March 16, 2018October 25, 2023

Hidden Costs of Probate

People will often go to great lengths to make sure that their estates do not have to go through probate. They often fail to take little steps and find themselves in probate unnecessarily for other reasons.

Probate is often thought of as something that happens after a person passes away. If a person has not planned to avoid probate, then the estate must go through probate for administration before any assets can be distributed to heirs. What many people do not realize, is that probate courts handle more things than just wills.

Consider the case of one elderly couple in Arizona. The wife suffers from dementia. She had a modest retirement account of $25,000. Her husband wanted to withdraw funds from the account to pay her medical bills. Before he could do that, he had to go through probate court to be appointed his wife’s guardian and conservator. In the process, he incurred $6,000 in attorney’s fees as WLTX19 reports in “Man spends thousands in probate costs to help wife with dementia.”

This unfortunate situation can often be avoided. Estate planning attorneys do more than just help their clients’ estates avoid probate, after the clients pass away. They also help people plan for end-of-life care and what will happen should they ever become incapacitated and can no longer look after their own affairs.

If you have not planned for this, then visit an estate planning attorney and ask about a general durable power of attorney. That document will let you appoint someone to look after your finances, if you become unable to do so.

Reference: WLTX19 (Feb. 15, 2018) “Man spends thousands in probate costs to help wife with dementia.”

March 15, 2018

Treating Children Equally When One Is Not Responsible

Most parents want to treat all their children the same in their estate plans. That can be difficult, when one of the children is not very responsible with financial matters.

Every parent with multiple children knows that despite being raised the same, they all turn out differently. They have different abilities and often very different attitudes about things.

Children also have different levels of financial responsibility. Nevertheless, most parents do want to leave all their children an equal inheritance and they do not want to offend one of them by treating them differently than the others. This was the dilemma of a woman who recently wrote into Market Watch for advice in "My son is responsible, my daughter is in debt — how do I split my estate?"

A common way to do this is to create an estate plan that limits how the trust assets can be used. Provisions can be written into the trust, so an irresponsible child cannot waste any money received on frivolous things. This is unlikely to offend any responsible children, if they use the money in reasonable ways.

Not all families are the same. The best way to get an estate plan that covers your unique family situation, is to visit with an estate planning attorney. Let the attorney develop the best way to distribute your estate, given the needs of your family.

Reference: Market Watch (Feb. 16, 2018) "My son is responsible, my daughter is in debt — how do I split my estate?"

March 14, 2018

Common Elder Scams

Some scams against the elderly are well-known. Nevertheless, they continue to work.

People who seek to scam the elderly out of money are not always very subtle about it. Not every scammer is patient enough to slowly get to know an elderly person and then con them out of their money. Some scams used against the elderly are demanding.

A common one is for an unknown person to call a grandparent and tell him or her that a grandchild is in trouble and needs cash wired immediately. The trouble normally consists of a problem with the police, where bail money is needed.

Another common scam the Minneapolis Star Tribune points out in "As senior population grows, so do scams targeting their money," is for a voice message to be left on an elderly person's phone claiming to be from the IRS. The elderly person is instructed to call a number right away for their last chance to settle a problem with the IRS by sending money.

Those schemes might seem like obvious scams to most people, but they continue to work on many of the elderly. The scammers seek to take advantage of the elderly person's diminished capacity and by demanding the money right away, the victim does not have the time to think through the request or ask anyone else about.

These and other scams against the elderly are unfortunately increasing. Elderly people should be aware of them and never agree to send money over the phone to someone, until they discuss the matter with someone else.

Reference: Minneapolis Star Tribune (Feb. 16, 2018) "As senior population grows, so do scams targeting their money."

March 13, 2018May 5, 2022

Revoking a Trust

People commonly wonder if they can revoke a trust that they no longer like and if they can have more than one trust. The answer is not a simple yes or no.

A reader recently asked a NWI Times column “Can an individual establish more than one trust?” It seems that the reader was curious whether he could have more than one trust and if creating a second trust would automatically revoke the first one.

These are common questions because most people are more familiar with the law of wills than of trusts. A person cannot have more than one will and creating a new will is an automatic revocation of any previous wills. Trusts do not work like that.

It is possible for a person to have more than one trust. It is not uncommon when people want to accomplish different things with different trusts. However, the assets put into the trusts cannot be the same and most people have no reason to have more than one trust. What most people seek to accomplish with a trust, can best be done with only one.

