The Petrosewicz Law Firm Estate Planning Blog

In Estate Planning, Fair and Equal are Different

What may work fine when you are raising children does not always work in estate planning, as reported in The Press Enterprise’s article “Why ‘fair’ and ‘equal’ aren’t always the same.” Thinking that treating children in the exact same way will avoid children arguing about who got more, who deserved more, etc., doesn’t apply here. Trying to treat kids the same, often ends up with parents feeling guilty and questioning their parenting skills. Sibling rivalry doesn’t always end, when kids grow up.

Adult children can have an emotionally charged and surprisingly juvenile response, when their parent’s estate planning comes to light, before or after a death. Beneficiaries often equate the terms of the will with how much they were loved—or treated unfairly.

When the older sibling who “was always Mom’s favorite” is put in charge of the estate, other siblings may hear “Mom didn’t love me as much” instead of recognizing that their older sibling has always been better at being organized and working through problems.

One of the hardest decisions in estate planning is often who should be in charge of managing the estate. In fact, this often leads to the entire estate plan grinding to a halt. Some parents elect to name several adult children as co-executors. Sometimes this works, and other times it turns into a complete disaster.

If you don’t want your children doing battle with each other in court and want them to continue functioning as a family, it’s best to have conversations in advance about your wishes. If you want them to work together, be realistic.

It may be necessary to choose a family member or friend to manage the estate, so as to avoid choosing one child over another. If the trusted person is a legal professional with trust administration experience, that may avoid years of family strife. However, if that family friend or relative also has their favorites or if there is any animosity between the children and this person, it may become even more complicated.

If a parent’s sibling is selected, will that person be able to perform the duties of their role, or might they be too infirm?

Another option is to name a professional executor, such as an attorney or trusted accountant. Some people consider using an institutional trustee, like a bank or a trust company, but they may only represent large estates.

Your estate plan needs to have clear instructions. Talk with your estate planning attorney about your family dynamics. They may have recommendations that you have not considered. Talk with your children, so they understand your thinking. A little information in advance could go a long way towards preserving family unity.

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

Reference: The Press Enterprise (Sep. 14, 2019) “Why ‘fair’ and ‘equal’ aren’t always the same”

Here’s a Good Way to Undermine Your Entire Estate Plan

The advice you receive from a well-meaning person at the bank, an online financial website or even or a relative at a family gathering can sometimes be extremely detrimental to your estate plan. Making all your accounts as Transfer on Death (TOD) or Payable on Death (POD) to avoid probate sounds like a simple solution. However, a simple solution does not always work well for a complex matter. That’s the warning from The Mercury in the article “Planning Ahead: Joint Accounts and Transfer on Death can torpedo an estate plan.”

In some states, probate is a complex and expensive problem. However, in others it is simply a court review of the estate to make sure that everything is in correct order. Therefore, avoiding probate should not be the driving force in an estate plan.

Sometimes joint titling and payable on death does work, especially in families where there is only one child or one heir. This is also a good solution, if the POD or joint account owner is your spouse.

However, here is where things get dicey. Let’s say your spouse passes away, and you name one of your children as the joint or payable on death for all accounts. Let’s say you also do that on your real estate properties and other assets and accounts.

How your accounts are titled overrides anything that your will says. If your will directs that all your assets be distributed in equal shares to your children, but your one child has become the legal owner of your assets when you die, you have created the perfect estate litigation storm.

On your death, the adult child becomes the owner, and has no legal obligation to share any of those assets with his or her siblings.

To take the example further, if the child dies shortly after you, then the assets go to his or her spouse. If his or her spouse is not living, then all your assets go to the estate, and not to their siblings as you had intended.

Another issue that is not resolved through titling is the ability for the estate to pay expenses. If son John becomes the owner of all your assets, who is going to pay for inheritance taxes, funeral expenses and other costs associated with settling an estate?

A smarter move than taking a simple piece of advice and trying to apply it to a complex matter: make an appointment with an experienced estate planning attorney in your state and create a plan for how you would like your assets to be distributed upon your death. Plan for expenses that occur, like funeral expenses and inheritance taxes. You can now rest easy, knowing that you’ve just spared your family the divisiveness and stress that can occur from well-intentioned but inappropriate advice.

