The Petrosewicz Law Firm Estate Planning Blog

Tips for Choosing a Fiduciary

One of the important tasks in creating a complete estate plan is selecting people (or financial institutions) to represent you, in case of incapacity or death. Most people think of naming an executor, but there are many more roles, advises the article “What to consider when appointing a fiduciary?” from The Ledger.

Here are the most common roles that an estate planning attorney will ask you to select:

• Executor or personal representative, who is named in your will and appointed by the court to administer your estate.
• Agent-in-fact (under a durable power of attorney) who manages your financial affairs while you are living, if you are unable to do so.
• Health care surrogate who makes health care decisions on your behalf while you are living, if you are incapacitated.
• Trustee of a trust document; administers the trust that you have created.
• Guardian: a person who makes health care and financial decisions on your behalf, if the court determines that other roles, like health care surrogate or agent-in-fact, are not sufficient.
• Guardian for minor children: person(s) who make decisions for your children, if you are not able to because of death or a loss of capacity before the children reach adulthood.

The individuals or financial institutions who take on financial roles are considered fiduciaries; that is, they have a legal duty to put your well-being first. Their responsibilities may include applying for government benefits, managing and invest your assets and income, deciding where you will live and working with your attorneys, financial advisors and accountants.

Many people name their spouse or eldest child to take on these roles. However, that’s not the only option. A few questions to consider before making this important decision include:

• Does this person have the experience, skill and maturity to manage my financial affairs?
• Does this person have the time to serve as a fiduciary?
• Would this person make the same health care decisions that I would make?
• Can this person make a difficult decision for my health care?
• Does this person live near enough to arrive quickly, if necessary?
• How old is this person, and will they be living when I may need them?
• What kind of response will my family have to this person being named?
• Are my assets substantial enough to require a financial institution or accountant to manage?

These are just a few of the questions to consider when choosing fiduciaries or health care agents in your estate plan. Speak with your estate planning attorney to help determine the best decision for you and your family.

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: The Ledger (Oct. 16, 2019) “What to consider when appointing a fiduciary?”

How Blended Families Can Address Finances and Inheritance Issues

The holiday season is a popular time for people to get engaged, including people who have been married before. If that’s you, understand that blending families means you’ll need to deal with inheritance and finance issues, says U.S. News & World Report’s article “6 Financial Considerations for Remarriage.” The best time to have these conversations is before you walk down the aisle, not afterwards.

Look at your budget and talk about how things will work. That includes day-to-day expenses, monthly expenses and large purchases, like houses, vacations and cars. Talk about a game plan for going forward. Will you merge your credit card accounts or bank accounts? What about investment accounts?

Financial obligations outside of the marriage. Two things to check before you wed: your divorce papers and the state’s laws. Does anything change regarding your spousal support (alimony) or child support, if you remarry? It’s unlikely that you would lose child support, but the court may determine it can be reduced. The person who is paying child support or alimony also needs to be transparent about their financial obligations.

Review insurance and beneficiaries. One of the biggest mistakes people make, is failing to update beneficiaries on numerous accounts. If your divorce papers do not require life insurance to be left for your spouse on behalf of your children (and some do), then you probably want to make your new spouse the beneficiary of life insurance policies. Investment accounts, bank account, and any other assets where a beneficiary can be named should be reviewed and updated. It’s a simple task, but overlooking it creates all kinds of havoc and frustration for survivors.

What will remarriage do to college financing options? A second marriage may increase a parent’s income for college purposes and make children ineligible for college loans or needs-based scholarships. Even if the newly married couple has not blended their finances, FAFSA looks at total household income. Talk about how each member of the couple plans on managing college expenses.

A new estate plan should be addressed, even before the wedding takes place. Remember, an estate plan is for more than distributing assets. It includes planning for incapacity, including Do Not Resuscitate Orders (DNR), powers of attorney for finances and for health care, designations of guardianship or consent to adoption, various trusts and if needed, and special needs planning.

Create a plan for inheritance. If either spouse has children from a prior marriage, an estate plan is critical to protect the children’s inheritance. If one spouse dies and the surviving spouse inherits everything, there is no legal requirement for the surviving spouse to pass any of the deceased’s assets to their children. Even if you are in mid-life and death seems far away, you need to take care of this.

Speak with an estate planning attorney who can help you create the necessary documents. You should also talk with your children, at the age appropriate level, about your plans, so they understand that they are being planned for and will be taken care of in the new family.