Whether and how a trust can be revoked, depends on what type of trust it is. Some trusts are created to be revocable at any time, but an attorney should create the trust.

Other trusts are created to be irrevocable. Sometimes they can be revoked but there are often tax penalties for doing so. It is usually advisable to amend an irrevocable trust where and how state law allows.

If you have questions about a trust you have created, it would be best to consider meeting with an estate planning attorney. Profit Law Firm has estate planning attorneys with meeting locations in Chevy Chase, Greenbelt, and the District of Columbia.

Reference: NWI Times (Feb. 18, 2018) “Can an individual establish more than one trust?”

March 12, 2018

Planning for Accident or Illness

It is impossible to know whether you will ever have an accident or have an illness that will leave you incapacitated. However, you can easily plan for dealing with it should it happen.

Most people generally understand that the older they get, the more likely they are to suffer from cognitive decline because of Alzheimer's or some other form of dementia. As people get older, they often begin to prepare for what will happen if their time comes and they become incapacitated.

What people do not think about is that elder dementia is not the only way people can become incapacitated. There are no age requirements for disabling accidents or illnesses. Everyone, no matter their age, should plan for what would happen if they are incapacitated. It is not difficult to do, as TC Palm discusses in "Be as prepared as you can by planning for incapacity."

To get started, schedule an appointment with an estate planning attorney. The attorney can prepare the necessary documents for incapacity.

You will need a general durable power of attorney, so someone else has the authority to handle your day-to-day finances. A health care power of attorney will allow someone else to make your health care decisions. A living will lets you decide ahead of time what medical means can be taken to prolong your life.

Consider taking another step at the attorney’s office and get an estate plan, just in case an accident or illness does more than incapacitate you. A thorough estate plan prepares you and your loved ones for illness and death.

Reference: TC Palm (Feb. 20, 2018) "Be as prepared as you can by planning for incapacity."

March 9, 2018May 10, 2024

Blended Families and Trust

Trust can be a key aspect of whether blended families will fight over an estate, after a loved one passes away.

Blended families are often the ultimate source of problems in estate litigation. When there are children from multiple marriages and stepparents who all have a potential stake in an estate, fights over the estate are more likely to occur. An estate planning attorney can help you find solutions for planning for blended families.

Those in blended families just have fewer bonds than more traditional families.

The Financial Times recently discussed this in an advice column titled “Should I trust my wife to divide my assets fairly?” A man who was on his second marriage wanted to make sure both of his children received an equal share of his estate. The children were each from a different marriage, so the man was concerned that his second wife might not leave the same amount of money to the child from his first marriage, if he left everything to her first.

The question almost begs the answer: well, if you must ask, then you have your answer.

That is not to say that stepparents can never be trusted to divide everything equally. However, the real trust factor to be concerned about, is not the trust between the husband and wife. The real concern should be the trust between the stepparent and the stepchild. The better they get along and trust each other, the more likely they will work together without fighting over an estate.

It is normally best not to leave things up to trust. Estate planning attorneys can give you many different options for making sure everyone in your family is appropriately taken care of, regardless whether they trust each other.

Reference: Financial Times (Feb. 6, 2018) “Should I trust my wife to divide my assets fairly?”

March 8, 2018October 25, 2023

Do Your Estate Plan Now

If you are wondering when you should do your estate planning, the best answer that you can get is that you should do it as soon as you possibly can.

One of the many things people wonder about when it comes to estate planning, is when they should plan for their own estates. People often think the best time for estate planning, is after some particular life event happens.

They wonder if that means they should do it after they get their first job, after they get married, after they have their first child, after they make a certain amount of money, after they retire or after something else. The truth is that estate planning should be done after any of those events. It is best not to wait for any particular event to get started.

You will always be better off with a plan, than without one, as grbj.com points out in “Estate Planning: better done sooner rather than later.”

You never know when you will need to have an estate plan. You cannot guarantee you will only pass away after you have lived long enough to experience any specific big life-changing event. We all know that life and death does not work that way. Waiting for something specific to happen in your life before getting an estate plan, does not make sense.

It always makes good sense to have an estate plan. Having one will leave your heirs better off after you pass away, no matter how many assets you have or at what stage of life.

Do not wait for something to happen to get an estate plan. Visit an estate planning attorney and get one now.

