The Petrosewicz Law Firm Estate Planning Blog

What If Only One Parent Is Willing to Plan?

Making matters much worse for one family, is the fact that while the mother is willing to speak with an estate planning attorney and make a plan for the future, the father won’t even discuss it. What should this family do, asks the article from nwi.com titled “Estate Planning: Can one spouse plan?”

Planning for your eventual demise and distribution of your worldly goods isn’t as much fun as planning a vacation or buying a new car. For some people, it’s too painful, even when they know that it needs to be done. There’s nothing pleasant about the idea that one day you won’t be with your loved ones.

 Although contemplating the reality is unpleasant, this is a task that creates all kinds of problems for those who are left behind, if it is not done.

Unfortunately, it is not unusual for one parent to recognize the importance of having an estate plan and the other parent does not consider it to be an important task or simply refuses. In that case, the estate planning attorney can work with the spouse who is willing to go forward.

Some attorneys prefer to represent only one of the spouses, especially in a case like this. Spouses’ interests aren’t always identical, and there are situations where conflicts can arise. When a couple goes to the estate planning attorney’s office and wishes the attorney to represent both of them, sometimes the lawyer will ask for an acknowledgment that the lawyer is representing both of them as a couple. In the event that a disagreement arises or if their interests are very different, some attorneys will withdraw their representation. This is not common, but it does happen.

The estate planning lawyer usually prefers, however, to represent both spouses. Married couple’s estates tend to be intertwined, with real property jointly owned as husband and wife, or husband and husband or wife and wife. Spouses are usually named beneficiaries of life insurance and retirement accounts. Even in blended family situations, this holds true.

If the father in the situation above won’t budge, the mother should meet with the attorney and create an estate plan. The problem is, she may not be able to plan effectively for the two most common and usually the most valuable assets: their jointly owned home and retirement accounts.

If the home is owned by the spouses as “entireties property,” that is, by the couple, she can’t make changes to the title, without her spouse’s consent. One spouse cannot sever entireties property, without both spouses agreeing. Some retirement plans are also subject to the federal law ERISA, which requires a spouse’s consent to change beneficiaries to someone other than the spouse.

Even with these issues, having a plan for one spouse is better than not having any plan at all.

The only last argument that may be made to the father, is that if he does not make a plan, the laws of the state will be used, and few people actually like the idea of the state taking care of their estate.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: nwi.com (Nov. 17, 2019) “Estate Planning: Can one spouse plan?”

What Estate Planning Documents Do You Need?

Wouldn’t your children be relieved to learn that you’ve done all the necessary advance planning so that if you should become incapacitated, someone has been properly appointed to help with health care and financial decisions? The Tennessean suggests that you “Give your loved ones peace of mind with legal documents” so that your spouse and your family will be able to take the necessary steps to give you the care and dignity you (and they) deserve.

Here’s a checklist of the documents that everyone should have in place:

Power of Attorney for Health Care. When you have mental capacity, you can make your own decisions. When you do not, you need someone to be appointed who knows your beliefs and wishes and has the ability to advocate for you. Ideally, you should name one person to be your agent to minimize arguments. Talk with your family to explain who has been named your power of attorney for health care, and if need be, explain why that person was chosen.

Power of Attorney for Finances. There are different kinds of POA for finances. The goal of the POA for finances is so they can make decisions on your behalf, when you become incapacitated. Some states use “springing” POA—but that may mean your family has to go through a process to prove you are incapacitated. Check with an estate planning elder law attorney in your state to see what the laws are.

Advance Directive. This describes what kind of life sustaining treatment you do or do not want if you are in a coma, are terminally ill or have dementia. You can direct whether you want CPR, tube feeding, and other life-sustaining procedures to be withheld, if your quality of life is diminished and there is no hope of improvement. This will help your family to know what you want in a time when emotions are running high.

Last Will and Testament. Have a will created, if you don’t already have one. This directs distribution of your assets according to your wishes and does not leave them according to the laws of your state. Not having a will means your family will have to go through many more court proceedings, and people you may not want to receive your worldly possessions may get them.

Trusts. Talk with your estate planning attorney about placing assets in trust, so they are not subject to the public process of probate. Your wishes will be followed, and they will remain private.

The Petrosewicz Law Firm can assist you with your estate planning and trust needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: Tennessean (Nov. 16, 2019) “Give your loved ones peace of mind with legal documents”

Are Seniors Prepared for Natural Disasters?