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

Reference: The Mercury (Dec. 4, 2018) “Planning Ahead: Joint Accounts and Transfer on Death can torpedo an estate plan”

The Basics About Caring for a Senior Parent

The reversal of roles happens when children become the caregivers of their aging mothers and fathers. In some families, it’s an easy transition, based on an affectionate understanding by children and parents that this is the natural course of life. However, it’s not easy for everyone, says Connecticut Magazine in the article “Senior Caregiving 101.”

The very idea of being in charge of the people who taught you how to tie your shoes and drive a car can be emotional. Therefore, many people put off having the talk about caregiving, until an emergency presents itself. That’s not a good plan. Those of us in our 40s, 50s, and 60s will at some point need to be involved in taking care of a parent, including their finances, living arrangements, legal issues and medical care.

Where to start? Take it one step at a time.

Begin with a conversation about these issues, long before anyone is sick. Getting started in a crisis leads to increased anxiety and sometimes outright panic.

If you are worried that your parents or siblings will think you are after their money, think again. How you approach these topics will make the difference. Once a caregiving plan, legal and financial matters are addressed, you’ll all feel more comfortable. Start with a simple thought: “I/We want to make sure that your wishes are respected.”

Is there a lot of paperwork? Yes and no. By preparing in advance, you avoid digging through a scavenger hunt for insurance policies and bills and wills. You’ll know where the documents are and will be free to focus on the important things, such as taking care of and spending time with your aging parents.

You’ll need to have a Power of Attorney prepared. A Durable Power of Attorney means that the Power of Attorney will remain in effect, so the appointed agent may continue acting, even if the principal becomes mentally incapacitated. Power of Attorney can be limited or broad. However, it’s a good idea to build in periodic reports, as a system of checks and balances.

You’ll also need an advance directive. This is a document that protects an individual’s right to refuse medical treatment or to request treatment, if they are not able to make decisions on their own. Depending on the person’s needs, they may need a living will, a health care representative, designation of a conservator and an anatomical gift declaration. This is needed, if they want to make an “anatomical gift,” which is also known as an organ donation.

A will should also be prepared with the help of an estate planning attorney. An executor needs to be named. However, it’s also important that any accounts with beneficiary designations be checked to make sure that they reflect your parent’s wishes. Any beneficiary designations supersede the will and there’s no way to undo that. If they haven’t looked at their life insurance policies in decades, it’s time for a review.

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

Reference: Connecticut Magazine (Nov. 23, 2018) “Senior Caregiving 101”

Four Giant Estate Planning Mistakes to Avoid

Just because someone is a creative genius, does not mean they know how to run the business-side of their lives. That’s especially true when it comes to estate planning, reports the Reno Gazette Journal as it affirms that “Yes, even celebrities make estate planning mistakes.” Here are the top four biggest mistakes:

No will. Biggest names: Prince, Aretha, Amy Winehouse and that is just a few. That means your affairs aren’t in order and your loved ones are not protected. Winehouse left an unwritten song about her finances, but she also left a $6.7 million estate. She had a brother and an ex-husband, but no direction as to who should get what. Without a will, her estate went through the probate process and was distributed to her parents. You need to have a will to name guardians of your minor children and ensure that your assets are distributed, according to your wishes.

Not setting up a trust. Celebs want their glamorous red-carpet photos all over Instagram and Facebook, but that doesn’t mean they want their personal finances to become public record. A will is a public document and a living trust keeps things private. There was more than one tragedy that followed Whitney Houston’s death. Her will named Bobbi Kristina Brown as her sole beneficiary. However, her daughter died three years later. Then her estate was tangled up with an IRS battle over the valuation of recording royalties. The bill from the IRS: $2.2 million in additional taxes. Her ex, Bobby Brown, may yet end up the heir of the Houston estate. That may not be what Whitney wanted.

A living trust keeps your estate private. It designates who is entitled to your assets, and how they are to receive them. It names trustees, and may provide tax benefits.

Not keeping the plan up to date. Life is all about change. Financial conditions, health, family relationships, divorce, marriage, birth, adoptions, estrangements: everything changes. The world-famous author Michael Crichton, author of Jurassic Park and many, many other best-sellers, was diagnosed with throat cancer, when his sixth wife was pregnant. His will was not updated. She had to sue to include the baby as an heir, and a daughter from a prior marriage opposed it. The judge ultimately ruled that the baby should inherit. However, simply updating his will would have taken care of everything, minus the resulting stress, cost and rancor.