Reference: grbj.com (Feb. 9, 2018) “Estate Planning: better done sooner rather than later.”

March 7, 2018September 10, 2025

Gifts for Educational Purposes

Giving money to children and grandchildren for educational purposes is a common goal in estate planning. There are several different ways that it can be done efficiently.

Most people would prefer that their children and grandchildren do not have to go into debt to get an education. If they can find some way to pay for the education, besides having college students take out student loans, it is what most parents and grandparents would prefer.

It is common for people to take this into consideration when they visit an estate planning attorney, because they would like their estate plans to account for future educational expenses. There are a few good ways that the educational expenses of children and grandchildren can be covered, as The Legal Intelligencer recently explained in “How to Make Tax-Efficient Gifts to Children, Grandchildren for Their Education,” including:

529 plans are investment vehicles that allow people to put money in tax free. The money can then be used for the educational expenses of a beneficiary later. Withdrawals for education are also tax free.
Irrevocable trusts are another option. They do not have the same tax benefits. However, they can be grantor retained trusts allowing the settlor to have control over the assets, so they can be invested appropriately.
Another option is to pay the child’s or grandchild’s tuition directly. Educational gifts made in this way are not subject to gift taxes.
IRAs can also be used for this purpose, when gifts to children or grandchildren are used to fund their own IRAs. However, you should consult with an accountant first, because there may be unintended tax consequences, if not done properly.

Reference: The Legal Intelligencer (Feb. 12, 2018) “How to Make Tax-Efficient Gifts to Children, Grandchildren for Their Education.”

March 6, 2018

Report Finds Problems with Assisted Living Oversight

One way that Medicaid can save money is by paying for assisted living care for seniors who are eligible for it, instead of paying for nursing home care. A new report found that because of a lack of oversight, that is not happening.

Medicaid was not originally designed to pay for seniors' stays in assisted living facilities. However, as more and more money was being spent on nursing home facilities and the costs at those facilities continued to rise, the federal government granted states waivers to use Medicaid funds for the generally less expensive assisted living facilities.

This should have saved the federal government quite a bit of money.

A group of Senators asked the Government Accountability Office to study how the government's money was being used. The results were not good as The New York Times reported in "U.S. Pays Billions for 'Assisted Living,' but What Does It Get?"

Every year the government spends approximately $10 billion on assisted living facilities. The discouraging news? It is almost impossible to determine how much of the money is well-spent and how much of it is not. The GAO found that a lack of regulations and proper oversight made it impossible to get even basic information about patient outcomes and critical events in many states.

This is disturbing since Medicaid is expected to need even more money in the future to pay for the nursing home care and assisted living care of an aging population. If the oversight problem is not fixed, it will be seniors who are most harmed by the problems.

Reference: New York Times (Feb. 3, 2018) "U.S. Pays Billions for 'Assisted Living,' but What Does It Get?"

March 5, 2018

The Failure of James Brown’s Estate Plan

James Brown intended for his estate to give millions to poor children. However, he passed away 11 years ago, and the children have still not received anything.

It is not clear how much the estate of legendary soul singer James Brown is worth. The estate claims it is worth about $5 million. However, some experts estimate that it could be worth as much as $100 million.

It is clear is what Brown intended to do with his wealth. He had a carefully crafted estate plan that was intended to give millions to poor children throughout Georgia and South Carolina.

Brown passed away in 2006 but his estate has not given any of the money to the children. Instead the estate is still bogged down in numerous lawsuits and remains unsettled, as The New York Times reported in "Why Is James Brown's Estate Still Unsettled? Ask the Lawyers."

The main source of the dispute appears to be a family feud with Brown's children and grandchildren on one side and his widow, who is the estate administrator, on the other side. Numerous lawsuits have been filed.

In perhaps the biggest lawsuit, the children and grandchildren allege that the widow has cut inappropriate side deals for the copyrights to Brown's music. These copyrights are where the bulk of the estate's value likely is found. They also allege in another lawsuit that the widow was not even married to Brown, because she was allegedly also married to another man.

It is safe to say that this dispute is unlikely to end soon. The biggest losers here are the children who would otherwise be receiving assistance.

Reference: New York Times (Feb. 4, 2018) "Why Is James Brown's Estate Still Unsettled? Ask the Lawyers."

Building Legacies that Last Estate Planning and Elder Law

Month: March 2018