With hurricanes, tropical storms and wildfires becoming routine events, data from the National Poll on Health Aging suggest that older adults, loved ones and their care providers should take time to prepare for how they will cope and communicate in an emergency. The question is not if something will occur, but when. According to the article “Many Older Adults Aren’t Ready for Natural Disasters” from the website futurity.com (U. Michigan), fewer than half of the seniors surveyed have signed up for emergency warning systems from their community. Less than a third have an emergency kit prepared with essential supplies and medicines to get them through an emergency or to take with them, if there is an evacuation.

The poll asked a national sample of 2,000 adults age 50 to 80 about their readiness for several different types of emergency situations. About seventy-five percent said that they had already experienced at least one major emergency in their lives.

“Whether it’s as straightforward as a power outage that lasts a day, or as severe as a hurricane, tornado, or earthquake, preparing can make a huge difference,” says Preeti Malani, the poll’s director and a professor at the University of Michigan Medical School.

One of the key steps for an adult to take in disaster readiness is to talk with loved ones about what will happen in different types of emergencies, and what needs they should consider. For those who depend upon medicine, medical supplies and equipment, this can be lifesaving.

A basic emergency plan to evacuate and be safe is a smart idea for everyone. For older adults who have health issues or mobility challenges, this is particularly important.

There are some areas where seniors are prepared. 85% said they have a week’s supply of their medications on hand, and 72% say they have a week’s worth of other medical supplies.

Having a plan in place for disaster is important for seniors. So is having an estate plan, to prepare for life’s unexpected occurrences. If you don’t have an estate plan, speak with an estate planning attorney soon to have a will, power of attorney, healthcare proxy and other planning documents in place.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: futurity.org (U. Michigan) (Sep. 4, 2019) “Many Older Adults Aren’t Ready for Natural Disasters”

Start the New Year with Estate Planning To-Do’s

Families who wish their loved ones had not created an estate plan are far and few between. However, the number of families who have had to experience extra pain, unnecessary expenses and even family battles because of a lack of estate planning are many. While there are a number of aspects to an estate plan that take some time to accomplish, The Daily Sentinel recommends that readers tackle these tasks in the article “Consider These Items As Part of Your Year-End Plan.”

Review and update any beneficiary designations. This is one of the simplest parts of any estate plan to fix. Most people think that what’s in their will controls how all of their assets are distributed, but this is not true. Accounts with beneficiary designations—like life insurance policies, retirement accounts, and some bank accounts—are controlled by the beneficiary designation and not the will.

Proceeds from these assets are based on the instructions you have given to the institution, and not what your will or a trust directs. This is also true for real estate that is held in JTWROS (Joint Tenancy with Right of Survivorship) and any real property transferred through the use of a beneficiary deed. The start of a new year is the time to make sure that any assets with a beneficiary designation are aligned with your estate plan.

Take some time to speak with the people you have named as your agent, personal representative or successor trustee. These people will be managing all or a portion of your estate. Make sure they remember that they agreed to take on this responsibility. Make sure they have a copy of any relevant documents and ask if they have any questions.

Locate your original estate planning documents. When was the last time they were reviewed? New laws, and most recently the SECURE Act, may require a revision of many wills, especially if you own a large IRA. You’ll also want to let your executor know where your original will can be found. The probate court, which will review your will, prefers an original. A will can be probated without the original, but there will be more costs involved and it may require a few additional steps. Your will should be kept in a secure, fire and water-safe location. If you keep copies at home, make a note on the document as to where the original can be found.

Create an inventory of your online accounts and login data for each one. Most people open a new account practically every month, so keep track. That should include email, personal photos, social media and any financial accounts. This information also needs to be stored in a safe place. Your estate planning document file would be the logical place for this information but remember to update it when changing any information, like your password.

If you have a medical power of attorney and advance directive, ask your primary care physician if they have a means of keeping these documents, and explain how you wish the instructions on the documents to be carried out. If you don’t have these documents, make them part of your estate plan review process.

A cover letter to your executor and family that contains complete contact information for the various professionals—legal, financial, and medical—will be a help in the case of an unexpected event.

Remember that life is always changing, and the same estate plan that worked so well ten years ago, may be out of date now. Speak with an experienced estate planning attorney in your state who can help you create a plan to protect yourself and your loved ones.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: The Daily Sentinel (Dec. 28, 2019) “Consider These Items As Part of Your Year-End Plan”

How Does the SECURE Act Change Your Estate Plan?

The SECURE Act has made big changes to how IRA distributions occur after death. Anyone who owns an IRA, regardless of its size, needs to examine their retirement savings plan and their estate plan to see how these changes will have an impact. The article “SECURE Act New IRA Rules: Change Your Estate Plan” from Forbes explains what the changes are and the steps that need be taken.

