts (RLTs). The RLT was supposed to help you avoid the high cost and lengthy process of probate, avoid estate taxes, and protect your privacy. It was supposed to be the one estate planning document you needed, forget having a will.

Does an RLT really have all those wonderful benefits? For some people, it’s a great estate planning tool. For others, it’s overkill, way too much work and way too expensive. How do you know if it’s right for you?

An RLT is a device created by a trust document whereby title to your assets, as the grantor of the trust, is now given to a trustee (the trustee is also you). The trust agreement will then describe what happens to your assets when you die. Normally, when you die, all assets in your name must be distributed to your heirs through a process called probate. When you have an RLT that is properly set up, you don’t have any assets in your name. All of your assets are in the trust’s name. So, probate is not required. However, probate in New Jersey is a fairly quick, fairly inexpensive process (unlike in other states). So, avoiding probate is usually not the goal in New Jersey.

Having an RLT does not mean saving on estate taxes. The law does not give any special treatment for assets that you have in an RLT, since you can dissolve the RLT at any time.

When does having an RLT make sense? If you own property in more than one state, you would normally have to have probate done in every state in which you own property. The usual scenario is being a resident of New Jersey but having a second home in another state (maybe a house in the Poconos, or a condo in Florida). If all of your property is in an RLT, you do not have to go through probate in any state.

An RLT can make sense if you become incapacitated and cannot carry out your own affairs. A trust agreement can provide for a successor trustee to act in your stead if you cannot act for yourself, it can provide for determining when you can’t act for yourself and can spell out exactly what you would want done if you are incapacitated so your successor trustee knows how to carry out your wishes. In some instances, the actions of your successor trustee will be accepted by others more readily than if you have a durable power of attorney (a document that appoints someone to act for you when you can’t act for yourself).

Even if you do have an RLT, you should still have a will. In the event you have not transferred all of your assets into the RLT, you need the will to distribute those assets not in the RLT after you die.

Update Your Estate Plan

I recommend to my clients that they come in for an estate plan check-up every two years. An estate plan check-up is a time when I meet with my client, ask about what has changed in her life in the past two years, and describe what changes have taken place in the law that might affect her estate plan. After we have our conversation, I ask whether, in light of what we just spoke about, would my client want to change anything in her estate plan.

Usually, the answer is “yes.” Why? Because the laws affecting estate tax is changing fairly often these days and that impacts how your estate plan is structured. Frequently, in order to avoid paying estate tax to the state or the federal government, I will create one or more trusts in your will. A trust is a great device to get money out of your estate, and therefore not have to pay estate tax on it, but it can be a burden in terms of living with it. You have to file tax returns for the trust every year and sometimes prepare an accounting to the beneficiaries of the trust so they know how much was earned, through which investments, and how the income from the trust was distributed. A lot of extra work that you may not want to go through if you don’t need to.
On the other hand, maybe you never needed to think about estate taxes, but your mother died and left you a significant inheritance. Now you have some real money to think about. That can change your estate plan.

Your estate plan may change because you have had a big fight with your executor (or divorced him if it was your husband) and now you don’t want that person to act as your executor. Or perhaps the couple that you chose to be your children’s guardian have moved away from your neighborhood and your kids haven’t seen them in a few years. So you want to name a different guardian.

Your estate plan is never set in stone. It’s not a one-shot deal that you never have to re-think until someone dies. If it has been more than two years since you last talked to your estate lawyer, make an appointment now. You might find that you need to change more than you thought.

Grandparents Paying for College

College is a very expensive proposition these days. The cost of attending the most prestigious college is over $50,000 per year. It’s very difficult for parents to save that kind of money, especially if they have more than one child. If there are grandparents who are capable and willing to help out with college expenses, even a portion of them, they can accomplish two goals.

The first goal is obviously to help the grandchild pay for the enormous cost of college. In some cases, it is the difference between the grandchild attending the best college for that grandchild and a less-costly, but not great alternative. The other goal is that it reduces the size of the grandparent’s estate and may mean the difference between paying estate tax and not paying estate tax.

If paying for any part of college would squeeze the grandparent financially, then the grandparent should not even attempt it. The financial security of the grandparent is more important – no one should place himself in financial jeopardy to help her children or grandchildren.

But if the grandparent has enough for her needs and wants and there is money left over, helping pay for a grandchild’s college expenses is a terrific gift.

