Arizona Estate Planning Lawyer & Attorney : Stephen Follett Law Firm : Probate Law and Trusts : Gilbert, Phoenix, Arizona

What you don't know about powers of attorney can hurt you!!!!  With each client I advise, I spend time explaining the legal aspect of planning.  But, most importantly, I focus on the practical aspect of implementing their plan.  I always review the pitfalls with them. 

Powers of attorney are especially succeptible to failure/rejection by banks and other financial institutions because they can be liable for fraud if they assist someone drain an account.  This is the reason why it is very important that every "t" is crossed and every "i" is dotted.  There are many ways to make a mistake, but few ways to do it right.  Just filling out a form and executing it may not be sufficient for your needs.

This post from Gerry Beyer brought to my attention this real life story of a son who took 9 trips to the bank before it honored his power of attorney over his father.  Unfortunately, this is all to common. 

This is why the assistance of a qualified attorney can prove invaluable.  If the bank ultimately rejected the power of attorney, then expensive guardian/conservator proceedings would have been the only way to reach his money.  Truthfully, there likely would have been little left of the meager IRAs after attorney fees and court costs.

 

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People are becoming savvy about how the law affects them, especially as more people are experiencing divorce and its effects.  They understand and feel the need for a different result.

In this article, Kathleen Pender offers some basic advice about a "pre-nup" agreement that is the the principle method to reach a different result on divorce.  Here is a list of people suggested by the article that should consider a pre-nup:

You've been married before, especially if you have children. 

You have substantial assets.

You started a business before marriage.

One partner has a big debt.

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Suppose you could deposit your money into two different accounts, which would you choose?

• Bank account (A) is safe from lawsuits, creditors, divorce, bankruptcy, etc.; or,
• Bank account (B) could be wiped clean by lawsuits, creditors, divorce, bankruptcy, etc.

I assume that you would choose account A for YOUR money.  Believe it or not, estate plans that I review much more commonly offer account B to their children and grandchildren.

Whether assets or money are passed by a will or by a trust, they can be placed into a protected account.  That "account" is actually a specialy designed trust for the benefit of each child or grandchild designed to give protection.

There is little downside, because the child or grandchild can become trustee of their own trust at an age that is appropriate under the circumstances.  Consequently, the child has control over their "account."  Truly, in this age where litigation and divorce are rampant, an inheritance protection trust is a very powerful tool to preserve YOUR money for the benefit of the people you love. 

It would also be an appropriate time to include your children in your planning process.  Consider asking your children which account they would rather have for their inheritance and legacy.

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The family dynamics after the death of a parent can change dramatically.  Parents often do not truly understand their own children and family.  If you are a parent, you may be saying to yourself:

He is right some families are really messed up.  I am glad my kids get along.

The problem is, this is what many other parents have said before World War III breaks out after their death.  Karen S. Gerstner, a member of the Houston, Texas, firm of Karen S. Gerstner & Associates, P.C. wrote the following in her article in the Property and Probate Magazine of the ABA.

When I was a young lawyer, I attended a meeting with several attorneys to discuss certain “contested matters” that had arisen after the death of a widower who died survived by four children. I was shocked to hear one of the seasoned attorneys say, “If all decedents had only one child, my workload would decrease to nothing.” Whether you go back to Cain and Abel, or only as far back as the Smothers Brothers (“Mom always liked you best”), sibling rivalry is the chief factor in many disputes arising after a parent dies. Many laypeople attribute all litigation to greed, but in the case of family situations, often much more is involved than simply greed. Sometimes children hold deep-seated resentments, which may be based on perceived unfair treatment by a parent or sibling, often going back many years. Sometimes the last living parent is the only “glue” holding the children in the family “together” (if they ever truly were, in fact, “together”). Sometimes parents have unrealistic expectations about family.  

I have seen children try to impose their view of "fairness" to their parent's estate plan.  In some situations it comes to theft and in others subtle manipulations.  As Ms. Gerstner stated, sometimes the last parent is the only reason for children to hold back deep-seated resentments and emotions.

Proper advanced planning is the best way to mitigate the potential for court challenges in the family.  Hopefully, enough can be done during life to address some of the underlying issues that give rise to court challenges.

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The latest installment of Do-It-To-Yourself Estate Planning comes from the Florida Probate & Trust Litigation Blog.

In this case, a husband tried to give his second wife the right to live in the home until she died.  But, he wanted to ensure the home went to his children from his first marriage.  He executed a deed, that clearly stated his intentions.

After his death, his second wife transferred the deed to herself and her grandson, trying to ensure the property went to her family rather than his.  The husband's daughter listed in the deed objected.

However, the problem wasn't with his stated intentions.  The problem was that he did not comply with Florida law.  Ultimately, the deed didn't work as intended and it cost much more that paying a competent attorney.  Sometimes, we can be pennywise and pound foolish.