Some of the changes include revising wills and trusts which include provisions creating conduit trusts that had been created to hold IRAs and preserve the stretch IRA benefit, while the IRA plan owner was still alive.

Existing conduit trusts may need to be modified before the owner’s death to address how the SECURE Act might undermine the intent of the trust.

Rethinking and possibly completely restructuring the planning for the IRA account may need to occur. This may mean making a charity the beneficiary of the account, and possibly using life insurance or other planning strategies to create a replacement for the value of the charitable donation.

Another alternative may be to pay the IRA balance to a Charitable Remainder Trust (CRT) on death that will stretch out the distributions to the beneficiary of the CRT over that beneficiary’s lifetime under the CRT rules. Paired with a life insurance trust, this might replace the assets that will ultimately pass to the charity under the CRT rules.

The biggest change in the SECURE Act being examined by estate planning and tax planning attorneys is the loss of the “stretch” IRA for beneficiaries inheriting IRAs after 2019. Most beneficiaries who inherit an IRA after 2019 will be required to completely withdraw all plan assets within ten years of the date of death.

One result of the change of this law will be to generate tax revenues. In the past, the ability to stretch an IRA out over many years, even decades, allowed families to pass wealth across generations with minimal taxes, while the IRAs continued to grow tax tree.

Another interesting change: No withdrawals need be made during that ten-year period, if that is the beneficiary’s wish. However, at the ten-year mark, ALL assets must be withdrawn, and taxes paid.

Under the prior law, the period in which the IRA assets needed to be distributed was based on whether the plan owner died before or after the RMD and the age of the beneficiary.

The deferral of withdrawals and income tax benefits encouraged many IRA owners to bequeath a large IRA balance completely to their heirs. Others, with larger IRAs, used a conduit trust to flow the RMDs to the beneficiary and protect the balance of the plan.

There are exceptions to the 10-year SECURE Act payout rule. Certain “eligible designated beneficiaries” are not required to follow the ten-year rule. They include the surviving spouse, chronically ill heirs and disabled heirs. Minor children are also considered eligible beneficiaries, but when they become legal adults, the ten year distribution rule applies to them. Therefore, by age 28 (ten years after attaining legal majority), they must take all assets from the IRA and pay the taxes as applicable.

The new law and its ramifications are under intense scrutiny by members of the estate planning and elder law bar because of these and other changes. Speak with your estate planning attorney to review your estate plan to ensure that your goals will be achieved in light of these changes.

The Petrosewicz Law Firm can assist you with your estate planning and trust needs.  Contact us today at (281) 344-9455 or [email protected]. 

Reference: Forbes (Dec. 25, 2019) “SECURE Act New IRA Rules: Change Your Estate Plan”

What has the Average American Saved for Retirement?

It’s the question we all wonder about, but not very many of us will come out and ask. A 2019 analysis of more than 30 million retirement accounts by Fidelity Investments found that the average balance in corporate sponsored 401(k) plans at the end of 2018 was $95,600. When it came to traditional, Roth and rollover IRAs, the number was $98,400, reports Investopedia in a recent article titled “What Is the Size of the Average Retirement Nest Egg?” A look at 403(b) and other defined contribution retirement plans in the non-profit sector found that it was $78,7000. These numbers were down between 7.8%-8% from the same quarter of the prior year. Blame the stock market for that.

Averages like this only indicate a few things. Younger workers, for example, tend to have less in their retirement accounts than older workers. Their salaries are smaller, and they haven’t had decades to accumulate tax deferred income in their accounts. However, that gap is wide.

A June 2018 report from the Transamerica Center for Retirement Studies looked at a nationally representative sample of more than 6,000 workers and broke out retirement savings by generation. The boomer members had estimated median retirement savings of $164,000 in 2017, while Gen Xers had $72,000 and millennials had $37,000.

Aside from age, the big factors in retirement savings success seem to be education and income. People with higher income put more money into their retirement accounts. The Transamerica study shows that households with incomes of under $50,000 had estimated median retirement savings of $11,000. Households with incomes between $50,000 and $99,999 had median savings of $61,000 and those with incomes of $100,000 or more had $215,000.

The higher the level of education, the more money people have set aside for retirement.

Therefore, if you’re wondering how your nest egg compares to the average nest egg, the first thing you’ll want to do is decide to whom you want to compare yourself and your nest egg. You can compare yourself to the U.S. population in general, or to people who are more like you in education, age and income.

Here’s an unnerving thought: no matter if your nest egg is way above your peer group, that doesn’t mean it will be enough when retirement rolls around. Everyone’s situation is different, and life hands us unexpected surprises.