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

Reference: U.S. News & World Report (Nov. 18, 2019) “6 Financial Considerations for Remarriage”

Special Needs Family Requires Special Planning

Taking steps to plan for the future, when loving parents will not be there to help their disabled child as they age, is a hard thing to confront. However, planning in advance for special needs family members is vital. An article titled “4 Tips for Estate Planning When Your Child Has a Disability” from Yahoo! Lifestyle offers good insights and information. An elder law attorney with a focus on special needs planning will be an invaluable resource.

Create a letter of intent. This is a letter of instruction that includes information family and friends will need, if you die or become incapacitated. It should list all the information someone would need to step into your life to care for your loved one. That includes information about medications, daily routines, strategies you use for calming and other daily living information that only you know. The goal is for someone to be able to step in and see how your life works with as little stress as possible and make the transition easier.

Meet with an attorney with experience in special needs planning. Most attorneys will meet you for a free consultation. Allow them to help you build a vision for what you want your loved one’s future to look like. They will know how to plan out the future and what documents will be needed.

Create a will. You’ll want to be the one deciding who should be the caregiver for your child, and who should be in charge of your money. Without a will, the estate goes to probate and a judge who does not know you or your child will make these decisions. Having a will ensures that assets are distributed as you intended and that the care of your child is done by someone you select.

Create a special needs trust. Your attorney will help with this special type of trust, which allows you to distribute funds and property in a way that will not make your loved one lose their government benefits. Your special needs child is not permitted to have more than $2,000 in a bank account or they will become ineligible for Medicaid and Social Security.

Create an estate plan. The estate planning attorney will be able to help you use strategies to transfer assets, after you have passed.

Set up a power of attorney or guardianship. Do you need to take full guardianship of your special needs child, when they turn 18? Can he or she understand money and decisions? Will they ask for help? Supported decision-making is a viable alternative for some families, but you know your child best. If necessary, power of attorney for financial and for medical issues may work better. Talk to an attorney when your child turns 17, so that you can be prepared.

Establish an ABLE Account. An ABLE account ensures that benefits are not jeopardized. The account can hold money to ensure that your child never has more than the permitted number of assets.

Take this one step at a time, as you likely have done throughout your special needs child’s life. It may take a long time to put all of these steps in order, so start now.

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

Reference: Yahoo! Lifestyle (August 26, 2019) “4 Tips for Estate Planning When Your Child Has a Disability”

Having That Conversation with Your Parents

Despite any uncomfortable feelings, the sooner you start talking with your parents about their financial situation, and the more conversations you can have, the better, says Wisconsin Public Radio in the article “How To Talk To Your Parents About Their Finances.”

The goal is to get the conversation and the work done before it’s too late. If you wait until Alzheimer’s has taken hold, for instance, you may be out of time. For one woman, whose mother was diagnosed with Alzheimer’s at 65, the realization that she had to act fast was followed immediately by a swift set of actions.

After the diagnosis, she became her mother’s power of attorney. If that hadn’t happened, her mother would not have been considered legally competent to make that decision. That would have led to a legal nightmare, including asking the court for guardianship.

The daughter had to step in and take over the entire financial picture, with little help from her mom. It was a challenge that came with many lessons that are shared here.

The conversation isn’t just about money. There are many issues that need to be discussed. What does retirement look like? Do the parents want to stay in their current home, or will they want to downsize in their current community? Do they see themselves moving to live near grandchildren? What kind of care do they expect to need, and where would they want to receive that care? Be gentle, and remember that you are asking the people you love to explore sensitive topics that are likely to be hard to consider. And don’t give up if they push back. If one approach doesn’t work, try another.

Try storytelling. Maybe you had a family member who didn’t do any planning and left a disaster behind that has become part of your family’s collective history. “Remember Uncle Alan and what his nephew went through after he died?” might bring up some painful memories, but it is a starting point. “While the family was grieving his loss, a few family members couldn’t think of anything but the headaches that were created.  Express your hopes that you can help them from leaving that situation for their own children.

Make a list of bills to start. If there were an emergency and you had to take over everything, with no prior notice, a list of bills would be helpful. You want to get a list of their monthly and quarterly bills and then learn where the money to pay those bills comes from. Are they relying on Social Security? Is there a pension?  Are there any IRA or SEP distributions? Do they have a mortgage, or credit card debt? Some parents may be reluctant to hand that information over. An alternative is to have them write down all of their information, including website accounts and passwords, and put it somewhere in the house and tell you where the list is. At least that way you can access it, if need be. If you’re not sure if they will actually do this, take a look while you are visiting to make sure the list is where they said it would be.

Another way to have this conversation is to go with them to an estate planning attorney’s office, when they have their wills, power of attorney, and health care proxy forms done. The conversation may be easier when it is taking place on neutral territory, as part of a larger conversation about their plans for the future.