I have taken this to heart.  Now, when I go to my mechanic, I listen to him a little more carefully because he is the expert and I do not want to be left stranded in the Arizona desert.  I understand that good protection is worth its price.

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Parents' brains are like supercomputers that constantly update with information about their children.  This information is vital to start kids in the morning get them to the end of the day.

Parents:  What would happen if you do not return from a date?  What does your babysitter know?  Who would be called?  What about allergies or medicine?  Imagine someone trying to peice together all the information that is in your brain.

This post on the Massachusetts Estate Planning and Elder Law Blog makes the following important points:

Whether you're going out for the evening and leaving your children with a babysitter, or going away for a week and leaving your children with your parents, it's a good idea to keep a binder handy with all of the important information: 

• Each child's full name, date of birth and social security number.
• Any allergies (these should be in large, red lettering) to foods, medicines, soaps, etc.
• Name and phone number of pediatricians and other doctors seen regularly.
• Any recent or chronic illnesses.
• Name, dosage and location of any medications for each child.
• Name of each child's teacher and grade at school.
• Name of people allowed to visit child, and name of anyone you don't want visiting your child.
• Photocopies of the front and back of any health insurance or dental insurance cards.
• Copy of emergency guardianship proxy document.
• Recent pictures of each child. 

Because a working estate plan is important to me, I assist parents to collect this information and give them an easy way to keep it updated.  After all, if you create an estate plan, it fails in large measure if it does not keep continuity for the emotional, psycological, financial, and practical aspects of children's lives.

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Arizona is a community property state for married couples.  It is not available for unmarried couples.  Community property is an ownership status that is favored for estate tax and capital gains tax (step up in basis).

It also allows for much more flexibility in planning with trusts.  In other common law states, it is necessary to divide assets for estate tax planning purposes before death.  However, with community property, it is possible to divide assets for tax planning purposes after death. 

This means there is a tremendous amount of flexibility for the surviving spouse.  This can be important because the assets may be split differently depending on which spouse dies first.

If you have moved to Arizona, and have two trusts designed in other states, it may make sense for you to explore and consider the benefits of changing ownership to community property.  However, this is a highly individualized decision and it will be important to discuss this with a qualified Arizona estate planning attorney experienced and educated in tax planning.

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If you have real property (land, houses, etc.) in more than one state then you need a trust.  When you have property in more than one state, you are subjecting each parcel of property to probate in each state. 

When you place property in a trust, you enable your trustee to sell or manage the property without passing through probate.

In Sun Lakes, Apache Junction, Casa Grande, and other communities with large "snow bird" populations it is common to own a winter home here and a summer home in another state.  If you are in this situation, then you should consult with a qualified estate planning attorney in your principal state in order to address the potential of two probates.

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This blog was featured as the blog of the day at Inter Alia.  Inter Alia is self described as "an internet legal research weblog, among other things".

How Tom Mighell manages to find as much information and can post as much as he does is a mystery to me.

Thanks Tom.

Stephen

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In light of Britney Spears' recent problems, the court has declared she is not capable of handling her own affairs.  As a result, her father was appointed to take care of Britney and some of her assets.

Britney also formed a trust according to this article.  Like most trusts, Britney was named as the sole trustee.  However, because she was judged incompetent to handle her own affairs, she can no longer manager her trust.  Apparently, the trust did not provide for a successor trustee, because her brother and attorney are now acting as trustee.  Or, court action was required to have them appointed.

Now that her brother has been appointed, he is trying to determine what the trust owns.  Britney was not clear on "funding" the trust.  She put some of her assets and companies in the trust but others were left out.  So, he has petitioned the court to make a ruling to try to determine what is in the trust for him to manage.

The lesson is that maintenance of your estate plan and trust is important.  While it is good that Britney formed the trust, it would have been better if she funded the trust.  It would have been best if she kept a list of the assets in the trust for the benefit of the succeeding trustees.

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I watch how people find this blog.  It gives me an idea of the topics in which people are interested.  One search was "estate planning in arizona and children from a previous marriage".

As a general rule, in Arizona, children from a previous marriage have a special status under the law.  If you do not have a will or a trust, then the government will give half of your community property and half of your separate property to children of a previous marriage.  The surviving spouse gets the rest.

I have seen this outcome and it is often very tragic.  Once, because of the way a couple had structured their investment properties, the husband owned the rental house in his name.  It was the couple's retirement.  When he died, his wife lost half of the retirement to the children of the husband.

Usually, when there are children of a previous marriage a trust is a good idea.  The trust is structured so that the surviving spouse gets to use the money during his/her life, but then at the surviving spouse's death the money can go to right children.  Otherwise, if a will is used the surviving spouse gets the money and the surviving spouse could give it to anyone, and the children could get nothing.

If you are married and you or your spouse have children from a previous marriage you need to speak with a qualified Arizona estate planning attorney.  This general information is insufficient for any planning.