One way to prepare is to have an estate plan. If you don’t already have an estate plan, which includes a will, power of attorney, health care power of attorney, possibly trusts and other strategic tools for tax planning and wealth transfer, make an appointment with an estate planning attorney.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: Investopedia (Sep. 24, 2019) “What Is the Size of the Average Retirement Nest Egg?”

Planning for Care in Advance

An aging parent’s health can fail suddenly, or they can have a fall that will unexpectedly put them into a precarious state. Therefore, it is vitally important that legal and medical arrangements be made, while they are still well enough to be an active participant in decisions, advises TAP into Roxbury in the article “Putting Together a Plan of Care.” Here are the steps to get you started:

Advance Directive: This document spells out their wishes regarding future medical care and treatment, if they are no longer able to speak or make decisions on their own behalf.

A Living Will is used to state in advance whether or not they want to have medical treatment, like a feeding tube, ventilator, or heart machine to prolong life, when death is inevitable.

A Durable Health Care Power of Attorney appoints another person to make medical decisions, if the person becomes incapacitated.

A Power of Attorney names someone who will be able to make decisions about their finances, pay bills, and manage real estate and other assets.

A Last Will and Testament provides information about what they would like to happen to their assets upon their demise and names an executor who will be in charge of carrying out their wishes.

Copies of medical insurance cards and any other insurance information, if emergency treatment is needed.

A Do Not Resuscitate (DNR), if they do not wish to be brought back to life during a medical emergency.

A list of medications they are currently taking, as well as doctor’s names and contact information.

A list of professionals, including their estate planning attorney, CPA and financial advisor, and all contact information.

Having all these documents prepared in advance of any emergency will be helpful, if they are ever needed. Keeping them in a safe and accessible location where they can be obtained quickly in an emergency is also important. Do not put them in a safe deposit box, which may be sealed upon their death.

Some seniors are reluctant to have these discussions, although they may be more comfortable having them with a person outside the family, like an estate planning attorney.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: TAP Into Roxbury (October 7, 2019) “Putting Together a Plan of Care”

Holiday Gatherings Often Reveal Changes in Aging Family Members

A look in the refrigerator finds expired foods and an elderly relative is asking the same questions repeatedly. The same person who would never let you walk into the house with your shoes on now, is living in a mess. The children agree, Mom or Dad can’t live on their own anymore. It’s time to look into other options.

One of the biggest questions, according to the Cherokee Tribune & Ledger-News’ article is “How to pay for long-term care.”

The first question involves the types of facilities. There are many different options but the distinctions between them are often misunderstood. Assisted living facilities provide lodging, meals, assistance with eating, bathing, toileting, dressing, medication management and transportation. However, a skilled nursing facility adds more comprehensive health care services. There’s also the personal care home, which provides assisted-living type accommodations, but on a smaller scale.

The next question is how to pay for the residential care of an elderly family. This weighs heavily on the family. That elderly person is often the one who did the caregiving for so many years. The reversal of roles can also be emotionally difficult.

There are a few different ways people pay for care for an elderly family member.

Long-term care insurance, or LTC insurance. Few elderly people have the insurance to cover their residential facility stay, but some do. Ask if such a policy exists, or go through the piles of paperwork to see if there is such a policy. It will be worth the search.

Veteran’s benefits. If your loved one or their spouse served during certain times of war, is over 65 or is disabled and received an honorable discharge, he or she may be entitled to certain programs that pay for care through the Department of Veterans Affairs.

Private pay. If your loved one has financial accounts or other assets, they may need to pay the cost of their residential facility from these assets. If they don’t have assets, the family may wish to contribute to their care.

Another route is to apply for Medicaid. An elder law attorney in their state of residence will be able to help the individual and their family navigate the Medicaid application, explore if there are any options to preserving assets like the family home, and help with the necessary legal strategy and documents that need to be prepared.

Meet with an elder law estate planning attorney to learn what the steps are to help your elderly loved one enjoy their quality of life, as they move into this next phase of their life.

The Petrosewicz Law Firm can assist you with your elder law needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: Cherokee Tribune & Ledger-News (November 30, 2019) “How to pay for longterm care.”

Can My Estate Plan Include Illiquid Assets, Like Real Property and Ownership Interests?

Many people are focused on their traditional assets that generate monthly statements, like bank and investment accounts, stocks and mutual funds. However, those assets, which are called “liquid” because they can be readily converted to cash, are often less than half of their entire portfolio. Wilmington Biz advises readers not to ignore their illiquid accounts in the article “Don’t Overlook Those Harder-To-Sell Assets When Making An Estate Plan.”