Disabled before death. Estate planning is for the living also. You may be disabled and need help in managing your financial affairs. One out of 10 people over age 65 are diagnosed with Alzheimer’s disease, then at age 85, the rate skyrockets to one out of three. One celebrity whose dementia led to a nasty family rift was Etta James, the blues singer best known for the classic “At Last.” She had signed power of attorney over to a son from a prior marriage in 2008. Her husband of more than 40 years said that she was already suffering from dementia and was not competent to sign any legal documents. The son wanted to limit the amount of money the singer’s husband spent on her medical care. They finally settled, and her husband was named as conservator. However, he was given a limit of $350,000 for care for his wife. Etta James passed away shortly thereafter.

Celebrities are not the only ones who make enormous mistakes, when it comes to estate planning but they are the ones that we read about. The ultimate goal of an estate plan is to take care of families at many different asset levels and to protect and care for the living, as well as the deceased.

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

Reference: Reno Gazette Journal (Nov. 14, 2018) “Yes, even celebrities make estate planning mistakes”

For Snowbirds, Estate Planning Is Needed for More than One Nest

Leaving the cold behind is a wonderful journey for the many northerners who make the annual trip. However, they need to be aware of some unintended consequences to their estate plans. State laws govern the administration of estates and the rules in one state may not always be the same in another, according to an article from The Indiana Lawyer titled “Multi-jurisdictional estate planning requires research, collaboration.”

This multi-state thinking applies to anyone with property in more than one state—or countries. How then can they figure out how to administer their assets after death, if they are spread out across the country or around the globe?

The process sounds simple but it’s not. Their estate planning attorney needs to understand and advise them about the laws governing each of the jurisdictions where they have assets. It requires extensive research and may need the help of other attorneys working together. If the cost is a concern, understand that the cost of doing this after death will likely become far more complex and costlier.

The first step is to identify the assets and where they are located and then determine where the client maintains legal residence.

People often have property in a few states, as well as bank accounts in a few states. Tangible assets, such as real estate and intangible assets, such as bank accounts, are treated differently in estate planning law.

Tangible assets are typically governed by the law where the asset is owned, while intangibles are governed by the law of where the client resides. One way to simplify this process is to put all the assets into a revocable trust, which avoids probate and helps a client avoid multiple ancillary estates.

 However, estate attorneys will need to know the estate law of other locations to help their clients make the right decisions for their assets.

Many states have probate laws with similar general principles. However, the details are different. One example: a trust that was properly executed in Indiana was ineffective under Florida law, because of the lack of sufficient witness signatures. It was a small detail, but one that made all the difference.

The problem becomes even more complex, when the person has assets in foreign countries. In some countries, forced heirship will actually prohibit citizens from dictating where their assets go after death. In these countries, a certain percentage of a citizen’s assets must go to their children, spouse, etc., and some countries don’t recognize the concept of a trust, so creating a revocable trust to avoid ancillary estates won’t work.

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

Reference: The Indiana Lawyer (Oct. 17, 2018) “Multi-jurisdictional estate planning requires research, collaboration”

Pop Artist’s Estate May Be a Knotted Mess for a Long Time

A lawsuit accusing several people of taking advantage of Robert Indiana, the artist known for his iconic LOVE artwork, must be sorted out, before his estate can go forward with plans for a museum showing. Attorneys for the pop artist’s estate questioned those closest to Indiana about his assets, now valued at $60 million, according to a story from Associated Press titled “Untangling pop artist Robert Indiana’s estate may take years.”

The process of sorting out the assets and getting the museum started, may be delayed for at least two years because of a lawsuit that alleges that Indiana’s caretaker and an art publisher took advantage of him and produced forgeries of his work. The pair deny the accusations.

The lawsuit was filed by the company that owns the copyright to several of his most famous works.

The artist died at age 89 in May at his home on Vinalhaven Island, off the coast of Rockland, Maine.

Jamie Thomas, Indiana’s caregiver and power of attorney, acknowledged receiving more than 100 pieces of Indiana’s artworks as gifts over the years. Testimony suggested he was also paid about $490,000 and withdrew $615,000 at the request of the artist during the final two years of Indiana’s life. Thomas also received $35,000 for a car.