There are different ways to accomplish this goal. There are 529 plans, education savings accounts, and payments made directly to the college. The grandparent should not make a direct gift to the grandchild. Even if the grandchild makes every promise to use the money for college, the grandparent no longer has control of it and he could use the gift money to buy a car. It will also reduce the amount of financial aid that he might get from his college. If a grandparent gives more than $13,000 per year to her grandchild, it counts against yherlifetime gift and estate exemption.

Before a grandparent makes any contribution to a grandchild’s college costs, she should consult her tax advisor and her financial planner to coordinate her plan to help with college with her overall financial plan.

Buying a Second Home

Many of us dream of a second home. It may on the Jersey Shore, or on a lake, or in another part of the country. The current foreclosure mess has left many properties in desirable parts of the country available for what seems like very cheap prices. If your credit is good and you have enough money to carry two houses, it might be a good time for you to look for that dream house.

If you are looking for a second house as part vacation home, part investment, then you need to check out the local real estate market. Talk to the local real estate agents and find out how far prices have fallen. If you are thinking of renting out your house for part of the year, ask about how easy it is to rent to others and what the typical rental rate is for the size of house that you are looking at. Will the rental income cover the mortgage and taxes or just be a nice extra bit of cash?

Are you looking for a retirement home? In that case, your investigation will have a different focus. You will be concerned with the amenities that may come with the house, such as a pool, and with the amenities that the town or city that it is located in will provide, such as golf, other sports, cultural activities, good hospitals, closeness to an airport, and pleasant year-round climate. You may want to look for a 55+ adult community that provides activities and a clubhouse. You will also be looking for a house that will still be comfortable for you when you don’t want to take care of the lawn or walk up flights of steps every day.

Also think of how long you might want to stay in this house. If you think in terms of 5-10 years, you could be better off just renting. The costs of buying and selling, plus maintenance, make a house an expensive proposition over the short-term. Just think about how much cash you would pull out of your current house if you sold it now. Not that much if you bought it 5 years ago. You might even be taking a loss.

Mortgage loans for second homes are harder to get because the lenders know that you are not living there full-time. You are statistically more likely to default on a mortgage on a second home than on your primary residence. So, you need a very high FICO score and a lot of money in savings.

Just remember from an estate planning standpoint that if you own property in another state that you must probate that property in that state as well as your home state. There are techniques to get around this issue that your estate planning lawyer will know about.

Estate Planning If You Are Not Wealthy

You may not think you need to have a will. After all, you don’t think of yourself as wealthy. And you think you won’t need to pay any estate or death taxes (those are only for the rich, right?). And you’re fairly young and in good health, so you aren’t dying anytime soon. But you could be wrong – about all of your assumptions.

There are many reasons that people own their property in joint ownership. One of those reasons is so that the other owner automatically inherits upon your death - without needing a will. But, there are also reasons why that could be a bad idea. You may have accounts that can be “payable on death.” And for those accounts, you would not need a will. But, it is unlikely that everything you own is in joint ownership or a “payable on death” account. So, you need a will.

You probably have heard that you don’t pay “death taxes” or "estate taxes" unless you have an estate of more than $3.5 million. That $3.5 million is the federal estate tax exemption. So if you die and your estate is less than $3.5 million, then your family does not pay federal estate tax. But if your estate is more than $675,000, you will pay a death tax to New Jersey. And if you start counting the equity in your house, the balance in your retirement account, a life insurance policy that is not in a life insurance trust, and your stocks (even with the hit it took in the stock market these past few months), you might easily be past the $675,000 number. Do you want to pay estate taxes to New Jersey? So, you need a will.

Do you have minor-aged children? Do you want your relatives arguing over who should be the guardians of your children? Do you think that one of your relatives shouldn’t even be the guardian of your pets, much less your children? Do you know for sure that you will not die until the youngest child is over 18? So, you need a will.

Do you want your family hard-earned assets to be destroyed by your creditors, by an ex-spouse, by the stupid decisions of your college-aged kids, by your spouse re-marrying and giving your money and things to the new spouse? So, you need a will.

Of course the wealthy know that they need estate planning. And the majority of them spend the time and money to come up with a plan that leaves them with the peace of mind that comes from being in control as much as possible. They don’t leave things to chance. You may think you don’t need to act like them because you don’t have the same amount of money. But don’t you like the idea that you can leave things the way you want them, not to chance? Don’t you like the idea that your loved ones will be protected from bad luck and bad decisions? So, you need a will. Go call an estate lawyer. You’ll be glad you got a will.