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Having a purpose in life is an important part of making decisions.  Whether we conciously choose a purpose or not, our daily decisions constitute our purpose in life by default.  The default choice often turns out disappointing.

Part of finding our purpose, and then living by it can be assisted by creating a Family Mission Statement.  For the estate planning process, a family mission statement is extremely valuable.  The mission statement will the the guiding principle and purpose for the choices you make.

Here is an interesting article on what estate planners need to know about mission statements.  The author tackles the fear of parents that will leave wealth to their children:

Medieval alchemists failed to turn lead into gold. Wealthy twenty-first century parents fear a reverse alchemy. Will their privileged children transmute inherited gold into leaden lives – hollow, shallow, self-absorbed, addicted, indolent, meaningless, wasted?

He discusses how the extremely rich use mission statements to develop a coherent plan to passing on their wealth and passing on enduring values. 

Whether you are extremely rich or not, you can pass on your wealth and your values.  A caring estate planning attorney will be sure to ask you questions regarding how and why you want to do the certain things that you choose to do.  With a mission statement, you will be prepared to answer those questions because you will have a purpose for the answer.

As part of my planning, I like to help my clients with those questions.  Some are not interested, but many of my clients find the process of considering their purpose and mission very helpful in the planning process.

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I am an advocate of open estate planning, meaning I feel more families should communicate openly about their estate plan.  I believe that explaining your plan can reduce and relieve some of the bickering that occurs in a family after death when the plan is discovered. 

However, there is no right answer for every family.   In this article, Val Farmer discusses open planning and shares how open planning resulted in bickering before the death.  Unfortunately, openness only served to advance the bickering before the death.

I suppose keeping the estate plan secret can be succesful because it will tend to influence potential heirs to keep treating the benefactor civily so they do not get written out of the will.  And, conversely, the potential heirs will not harrass the benefactor because they do not know they have already been written out of the will.

Val Farmer tells of three cases along the preceeding themes.  In one case of hostility,  a daughter married outside of her mother's church and objected to her mother's faith.  Her mother gave 25% to her church in the will and then told her daughter about it.

The daughter constantly harassed her mother about the Will for the last 15 years of her life, even to the point of withholding visits from her only grandchildren.

It would have been better for the daughter to discover, after her mother’s death that her mother continued to support the faith of her fathers. The mother would have had a much more peaceful final 15 years of her life and would have been able to see her grandchildren more.

So, there is no perfect answer.  While I am still an advocate of open planning, I concede that in some situations openness may only serve to increase the strife and bickering.  As with every decision, I discuss the possibility with my clients and leave the decision to them. 

I firmly believe that in almost every case, a well informed client will make the right decision for them.  Consequently, my role is to ensure my clients are well informed when they choose.

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At the end of all estate planning, I provide a form that allows my clients to think about what they want for a funeral, memorial, and disposition of their remains.  They are able to then take that and complete it at their convenienc.

I usually mention burial or cremation because they are the most common.  However, there are two other methods for the disposition of remains that have become available because of technology.

Several years ago, I saw this website that allows you to have your loved ones remains turned into manmade diamonds.

Just recently, I saw this post by the Professor Beyer on his blog.  A new company Promessa uses a process to freeze dry a person's remains and turn it into an eco friendly powder.  Follow the links to see how your loved ones remains can be returned to the cycle of life and serve to nurture the growth of a tree planted in memorial.

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Freedom is the great American Dream.  Freedom to succeed and be who we want to be.  We are normally free from direct control of the government, except when we have been convicted of a crime.

However, this story about a court appointed guardian demonstrates that the government can take away almost every significant right from ordinary citizens, including the right to manage and spend your assets and money.  One way to prevent the government from taking such absolute control over our assets is to place them in a properly drafted trust.

Consider Norman Baker's situation:

Until he was placed in a nursing home against his will by the court-appointed attorney he is trying to reject, Norman Baker owned and managed two dozen rental properties, many of which he designed and built himself. He also owned a 33-acre farm, with four horses, an array of tractors and other heavy farm implements, a carefully preserved century-old barn, a restored farmhouse from which he drew steady rental income, and a 3,000-square-foot brick home, which he also designed and built.

All Norman Baker's properties were free of any liens or mortgages. ?Before he was confined against his will to a nursing home, Norman Baker also had some $250,000 in cash and liquid investments above and beyond his real estate holdings. He rented his properties and lived a quiet, private life.

Today, without writing a check or using a credit card or making a single bad investment, Norman Baker has less than $20,000 in cash. Most of his rental properties are vacant. Some have been flooded. In one, a broken pipe has resulted in a water bill in excess of $19,000. Nearly all his properties, which were once entirely rented, are now vacant. Some have been seriously vandalized. A rental property business, which yielded a steady cash flow, is now bleeding cash every month.

Read the whole story.  Unfortunately, Norman Baker had his assets controlled by someone appointed by the court.  Obviously, spending his cash and leaving the property distressed was contrary to what Norman would have done. 