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

Reference: Wisconsin Public Radio (September 2, 2019) “How To Talk To Your Parents About Their Finances”

Ignoring Beneficiary Designations Is a Risky Business

Ignore beneficiary forms at your and your heirs’ own peril, especially when there are minor children, is the message from TAPintoChatham.com’s recent article “Are You Read to Deal with Your Beneficiary Forms?” The knee-jerk reaction is to name the spouse as a primary beneficiary and then name the minor children as contingent beneficiaries. However, this is not always the best way to deal with retirement assets.

Remember that retirement assets are different from taxable accounts. When distributions are made from retirement accounts, they are treated as Ordinary Income (OI) and are subject to the OI tax rate. Retirement plans have beneficiary forms, which overrule whatever your will documents may state. Because they have beneficiary forms, these accounts pass outside of your estate and are governed by their own rules and regulations.

Here are a few options for beneficiary designations when there are minors:

Naming your spouse as the primary beneficiary and minor children as the contingent beneficiaries can be problematic. This is the usual response (see above), but there is a problem. If the minor children inherit a retirement asset, they will need a guardian of the estate for that asset. If only a guardian of the person is named in the will, this person cannot control the child’s money. Therefore, the court will appoint a Guardian Ad Litem to represent the child’s interest for this asset. That could be a paid stranger appointed by the court, until the child reaches the age of majority, usually 18 in most states.

Elect a guardian in the retirement plan beneficiary form. Some custodians have a section of their beneficiary form to choose a guardian for minor. Most forms, unfortunately, do not provide this option.

Make your estate the contingent beneficiary of the retirement account. While this would solve the problem of not having a guardian for the minor children, because it would kick the retirement plan into the estate, it may lead to adverse tax consequences. An estate does not have a measuring life, so the retirement asset would need to be fully distributed in five years.

Leave the assets to the minor children in a trust. This is the most effective means of leaving retirement assets to minor children without terrible tax consequences or needing to have the court appoint a stranger to oversee the child’s funds. Your attorney would either create a separate trust for the minor child or build a conduit trust under your will or a revocable trust to hold this specific asset. You would then change your beneficiary form to make said trust or sub-trusts for each minor child the contingent beneficiary of your retirement plan. This way you control who the guardian is for this asset for your minor child and are tax efficient.

Whichever way you decide to go, speak with an experienced estate planning attorney to determine which is the best plan for your family.

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: TAPintoChatham.com (Sep. 8, 2109) “Are You Read to Deal with Your Beneficiary Forms?”

More Reasons to Review Your Estate Plan

Every estate planning attorney will tell you that they meet with people every day, who sheepishly admit that they’ve been meaning to review their estate plan, but just haven’t gotten to it. Let the guilt go.

Attorneys know that no one wants to talk about death, taxes or illness, says Wicked Local in the article “Five Reasons to Review Your Estate Plan.” However, there are five times when even an appearance before the Queen of England has to come second to reviewing your estate plan.

You have minor children. An estate plan for a couple with young children must do two very important things: address the care and custody of minor children should both parents die and address the management and distribution of the assets that the children will inherit. The will is the estate planning document used to name a guardian for minor children. The guardian is the person who will determine where your children will live and go to school, what kind of health care they receive and make all daily decisions about their care and upbringing.

If you don’t have a will, the court will name a guardian. You may not like the court’s decision. Your children might not like it at all. Having a will takes care of this important decision.

Your estate is worth more than $1 million. While the federal estate plan exemptions currently are at levels that remove federal tax from most people’s estate planning concerns, there are still state estate taxes. Some states have inheritance taxes. Whether you are married or single, if your assets are significant, you need an estate plan that maps out how assets will be left to your heirs and to plan for taxes.

Your last estate plan was created before 2012. There have been numerous changes in state estate tax laws regarding wills, probate and trusts in Massachusetts. This is not the only state that has seen major changes. There have been big changes in federal estate taxes. Strategies that were perfect in the past, may no longer be necessary or as productive because of these changes. While you’re making these changes, don’t forget to deal with digital assets. That includes email accounts, social media, online banking, etc. This will protect your fiduciaries from breaking federal hacking laws that are meant to protect online accounts, even when the person has your username and password.

You have robust retirement plans. Your will and trust do not control all the assets you own at the time of death. The first and foremost controlling element in your asset distribution is the beneficiary designation. Life insurance policies, annuities, and retirement accounts will be paid to the beneficiary named on the account, regardless of what your will says. Part of a comprehensive will review is to review beneficiary designations on each account.