First, let’s see what assets fall into the illiquid category. Commonly, they include:

• Real estate, collectibles, artwork, cars, livestock, mineral rights and timber, as well as
• Financial instruments that don’t have a ready market: hedge funds, options, stock in non-public corporations and some types of debt securities.

The biggest consequences of leaving these assets out of an estate plan isn’t felt until after the owner dies. First, estate taxes must be paid which are levied on the value of all inheritable assets transferable to heirs. Those taxes are due in a matter of months. However, if a good chunk of those assets are illiquid, they may need to be sold in a hurry to raise the cash needed to pay the taxes or debts of the estate.

That presents a real problem for heirs.

Many illiquid assets can’t be sold, or have to be sold below their market value, if they have to be sold within a tight nine-month window or a reasonable estate administration time frame. If the decedent owned real estate in a region were prices are in a slump, the sale price will be lower than if there were enough assets to pay the taxes and wait for prices to return to normal or even become robust.

A will often divides the estate in a way that has nothing to do with the actual value of the assets. Let’s say three children are left a third of an estate, two-thirds of which are real estate and one-third of which is cash or liquid assets. The real estate may need to be sold, if the heirs don’t want to own an undivided interest in the real estate property together.

Here’s a more common situation: If the amount of cash needed to settle the estate is far less than the actual value of an illiquid asset, but the only way to get cash is to sell the asset, something that might have been hoped to be passed on to the next generation may be lost. That includes family farms, a family business or an heirloom.

Careful planning with an experienced estate planning attorney well in advance can avoid this and similar situations, where illiquid assets are concerned. It may mean setting up and funding a trust or using life insurance. An estate planning lawyer will be able to guide the family through the process to protect assets, but it must be done well in advance of the person’s death.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: Wilmington Biz (November 27, 2019) “Don’t Overlook Those Harder-To-Sell Assets When Making An Estate Plan”

A Will is the Way to Have Your Wishes Followed

A will, also known as a last will and testament, is one of three documents that make up the foundation of an estate plan, according to The News Enterprises’ article “To ensure your wishes are followed, prepare a will.” As any estate planning attorney will tell you, two other documents are the Power of Attorney and a Health Care Power of Attorney. These three documents all serve different purposes, and work together to protect an individual and their family.

There are a few situations where people may think they don’t need a will, but not having one can create complications for the survivors.

First, when spouses with jointly owned property don’t have a will, it is because they think that when the first spouse dies, the surviving spouse will continue to own the property. However, with no will, the spouse might not be the only person to receive property without a will; children from prior marriages may also inherit.  Even when all property is jointly owned—that means the title or deed is in both person’s names –upon the death of both spouses, a case will have to be brought to court through probate to transfer property to heirs when there is no will.

Secondly, assets with beneficiary designations transfer to the beneficiaries on the owner’s death, with no court involvement. For example, a payable on death, or POD, account transfers the specific account or asset upon the death of the owner.  If the beneficiary named on the accounts has passed and no alternate beneficiary is named, their share will go into the estate, forcing distribution through probate.

Other types of assets without beneficiary designations, such as real estate and vehicles, will have to go through probate.

Third, people who do not have a large amount of assets often believe they don’t need to have a will because there isn’t much to transfer. Here’s a problem: with no will, nothing can be transferred without court approval. Let’s say your estate brings a wrongful death lawsuit and wins several hundred thousand dollars in a settlement. The settlement goes to your estate, which now has to go through probate.

Fourth, there is a belief that having a power of attorney means that the person named as power of attorney, called the agent, can continue to pay expenses and distribute property after the principal, or the person who created the power of attorney, dies. This is not so. A power of attorney expires on the death of the principal. An agent under a power of attorney has no power, after the principal dies.

Fifth, if a trust is created to transfer ownership of property outside of the estate, a will is necessary to funnel unfunded property into the trust upon the death of the grantor. Trusts are created individually for any number of purposes. They don’t all hold the same type of assets. Property that is never properly retitled, for instance, is not in the trust. This is a common error in estate planning. A will provides a way for property to get into the trust, upon the death of the grantor.

With no will and no estate plan, property may pass unintentionally to someone you never intended to give your life’s work to. Having a will lets the court know who should receive your property. The laws of your state will be used to determine who gets what in the absence of a will, and most are based on the laws of kinship. Speak with an estate planning attorney to create a will that reflects your wishes, and don’t wait to do so. Leaving yourself and your loved ones unprotected by a will, is not a welcome legacy for anyone.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: The News Enterprise (September 22, 2019) “To ensure your wishes are followed, prepare a will.”