Norman could have protected himself from this situation.  If Norman had put his assets in a trust, the court would not have controlled them.  Instead of the court controlling the assets, the successor trustee would have controlled the assets.

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After the death of actor Heath Ledger, there was a lesson to be learned because he did not change his estate plan to provide for his daughter and her mother.

Now, there is another lesson.  Heath's father was executor of his grandmother's estate many years ago.  Apparently, as a result of that Heath's father alienated and estranged some family members.  As a result, the family members are now challenging Heath's father's management of the estate.

It goes without saying that this will undoubtedly cost Heath's estate both time and money.  In addition to the strife. 

Some may think that this happens only to the rich.  However, these same situations are played out in the lives of ordinary families.  These families sometimes have only tens of thousands of dollars at stake so it shouldn't happen to them, like it does when millions are at stake.

Ultimately, the amount of money is only one dynamic.  As seen in Heath's case, the uncles who have no interest in the money for themselves are challenging the process because of something that happened 15 years ago.  Strife can happen in any situation.

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I couldn't help posting on this article.  Apparently, spending money makes you happy when you spend it on someone else.

Regardless of how much income each person made, those who spent money on others reported greater happiness, while those who spent more on themselves did not.

I think that is one reason that some people get joy from planning.   They get the sensation of giving to their children and grandchildren.  That is why I believe it is a great opportunity to share a written letter of your feelings with the ones you love as part of your estate plan.  Writing it now helps you experience the joy and reading it later helps your family experience more joy in receiving.

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The seminar "19 Smart Ways to Plan Your Estate" that I presented this last week at Northern Trust Bank in Sun Lakes was a great success.  Thanks to those that participated.

I was pleased with the participation and the feedback.  The group asked great questions.  We were there talking afterwards for another 30 minutes or so.  Given the evaluation forms, it looks like everyone was glad they came and would refer a friend. 

I designed the seminar to explain how the probate processes work and what estate planning tools are necessary and what tools are optional.  I was told that it was a very clear explanation, which made it simple for people to evaluate what they needed and wanted.  

I did that on purpose to dispell all the myths that surround estate planning.  Especially the mystical and mighty "living trust."  It is a great tool, but so many times people are sold a trust that only benefits the person selling the trust.

I am willing to give the seminar to community groups, churchs civic groups, etc. so that people can get straight answers to their questions about estate planning without all the hype.

I especially want to thank Mark Zener and Sandy Hudson of Northern Trust for working with me.

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IRAs and other retirement investments are subject to special rules because of their preferred status in the IRS's rules on qualified investments.  Estate planning with IRAs requires specialized knowledge to be able to leverage the IRS's rules for maximum benefit for your family.

Here is an excellent article with illustrations for how to create more wealth for your family by strategic IRA planning with IRA inheritance trusts.  His article starts with the following:

[I]f a child or grandchild inherits an IRA, they will be tempted to close it out and withdraw all the money. In addition to having to pay income tax on all the withdrawal, there will be no continued opportunity for further tax deferred growth. If, on the other hand, a 25-year-old child inherits a modest, say $100,000 IRA, and if the IRA is left in place to pay only the required minimum distributions over the child's lifetime, it will pay the child far in excess of $1 million.

Consequently, the benefits of planning ahead with your IRA assets are plentiful.  Appropriate planning can protect the benefits of the IRA and protect the assets of the IRA for your heirs.  Read the article above and you will see illustrations of the power of an IRA inheritance trust.

Unfortunately, I have had occasion where IRAs were just left to children and grandchildren without consideration for the tax consequences of the planning.  This most often happens when estate plans are created by do-it-yourselfers, document preparers, and attorneys that do not focus on estate planning.

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When creating an estate plan that includes a living revocable trust, many consider allowing the trust to own life insurance and annuities.  This article discusses whether the trust should own the policies or whether the trust should be the beneficiary. 

As the author states, reasonable people will differ.  Consideration of ownership and beneficiary designations is part of the estate plan design.  Failure to consider the effect may lead to results that were not intended.  One consideration is who will ultimately bear the burden of estate taxes and expenses.  The author points out:

If the trust provides that it will pay all of the expenses and taxes and then split into three or four shares, leaving an asset outside of the trust will result in the trust's beneficiaries paying all of the taxes, even on the asset transferred outside of the trust.

Additionally, if you equalize everything today, then in three years your assets may change and your estate is no longer equalized.  Children could get unequal shares, so you would constantly have to monitor your estate plan. 

However, if everything is paid to the trust, then the job of equalizing your estate is simple.  If you control distribution through your trust and ensure your trust owns or is the beneficiary of all your assets, then the job of equalization is done for you.

Other reasons for using the trust as beneficiary rather than outright distribution include:

• holding proceeds for minor children;
• protecting proceeds from creditors, ex-spouses, etc.;
• equalizing estate taxes and expenses;
• protecting family members receiving government benefits;
• putting assets in a spendthrift trust for poor money managers; and
• leaving your retirement as your children's retirement.
  