Indiana’s will stated that he wanted Thomas to run the museum.

Thomas’ attorney says there’s far more to the story and that more details will be revealed.

After the success of his LOVE sculpture, Indiana retreated to Maine. His desire for solitude was almost as legendary as his art.

Indiana was described as a quirky guy, “Even within the realm of artists,” said Michael McKenzie, the art dealer mentioned in the lawsuit. McKenzie worked with Indiana over the years to print and fabricate his artwork.

The lawsuit raised further questions. An FBI agent investigating possible art fraud has requested an autopsy. The state medical examiner’s office has said that Indiana’s death was not suspicious, although at the current time, the official cause of death is “undetermined.”

As the years went by and Indiana aged, friends became concerned about his well-being.

The attorney for the estate said it is disappointing that it will take so long to fulfill the request made in his will. Transforming his home into a museum and displaying his artwork, is expected to cost about $10 million. The house, listed on the National Register of Historic Places, is in a state of disrepair.

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

Reference: Sioux City Journal (Sep. 12, 2018) “Untangling pop artist Robert Indiana’s estate may take years”

Getting Ready to Fly South? Estate Planning and Snowbirds

This is the time of year when people ,who can’t stand cold northern winters, start making their plans to head south to enjoy warmer climates. However, according to TBR Newsmedia’s article “Estate planning tips for snowbirds,” there are some legal matters that need to be addressed before heading south.

You’ll need to determine if you should see an attorney in your home state or in your winter residence, if you want to create estate planning documents and plan for care in the future.

In what state are you a legal resident? Some factors used to determine residency, include the amount of time spent in each state, your mailing address, what state issues your driver’s license, where your car is registered, where you vote and what address you use to file your income taxes.

Once you determine your state of residence, there are other considerations. Where do you plan on living in the future and where do you think you’ll receive healthcare? If you move south upon retirement but plan on heading back north when you are faced with health issues and need the support of family members, you need to consider those things when making your estate plan.

The laws governing Medicaid vary from state to state. You should have your documents reviewed by attorneys in both your northern and southern residences, to be sure that they comply with the law in both places.

There are also differences in the law for powers of attorney and advance directives, including health care proxies and living will documents. These are important documents and you’ll want to be sure they will work in both states.

For instance, in New York State, the person who is named to make medical decisions is called your agent, while that same role is called a surrogate in Florida. The term used under the law to name a default agent is proxy in Florida.  Although it seems simple, it could lead to confusion and a delay in decision-making at a time when minutes count.

The language listed in your power of attorney will differ state by state as well. If your agent is helping you with long-term care planning, this becomes especially important. You need to make sure that your power of attorney includes all possible powers your agent may need, regardless of whether you are paying privately or applying for Medicaid to cover costs.

Talk with an estate planning attorney about your travel plans and make sure that your documents are all in order, before taking off for a warm winter.

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

Reference: TBR Newsmedia (Sep. 3, 2018) “Estate planning tips for snowbirds”

Why Do So Many Pastors Pass on Estate Planning?

A survey conducted on behalf of the Southern Baptist Foundation found that more than half (!) of all Southern Baptist pastors do not have a will, trust, living will, electronic will, legacy story or durable power of attorney with healthcare directives.

The results of the survey, which are detailed in an article from Baptist Press titled “Young or old, many pastors lack a will, survey finds,” present a contradiction. When asked how important estate planning was, 74% said it should be considered a part of a person’s financial stewardship.

Basic planning saves a lot of headaches for loved ones. With an estate plan, assets can be protected, and taxes can be minimized. While it’s understandable why people might want to procrastinate, the reality is that not having a will can have a devastating impact on the family and on the estate.

The survey reveals that pastors age 18-44 are least likely to have a will or a durable power of attorney with health care directives.  However, even among pastors closest to retirement, ages 55-64 and 65 and up, only 54% have a will. Only 25% of these groups have a durable power of attorney.

One concern is that pastors with young families do not have a will in place. They do understand (64%) that in the absence of a will, the court decides who will care for a child, if the last parent dies without a will.

48% of the pastors agreed with a statement that if someone dies without a will, the family decides what happens with the assets of the deceased.

The fact is, for property and children, the court decides what happens, if there is no will in place.

