August 30, 2017

What Is Fair in Blended Families?

How to fairly divide an estate between multiple children, can be a difficult question to answer. It can get even more difficult, when the family is not a traditional one.

When people get remarried and they have children from a previous relationship, then their estate planning can get pretty complicated.

Consider for example, a man who has two homes and two daughters from a previous relationship getting remarried. This man decides to create a trust that leaves one of his homes to his two daughters, since that is the house in which they grew up in. The other home will go to his new wife.

That seems like an equitable solution.

However, the man and his new wife, then had a son and they also purchased a third home.

Now, the question becomes how do they make sure that all of the man's children are treated equally?

If any inheritance the new wife receives will eventually go to her son and he also receives a portion of his father's estate, then he will receive a larger inheritance than his step-sisters.

How to resolve this situation was the subject of a recent letter to Market Watch as reported in "How do I split my estate between my two stepdaughters and biological son?"

There is no single perfect solution to this situation that will work in all cases.

It depends on how much the woman brought into the marriage and how old her step-daughters were at the time.

What will work for one family, will not work for another.

If the women brought few assets into the marriage, then the fair thing to do might be to give her a life estate in the property, but then divide that property up equally between all three children when she passes away.

If you have a blended family, then visit an estate planning attorney to learn about the options to deal with this type of situation for your family.

Reference: Market Watch (August 8, 2017) "How do I split my estate between my two stepdaughters and biological son?"

August 29, 2017November 26, 2024

Update Your Estate Plan

If you do not continuously update your estate plan, then it will not be as effective as you want it to be.

After people get an estate plan, the last thing many of them want to do again, is to go back to the estate planning attorney and make changes.

It can be expensive to do so and it takes time away from other things. It also forces people to think again about their own deaths.

This leads people to think that if they have already gotten an estate plan, then at least they have something. They believe that they do not need to make regular changes, since they will always have time when they are older to change their plans to account for everything that has changed since they first got estate plans.

However, that is a bad idea as Market Watch reports in “There’s no time like the present to update your estate plan.”

The biggest issue is that you might not have as much time to update your estate plan as you think. Even the most cautious person with the healthiest habits in the world, can never know what might happen to him.

You do not have time to wait to update your estate plan to take changing circumstances into account. It is important to make changes to your estate plan, when those changes first become necessary.

If you do not continuously update your estate plan, then you risk leaving your family in a bad position when you pass away. They are the ones who will have to deal with anything that might have made sense once, but that no longer does.

Reference: Market Watch (August 7, 2017) “There’s no time like the present to update your estate plan.”

August 16, 2017

Estate Planning Bad Advice is Common

It is very easy to find bad estate planning advice on the Internet. Make sure that you are listening to experts.

If you start Googling for advice about what to do with your estate, you are likely to find some good sources of information. You are also likely to find a lot of bad information, even from people who put themselves out as trusted sources.

A recent column in the Mercury News, "Money Manners," is an example of the problem.

A couple wrote in to ask the columnists' advice about something their attorney suggested they do.

The attorney suggested that they convene a family meeting to discuss the terms of their estate plan. The couple was hesitant, because they knew not everyone would be happy with their plans and they did not want to deal with the fallout.

Unfortunately, the columnists then gave bad advice and suggested that the attorney only gave his advice, so he did not have to be the one to deliver the bad news to the family after the couple passed away.

The problem is that most estate planning attorneys do advise clients to talk to their families about their plans and what they should expect to receive, if not specifically, at least generally.

That advice is not given to make it easy on the attorney.

The reason for the advice is so people are made aware of the plans ahead of time and have a chance to express any discontent. Once informed, people are much less likely to pursue litigation over the estate.

When people learn the reasons behind the decisions they do not like, they have time to digest and accept them without costing the estate a small fortune in litigation costs.

The lawyer, in this case, would stand to earn more money if any of the family members did decide to sue.

Make sure the advice you receive is from experts. Listen to your attorney.

Reference: Mercury News (July 13, 2017) "Money Manners."

August 14, 2017February 15, 2024

Beneficiary Planning

Who you make the beneficiaries of your retirement accounts, can have major implications for your estate.

When you first signed up for a retirement account, you might not have thought about all the details that were presented to you. This is especially true, if you were given retirement account forms along with a large stack of other papers by a human resources person when you started a new job.

One of the items you would have filled out on the forms was an account beneficiary. If you were to pass away, this beneficiary would then receive the assets in the account.

At the time, you might not have thought too deeply about who you designated as that beneficiary. However, it is important that you do think about it when you are making your estate plans, as Morningstar pointed out in “Do’s and Don’ts for Beneficiary Designations.”