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I came across this entry in a real estate investing website discussing probate investing.  His article suggests the benefits of investing in real estate that is in probate.  He states that probate investing is lucrative because people who inherit property are motivated to sell at a reduced price.  He states they are motivated because:

In many cases, when an heir inherits property, they inherit a burden. There are estate taxes to be paid, repairs that must be made, in some cases, a mortgage or second mortgage must be kept up to date. Add in the fact that there are often multiple ‘owners’, and many of them may live far away, and you have a situation where selling the house is the best, sometimes only option to make sure that everyone gets their fair share of the estate. Ready cash may be more important to them than any other factor. Generally people who inherit the estate want the money and not the house, they will often take a quick sale at a discounted price.

 

While some of the reasons may be unavoidable, others are perfectly avoidable, like estate taxes.  Additionally, by creating a trust that holds the property the trustee can manage and sell the home for an appropriate price rather than leaving multiple owners to try to sell it together.

 

 

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The Wall Street Journal has an online article about business succession planning for parents that own businesses.  The article is behind a firewall so you cannot read it without a subscription.  But the article starts with this probing question and answer.

It is one of the toughest questions that parents who own businesses confront -- how can they be equitable in their estate planning when one child works for the company but others don't?

The answer: It isn't easy. But the best way to preserve harmony and, possibly, the business is to communicate with family members and forge an ownership-transfer plan as far ahead as possible.

Because family businesses are so often integral to the family, they are harder to pass on successfully to the subsequent generation.  Small businesses are always more difficult to deal with because they are hard to operate.  They can also introduce tax liabilities that force the sale of the business.  Often, it is very difficult to divide the business between heirs so much of the value is lost due to the sale.

While the solution may be simple and elegant, getting there is the hard part.  There are many personal and family issues tied up in the business, in addition to the many legal and tax consequences.

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Attorney Tracy Ellis posted a comment to my blog and I was introduced to her blog.  I read through it and found this interesting post.  A link in that post leads to estate plans of famous people for you to review.

Her observation was acurate, that you need a good estate plan even if you are not rich or famous.  Irrespective of wealth or fame, no one wants their family to endure unnecessary pain and burden on our passing.

Now more than ever, our lives are so complex that we need a good estate plan just so our families can make sense of our lives.  Goodness, some days I can't stay on top of my own life.

 

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It is customary to give some instruction about your wishes for your own funeral.  Apparently there is now a trend for elaborate planning of one's own funeral.  Here is a post by Neil Hendershot on his blog.

This is the one quote that sums it up:

With wedding planners already big across the United States, the latest trend in the mighty burial business is funeral pre-planning -- helping the living organize their final event on earth.

I can easily picture outrageous funeral planning when compared to wedding planning.  Go to Neil's post and read the rest.  There is some outrageous planning that you will have to read about yourself.

 

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The death of famous actor Heath Ledger was unfortunate and unforseen.  News regarding the aftermath shows how important it is to review and update your estate plan.  Professor/Blogger Gerry Beyer posts about it here.

Apparently, Heath prepared a will in Australia before he became successful that left everything to his parents and siblings. However, since then he had a child who may face a possibility of being left out of his estate. 

There is a possibility that New York or Australian law may provide for children that were born after the will was created.  Such a provision is for "pretermitted children" and was created because it regularly occurs that parents do not update their wills after having children.

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Here is an alert from the IRS on tax scams. 

Apparently there is a new one.  Rotten criminals are calling the elderly and posing as IRS agents.  They get personal information acting as though they are helping them get the tax refund.  Then they steal their identity or empty their bank accounts.

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I often ask clients what would happen to their children if they did not return from their appointment.  Then we talk about making sure that there is an emergency response plan in place to assure their children are taken care of in the event they do not return home because minor children are unable to care for themselves.  They need a legal guardian.

Small businesses are often like minor children.  They need constant care and attention from their owners.  They need a legal guardian--the boss.

If you are a small business owner, consider that question?  What would happen to my small business if I didn't return to the office today?  What would happen to the value of the small business?

If you cannot answer that question, then you need business succession planning as part of your estate plan.  Here is an article that talks a little bit about succession planning.  It can prompt some questions.  If passing your business and/or its value to the next generation is important, then talk with a qualified estate planning attorney.  Statistically, you only have a three in ten shot at getting the business to the next generation.

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I got a call the other day from someone who received a copy of the flyer for one of my seminars in Sun Lakes.  She wanted to learn more, but she couldn't attend the seminar.  So, we set up a consultation in my office.

I perform the seminars as a public service and to introduce myself to the community.  I also realize that sometimes it is more comfortable to learn something in a group workshop or seminar.  However, if you cannot attend a seminar, you can learn what applies to your specific situation in a customized complimentary consultation with me.