You are worried about long-term care costs. Estate planning does not take place in a vacuum. Your estate plan needs to address issues like your plan, if you or your spouse need care. Do you intend to stay in your home? Are you going to move to live closer to your children, or to a Continuing Care Retirement Community? Do you have long-term insurance in place? Do you want to plan for Medicaid eligibility?

All of these issues need to be considered when reviewing and updating your estate plan. If you’ve never had an estate plan created, this is the time. Put your mind at ease, by getting this off your “to do” list and contact an experienced 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: Wicked Local (Aug. 29, 2019) “Five Reasons to Review Your Estate Plan”

Why You Need a Power of Attorney in Your Estate Plan

A power of attorney is an important legal document that allows a person, known as the principal, to designate a person of their choice to become their agent, acting on their behalf. This is usually done when the principal is unable to manage their financial affairs due to disability, illness or incapacity. It must be done while the principal is still competent, notes Delco Times in the article “What’s the difference between guardianship and power of attorney?” There are also instances when power of attorney is used when the principal is unable to conduct their own affairs, because they are traveling or are deployed overseas.

Related documents are the health care power of attorney and the durable power of attorney. A durable financial power of attorney is a document where the principal designates the powers that the agent may exercise over their finances. The powers granted by this document can be used by the agent, regardless of the principal’s capacity or disability.

The principal has the option to grant very broad authority to their agent. For instance, the principal could give their agent the authority to gift all their assets, while they are still living. That’s why it is very important for the specific provisions in the power of attorney to be carefully reviewed and tailored to the principal’s wishes. There are risks in naming an agent, since they are able to exercise complete control over the principal’s assets. The agent must be 100% trustworthy.

A health care power of attorney allows an agent to make decisions about the principal’s health. Note that this document is operative only when a copy is provided to the attending physician, and the physician determines that the principal is incompetent.

Both health care power of attorney and financial power of attorney may be revoked by the principal at any time and for any reason.

If the principal has not had these documents prepared in advance and then becomes incompetent by reason of injury, illness, or mental health issues, they may not have the legal right to sign the power of attorney. When this happens, it is necessary for a guardianship proceeding to occur, so that other people may be named to take charge of the person’s financial and health affairs. Advance planning is always preferred.

If an individual is born with a disability that impacts their capacity and upon attaining legal age, does not have the capacity to sign a power of attorney, then a guardianship proceeding will be necessary. The court must determine if the person is truly incapacitated and if there might be an alternative to appointing a guardian. Once the guardian is appointed, the principal no longer has the legal right to make decisions on their own behalf.

A guardianship is a much more restrictive tool than a power of attorney. For one thing, the power of attorney generally does not need the involvement of the court. There is always the possibility that a guardian is appointed who does not know the family or the individual. A durable power of attorney allows a person to appoint someone they know and trust to help them and their family, if and when they become incapacitated.

Speak with your estate planning attorney about how a power of attorney works, and when guardianship issues might arise. Being prepared in advance by having the right documents in place, is always better than having the family going to court and hoping that the right decisions are made.

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

Reference: Delco Times (May 8, 2019) “What’s the difference between guardianship and power of attorney?”

A Love Letter to Your Family

Now, to the 70% of Americans who do not have an estate plan, the article “Senior Spotlight: Composing the ‘family love letter’” from the Lockport Journal should help you understand why this is so important. One reason why people don’t take care of this simple task, is because they don’t fully understand why estate planning is needed. They think it’s only for the wealthy, or that it’s only for old people, or even that it’s only about death and taxes.

Consider this idea: an estate plan is about protecting yourself while you are alive, protecting your family when you have passed and leaving a legacy for the living.

Some of the main elements of an estate plan are to create and execute documents that provide for incapacity and death, as well as provide information about your assets, liabilities and wishes.

You’ve spent a lifetime accumulating assets. It is now time to sit down with family members and have a heart-to-heart talk about the details of the estate and what your intentions are with respect to its distribution. The subject of death can be challenging for all. However, discussing your estate plan is vital, if you want to protect your family from what might come after you are gone. Each family has its own goals, so it’s a good idea to talk about it frankly, while you still can.

Without discussions and an estate, the chances of a family split, assets not going where you had intended and unnecessarily higher costs in taxes and legal fees, are a very real possibility.

If speaking about these topics is too hard, you may want to write your family a love letter. It would contain all the information that your family would need at the time of your death or if you become incapacitated because of illness or injury.

Your estate plan should also include the documents needed, so your family can make decisions on your behalf, if you are incapacitated. That includes a power of attorney, a health care directive and may include others specific to your situation.

Ideally, all this information will be located in one convenient place. Don’t put it on a computer where you use a password. If the family cannot access your computer, all your hard work will be useless to them. Put it in a folder or a notebook, that is clearly labeled and tell family members where it is.