Having a will protects the family in many ways. It protects minor children by allowing the parents to decide who they want to be given the responsibility to rear the children—a guardian—and to also select a person who will manage the funds left for the children.

A will also allows a person to express their wishes regarding the distribution of their assets. An estate plan can be designed to minimize tax liabilities and, if used in combination with certain trusts, control how and when assets are distributed.

Speak with an estate planning attorney to have a will created that reflects your situation and protects your family.

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

Reference: Baptist Press (Aug. 31, 2018) “Young or old, many pastors lack a will, survey finds”

Take These Steps to Get Ready for Year End Finances

September still feels a lot like summer in most parts of the country, and it’s tempting to think it will never end. However, as we are reminded by USA Today in the article “Retirement tips: 8 Ways to start your year-end financial planning now,” you can save yourself a lot of time and money by starting to get organized and taking action long before the end of the year.

Among the tips are:

Take care of your RMDs.

Once you reach 70½, you must start taking withdrawals from IRA, SIMPLE IRAs, SEP IRAs or any retirement plan. You must take the smallest possible amount by December 31. The same goes for inherited IRAs and inherited Roths. If you don’t take these distributions, or if they are not large enough, the penalty is painful: a 50% excise tax on the amount not distributed. Spare yourself the last-minute risk and do this in October or November.

Careful it’s not too big.

If you make an excessively big contribution when you roll over disallowed amounts, such as your annual RMD, or you don’t follow the once-per-year, 60-day rules about amounts withdrawn and then returned to a retirement account, you could face a 6% penalty of the excess contribution.

Give with a Qualified Charitable Distribution (QCD).

If you’re over 70½, you can make a donation using a QCD—that’s a donation from a retirement account RMD to a qualified charity. It excludes the amount you donate from your taxable income and it can be used to satisfy all or part of the amount of your RMD from an IRA.

It’s Tax Harvest Season

If you have a taxable account, examine unrealized gains and losses long before the year ends. Are there positions you can take with unrealized losses that can be sold to reduce or eliminate the gain? Year-end distributions can create problems for mutual fund owners. Consider waiting to purchase a mutual fund, until after it distributes capital gains.

Look at Funding a Roth IRA and Purchasing Cash Value Life Insurance

Both these financial vehicles can grow tax free and distributions are also mostly tax free. You can also consider a partial conversion of your traditional IRA to a Roth IRA. You’ll pay taxes on the amount of the income, so be sure you have enough money to pay the taxes due on the Roth IRA conversion. Do it in a year when your income will be lower to keep taxes low.

Beneficiary Designations and Your Estate Plan

While you’re looking over your finances, take the time to review beneficiary designations and your overall estate plan. Have there been changes since the last time you reviewed your estate plan? Marriage, death, birth, divorce, the sale of a property or an inheritance: these are all reasons to review your estate plan. Remember that your beneficiary designations supersede anything in your will, so make sure they are also up to date.

Don’t Forget the Finishing Touches

Estate planning attorneys hear this all too often—a trust is created but never funded. Titles to property don’t get changed. Make sure that you finish what you’ve started. Start early, so you can go into the holiday season with all of your personal legal and financial tasks completed.

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: USA Today (Aug. 29, 2018) “Retirement tips: 8 Ways to start your year-end financial planning now”

Why You Need an Estate Attorney

The government has many things it is very particular about.  However, you are not likely to notice one of those things very much. That is that property all needs to be traceable to a particular owner or owners.

This is important to the government for tax purposes. However, as you do not generally get all your property at one time, it is not always that noticeable. It is not a lot of paperwork for most individual pieces of property.

When someone passes away, things change. Then there is a lot of property that needs to change ownership and there is a lot of paperwork that needs to be done at once, as U.S. News & World Report discusses in "How to Deal With the Paperwork Scramble After a Spouse Dies."

It is easy to get overwhelmed and make costly mistakes when there is that much paperwork to fill out and file in such a short period of time. Those mistakes require even more paperwork and time to fix. People who are grieving and who do not know all the things that need to be done, make these mistakes all the time.

There is a good way to avoid most mistakes. Hire an estate attorney who can help with the process. The attorney knows what needs to be done and has staff to help with the paperwork.

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

Reference: U.S. News & World Report (June 19, 2018) "How to Deal With the Paperwork Scramble After a Spouse Dies."