I offer complimentary consultations because I believe the most important step in estate planning is choosing an estate planning attorney that you are comfortable with.  You will need to discuss some of your closest guarded financial and personal information to properly plan.  It shouldn't cost you money to meet with an attorney to see if there is a fit. 

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Are you worried about a pet outliving you?  In Arizona, you cannot will or leave property to your pet any more than you could will or leave the money to your car.  Under the law, a pet is seen as personal property.

However, you can leave money to a trustee with the instruction to care for the pet.  Leona Helmsley left millions to her dog Trouble.  You may not have millions to leave your pet, but you can still create a valid Arizona Pet Trust.  This is an opportunity to take the burden off a family member to financially care for a pet.

Here is a link to the Arizona law with some explanation from www.animallaw.info.  There are some limitations to an Arizona Pet Trust.  Here are a few:

• It is for a "designated domestic or pet animal".
• The trust must end in 21 years or on the death of the pet(s).
• You can only leave enough to reasonably care for the pet(s).
• The trustee cannot convert any of the trust property to her use.

This article by an Arizona attorney prompted this post.

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I read an interesting article here, written by Sheryl Garrett, CFP®, author of Personal Finance Workbook For Dummies that discussed what to do with "found money" that you were not expecting like the tax rebate.

The list has several great ideas to use the money wisely.  Her list includes investing it, using it for a dentist checkup, paying a health membership, etc.  She does not recommend just frittering it away on stuff.

One of her recomendations is to:

Use the rebate money to engage the services of an estate planning attorney. If you don't have a will then have one drawn up. Without a will issues such as child guardianship and disbursements of assets will not be decided by you, but rather the laws of your state. For many families, additional estate planning documents are also needed.

This could be the excuse you need to invest in an estate plan.

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I love analogies because it helps me get to those "AHA" moments when I am learning something new.  I really love sports analogies because sports were a big part of my youth.  The sports analogy he used made me stop and think about some of the things I have been procrastinating.

I read an article this morning and I realized that I only have the excuses that I make.  Rarely are my excuses true rational reasons for failing to do what I should.  My decision is to stop making excuses for the important things.

The article compares the excuses athletes make to the excuses made by people failing to plan their estate.  The best quote is:

Here are some of the excuses I've heard [for not planning]: I'm too old. I'm not old enough. I have too much land. I don't have enough land. My kids won't fight. My kids will fight anyhow. We'll do it after harvest. We will do it after taxes. We will do it after vacation. We will do it after the election. We need to talk with our kids first. I already did my planning with my attorney. I just bought some insurance. I just went to some workshops. I am not going to do anything. I'll let my spouse figure it out after I'm gone. We will decide after land prices stop going up.

Translation is "I am making excuses because I do not what to deal with it."

The author helps families create farm continuation plans.  Given the many variables in our economy and the estate tax structure, this is a highly important process for farm owners.  The same reasoning applies to business owners too.

Ultimately, this applies to everyone with even simple estate plans.  Just a simple will and other planning documents can make all the difference for your family.  Estate planning isn't just about money.  Estate planning is about the end of life transitions that reaches each of us.

Accordingly, a good estate plan has a will, financial durable power of attorney, healthcare power of attorney (health care proxy), living will (medical directive), and instructions and information for others to take over your affairs or conclude them.  Please do not make excuses for failing to plan.

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Yuma, Arizona attorney Larry Deason identifies seven important elements of an Estate Plan in this article.   The article is brief and easily understandable.

The seven points he makes are:

1. Health care power of attorney with a living will so your appointed agents can care for you to avoid costly guardianship.
2. HIPPA authority so that your loved ones can have access to your confidential medical information.
3. Durable financial power of attorney so your appointed agents can care for your money and assets to avoid costly conservatorship.
4. Revocable living trust to avoid costly living probate (conservatorship) and death probate.
5. Pour over will so anything not in the living trust is added upon death.
6. Funeral trust to protect money from creditors and Medicaid to ensure your family does not bear the burden of your funeral.
7. Completed legacy estate plan distributing the personal items (like grandmother's ring or grandfather's watch) that most frequently cause family fights.

I agree with each of these points.  However, a revocable living trust is not necessary for many situations.  In a modest estate, a will and proper advance planning is sufficient.

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The IRS will scrutinize gift tax returns and estate tax returns because there is much more "wiggle" room than income returns.  The process also invites more creativity by taxpayers and their attorneys.  Here is the IRS manual on gift and estate tax returns.

Preparing such returns should be done with the assistance of professionals.  This is especially true for exectutors, trustees, and personal representatives of an estate, who could be personally responsible.

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I read this about Anna Nicole Smith's Will on the Wachbrit Blog last year.  Now that I have my own blog I will share it again.

