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.
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Thursday, June 25, 2009
Friday, June 19, 2009
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.
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.
Wednesday, June 10, 2009
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.
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.
Monday, June 1, 2009
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.
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.
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