They’ll need this information:

• A list of your important contacts — your estate planning attorney, financial advisor, CPA, insurance broker and medical professionals.
• Credit card information, frequent flier miles.
• Insurance and benefits including all health, life, disability, long-term care, Medicare, property deeds, employment and any military benefits.
• Documents including your will, power of attorney, birth certificates, military papers, divorce decrees and citizenship papers.

Think of these materials and discussions as your opportunity to make a statement for the future generation. If you don’t have an estate plan in place already or if you have not reviewed your estate plan in more than a few years, it’s time to make an appointment for a review. Your life may have not changed, but tax laws have, and you’ll want to be sure your estate is not entangled in old strategies that no longer benefit 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: Lockport Journal (Feb. 16, 2019) “Senior Spotlight: Composing the ‘family love letter’”

Market Volatility Has You Worried? Here’s Something You Can Control

When investors are faced with turbulent markets, there’s a human response to want to do something—sometimes, anything. We’re hardwired to try to take control. That doesn’t always help us make the best investment decisions. However, as reported in this Daily Camera’s article, there is something that you can do that may make you feel better: “Freaked out about the market? Resolve to get your estate in order.”

If you care about your health care, financial affairs, minor children and even your beloved pets, this is an important task to take care of. An estate plan includes legal documents that help you, when you are living and helps your heirs, when you die. Powers of attorney give your loved ones the ability to manage your affairs, if you become incapacitated. An updated will ensures that your assets go to the inheritors you chose. Don’t forget your beneficiaries.

Your beneficiaries are the people who are named on several accounts and life insurance policies. You may have named people on investment accounts, life insurance policies, IRAs, bank accounts, annuities and other assets. If you have not done a full review of those documents in a while, you want to take care of this right away. Life and relationships change over time, and the people you originally named as your beneficiaries, may no longer be the ones you would select today. Note that any changes must be made while you are living—when you have passed, the beneficiaries receive the asset, regardless of what is written in your will.

If you’re not sufficiently motivated to make an appointment with an estate planning attorney, you should be aware that if you don’t have a will, the laws of your state will determine who gets your assets and even, lacking a will that names a guardian, who rears your minor children. You may or may not be a fan of court proceedings, but if you don’t have a properly prepared will, the court is going to be making a lot of decisions on your behalf.

Contact an estate planning attorney to begin the process of putting your affairs in order. An attorney whose practice focuses in this area of the law, is most likely a better choice than one who does wills on the side. There are many complex laws in estate planning, and there are many opportunities available to make the most out of your assets and grow your legacy. An estate planning attorney will know what will work best for you and 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: Daily Camera (Jan. 6, 2019) “Freaked out about the market? Resolve to get your estate in order”

Special Needs Families and Estate Planning

The challenges are even greater, if you are a parent of a child with special needs. It is likely that your child will outlive you and need a support system to handle everything from finances to personal care. Estate planning for a special needs family member is critical, according to the article “How to plan your estate when you have a child with special needs” from Austin American Statesman.

In some ways, estate planning for families with neurotypical children is the same. The basics need to be addressed. You need a will (perhaps in combination with a living trust), medical power of attorney, financial power of attorney, advance healthcare directive and HIPPA authorization.

However, one important thing is different. You need to be sure your estate is structured so when you pass, an inheritance does not disqualify your child from receiving government assistance.

Special Needs Trusts (SNTs) are created to help families ensure that their children will continue (or start) to receive benefits. A traditional estate plan could easily disqualify them.

Families need to think about their assets, as well as the needs of their child now and in the future. In some cases, that means the naming of a guardian to take care of the child and naming someone else to be responsible for finances.

Make sure to speak with the people you select for these roles. They need to understand what you are asking them to do and to be certain they are willing to take on these roles. Some families even write a letter to the people they name, to pass on more information. Often the letter includes who the family wishes their child to remain in touch with, or the personal preferences that they know keeps their child comfortable and happy. Some of the letters are highly detailed about finances or food preferences, while others focus on the love they have for their child.

Families with special needs children need to devote the time to planning for their eventual passing. Once the estate plan and special needs trusts are in place, however, you’re not done. Every few years, the documents need to be reviewed. Provisions can be included that will address issues as the child ages. However, as there are changes in life, there are also changes in the law and plans that need to be reviewed.

An estate planning attorney with experience working with special needs families will be able to create a plan that will ensure that your loved one will be cared for, long after the parents are gone. That peace of mind is invaluable.

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: Austin American-Statesman (Sep, 17, 2018) “How to plan your estate when you have a child with special needs”