If you saw in the news, Anna Nicole Smith had a daughter.  A short time later her grown son died.  Adding tragedy to the situation, Anna Nicole died months later.   After these three events, the status of her estate was in question.  Her will left everything to her deceased son and seemed to exclude her new surviving daughter.

Did she really want to disinherit her newborn daughter?

At the time her will was drafted, I am confident that the will accurately reflected her wishes--at the time.  Anna would likely not approve of the outcome as a result of the series of events that tragically unfolded.  However, her will, as written, could control the outcome and leave her daughter with nothing.

The two lessons to take away are:

1. Consider and plan contingencies for what you would believe to be highly unlikely events.
2. Review your estate plan regularly, and especially in expectation of major life events.

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Look here for a simple article on choosing a guardian for your minor children.  The three simple steps it lists are:

1. Make a list of possible guardians.
2. Decide what matters most.
3. Match people with priorities.

Perhaps the most important thing to remember is that you do not have to consider your possible guardian's ability to manage finances.  You can appoint a conservator/trustee to manage the money. 

Accordingly, in conjunction with your decision for guardian, you can choose a conservator or trustee to hold the money and spend it for your children--according to the instructions you leave them.  The three simple steps for choosing a conservator/trustee would be the same except you would subtitute your financial principles and priorities with those of raising your child.

 

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Just yesterday, I blogged about the need for farmers to plan carefully to avoid family fights.  Today, I see this article from Reuters: 

Grain rally complicates US farmer estate planning

The article focuses on the impact of rising grain prices and the rising value of farm land.  The good news is families are making more money and have more wealth.  The bad news is nearly half of that wealth could be lost at death.  Worse, without a plan the family will have to agree on the disposition of the family farm.

The article recognizes that even a plan completed a few years ago could be dangerously out of date today.  Moreover, the death tax and inheritance laws are very likely to change.  The only way to avoid the death tax and loss of the family farm is to plan well and plan ahead.

This is another reason to have a positive relationship with your estate planning attorney.

What struck me most was a daughter in law's comment that she feels uncomfortable bringing the subject up.  She and her husband farm her mother in law's land.  That is a recipe for disaster because if there is no plan, they could lose the farm and their income.  Her family depends on the land and there is no plan for the future.

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The disease of greed, bundled with other emotional baggage can create a fierce family fight over your estate.  Families that were otherwise cordial and loving can turn bitter and hateful.  From this disease, it is hard to recover loving family ties.  I have to believe this is the last result any parent or family would want to occur after their death.

When it comes to avoiding this unfortunate and terrible result, sharing the plan before you die is the most important step you can take.  Even the best estate plan with a will or living trust can be challenged.  Your estate plan should be explained and discussed among your family.  Sunlight is an effective disinfectant to create a clean and undisputed estate plan.

Val Farmer, a clinical psycologist specializes in mediating family fights over family farms and estates.  He wrote an article discussing ways to avoid those fights in the Prarie Star.  His advice is applicable to every person contemplating an estate plan or completing an estate plan.

The article is here, and this is the most insightful and instructional portion on avoiding the family fight over the estate:

What can be done to prevent this kind of family turmoil? One answer is deciding what is fair through open estate planning. Parents, while they are lucid and clear-headed about their estate goals, can discuss their plans openly and make clear their intentions so that everyone knows what will unfold. When estates plans are secret, then opportunities for manipulation and deception occasionally happen.

How can parents approach their children about estate plans?

Gather information. Get trusted legal and financial planning advice to know what options you have. Discuss with your advisers the emotional issues in the family to help them understand the complete picture of what you want to accomplish. Your own retirement goals, needs and security should be foremost in the planning process.

Be open. The process should be open and fluid to allow the gathering and exchange of information with family members. Children are self-conscious and don’t want to appear greedy or self-serving by bringing up the subject.

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Imagine the time comes that your family needs to handle your affairs after a tragic car accident.  If you are like 70% of Americans, you do not have a plan.  Without a plan, your family is unsure of what to do.  In addition to the severe emotional distress, they now have to attempt to navigate your passing without a map or plan.

Or, imagine you are one of the 30% who have at least a will.  After your death, your family at least has an idea of what to do.  Your family may or may not know the will exists.  When the will is found, it may become easier because at least there are some instructions.  There is still some delay, some questions, some anxiety. 

Now, imagine you have a Complete Estate Plan.  This plan isn't just comprised of the important legal documents.  It is a practical guide in case the worst happens.  Its design allows your family to focus on what is most important in a most difficult time.

Your plan has instruction letters to guardians, trustees, executors, pet care givers.   There is an actual diagram of your estate plan, giving a visual guide to your family.  The plan includes phone numbers of important people.  It has a list of all your assets, their numbers and addresses.  It lists your bills. 

Additionally, you complete estate plan gave you the tools to communicate the plan to your loved ones.  Immediately after the accident, they reviewed your plan and took emergency action.  Children were immediately taken to the appropriate family and did not enter child protective custody.  Pets were immediately cared for by friends or neighbors.

Because there was a plan, your family knew what needed to be done and when.  In the face of your tragic death, you gave them the priceless gift of an ordered and thoughtful plan.  Your family has a map and plan that eliminates uneeded stress.  It gives them time and space to mourn.

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From the Wills, Trusts & Estate's Professor's Blog, an example of a failed estate plan and what appears to be elder abuse.  In the article the professor cited, (The Medicaid Trap, Est. Analyst (Nov. 2007)) author Robert L. Moshman describes a very unfortunate situation. 

I copied the following excerpt of the article from the Blog because it tells the story well.  There is more on the professor's blog.

Mom, a widow, age 72, with a net worth of $500,000 owns a home worth $400,000. She has four children.

Five years ago Daughter and Son-in-Law lost their home and declared bankruptcy and ended up moving in with Mom.***

Then, one day, Daughter and Son-in-Law informed Mom that they want to buy her house[.]*** They tell her that by selling assets now, she'll qualify for Medicaid in the future. And they'll provide her with a life estate...***

Son-in-Law priced the house at $300,000, had Mom provide a "gift of equity" worth $150,000, got a mortgage for the remaining $150,000 which he had Mom sign over in return for the life estate.***

Without offering up one dime of his own money, Son-In-Law ended up with a house worth $400,000 and $150,000 cash. Meanwhile, Mom was left with a life estate. But from that day on, Mom was excluded from the household, subjected to verbal abuse, and ended up staying in her room, which was crammed with possessions that Son-In-Law threatened to throw out. The tension landed Mom in the hospital.

Mom didn't think she needed an attorney or daughter and son-in-law convinced her not to do it because an attorney could have interferred with what appears to be an abusive transfer.  Obviously, with half a million dollars in assets, it is worth the cost of a qualified attorney every time. 

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Wills are the traditional method for giving away property after death.  Practically everyone has heard of wills and has also heard that everyone needs one.

But, why do you need a will?

If you do not have a will, your stuff may go to the wrong people.  Consider the following.  A couple work for many years and develop quite a nest egg for their retirement.  However, neither got around to preparing a will.

The husband unexpectedly died without a will.  Now, she is obligated to divide the nest egg in half and give it to her husband's children from a previous marriage.  This includes the house that they shared!! 

This widow is now frightened and unsure about her future.  This is truly unfortunate because it could have been prevented with a properly drawn and executed will.

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Met Life has a special division, Met DESK (Division of Estate Planning for Special Kids) dedicated to helping parents plan for their special needs kids.  Snoopy is not the only thing that is kid friendly at Met.

Visit Met's website for some valuable information on estate planning for your special needs child.

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Having a Special Needs Child brings many financial demands.  Many parents pay out of their pocket for special schools, food, medicine, therapies, etc.  In an article from the Leimberg Newsletter for estate planning professionals comes this:

As the number of children diagnosed with autism, asperger's syndrome, and other neurological disorders skyrockets, parents and their advisers need to carefully understand and plan for their children (and grandchildren's) medical care and capitalize on tax and other available benefits.

If you are the parent of a special needs child, you should consider the tax breaks available for the money you are spending.  And, you should especially consider the estate planning benefits and pitfalls.

If you would like more information about special needs planning, feel free to contact me.  As the parent of a special needs child, I understand the unique challenges.  I want to help others because I know how overwhelming it can be.  I also know how parents of special needs children are hungry for more information.  I would like to satisfy some of that hunger.

The above quote came from Steve Leimberg's Estate Planning Newsletter # 1183 (October 4, 2007) at http://www.leimbergservices.com.  It is part of an important series for special needs planning.

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For your estate planning convenience, here is a file with the 2008 numbers from the IRS for estate planning purposes.

 

 

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I mentioned my desire to offer free education to the public in a previous post.  I am pleased to have an upcoming seminar offered free to the public.  I hope to see you there.

The first session of my new seminar:  "19 Smart Ways to Plan Your Estate" will be held Tuesday March 18, 2008 from 1:30 to 3:30 at the community room at Northern Trust Bank in Sun Lakes, Arizona.  A flyer with a detailed description of the program can be downloaded here.  It requires Adobe Acrobat Reader which is free.

The seminar was designed with special emphasis on 12 Planning Mistakes That Could Cost Your Family a Fortune -- and Their Solutions”   Come learn about the good and bad about wills and living trusts, especially 20 misconceptions about wills and trusts.  Read the flyer above for even more exciting topics.

This will be a unique - fact filled seminar that you will not want to miss.  It will be filled with examples that will engage your mind as I lead you through the legal process of creating an estate plan.  Mark your calendar now!  Invite a friend.  If you cannot make it, please feel free to call me for more information.

Topics include, living trusts, wills, powers of attorney, health care powers of attorney, living wills, ethical wills, beneficiary deeds, payable on death accounts, IRAs, retirement plans, and more.

 

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