There are actually many things to consider when naming beneficiaries on retirement accounts.

For example, different beneficiaries are treated differently for tax purposes and in how they can use the account.

Another thing to consider is your designated beneficiary, who will receive the account automatically and has no obligation to share with other people, even if you tell them they should. Therefore, if you have three children and name only one of them as a beneficiary, then you might not want to split the rest of your assets evenly between all three children.

The best thing to do is to talk to your estate planning attorney about your beneficiary designations and let the attorney help you determine the best options for them, as part of your overall estate plan.

Reference: Morningstar (July 23, 2017) “Do’s and Don’ts for Beneficiary Designations.”

July 25, 2017

Train Your Heirs

If you want your wealth to last and be available for future generations of your family, then you need to make sure that your heirs are ready to handle the responsibility of maintaining your wealth.

The ability to manage and preserve a large amount of wealth is not something most people are born with. If it were, then there would be few stories about big lottery winners ending up with less money after a few years, than they had before they won millions.

There are many stories like that.

There are also numerous stories about families that once had a lot of wealth that was lost over the generations.

These stories are actually so common that the few families who successfully preserve wealth for generations, are considered the exceptions to the rule.

Recently, the Wills, Trusts & Estates Prof Blog discussed ways to make sure your family might be one of the exceptions in "Preparing Heirs for Successful Wealth Stewardship."

The key to such success actually seems relatively simple. In practice, however, it can be difficult.

Heirs need to be trained to handle the wealth.

They need to know how to make good investments and how to avoid bad ones. They also need to learn what good uses for the money are and what type of spending would be wasteful.

Perhaps, most importantly, heirs need to know who to turn to for advice.

A good estate plan is also vital to preserving family wealth.

The wealth cannot be maintained without the proper legal instruments, but estate planning is not enough by itself.

Reference: Wills, Trusts & Estates Prof Blog (June 29, 2017) "Preparing Heirs for Successful Wealth Stewardship."

June 16, 2017

Leaving A Large Inheritance? Pros & Cons

Many wealthy people are torn between wanting to leave a large inheritance for their children and fears that their children will not be able to handle the wealth.

Wealthy parents whose children do not get independently wealthy on their own, often fear that leaving those children a large inheritance would be a mistake. The children might not be able to handle the money and it might cause them to give up their own careers.

In some cases, the children might also waste all of the money and leave nothing for their own children. Despite this common fear, the wealthy parents do want to leave their children large inheritances.

This tension creates problems for many people as they plan their estates, as the Wills, Trusts & Estates Prof Blog points out in "New Focus for Estate Planning."

The key to resolving this tension is to understand that estate planning can be about more than just transferring a lot of assets to heirs. With a traditional Will, heirs get all of the assets at once, which leaves open the possibility that assets will be misused.

There are many kinds of available estate planning tools that can be used to make sure that heirs do not waste everything.

Many types of trusts will help preserve the assets.

Of course, this can only be done, if an estate planning attorney knows that the client fears his children will waste an inheritance. The attorney needs the client to express these fears, so the attorney can devise the best plans.

Reference: Wills, Trusts & Estates Prof Blog (May 17, 2017) "New Focus for Estate Planning."

June 15, 2017

Alan Thicke Estate Battle

Alan Thicke's sons are fighting with their stepmother over their father's estate.

Two of deceased actor Alan Thicke's sons have entered the probate case to settle their father's estate with a unique claim. The have filed a claim suggesting that Thicke's third wife, Tanya Callau, is attempting to get more of the estate than she is entitled to receive and that she has threatened to go to the tabloids, if she does not get her way.

Thicke and Callau had a prenuptial agreement and she is already set to get a sizeable portion of his estate. Her take includes 25% of his personal assets, 40% of the remainder of the estate, a $500,000 life insurance payment and she can stay in the residence for the remainder of her life.

The sons have not stated what else Callau wants and it is not known what she would tell the tabloids, if she went to them.

TMZ reported this story in "Alan Thicke Sons Go To War With His Wife To Protect the Estate."

Other than the celebrity nature of this estate and the alleged threat to get the tabloids involved, this is, of course, not a particularly unusual estate battle.

Adult children are often at odds with a surviving step-parent and that battle often makes its way into probate court to fight over the estate. This is especially true when there are large sums of money involved.

Wealthy people who have remarried and who have children from previous relationships, need to understand how common these types of fight are. They then need to make estate plans with that in mind, if they hope to minimize the problems.

Reference: TMZ (May 16, 2017) "Alan Thicke Sons Go To War With His Wife To Protect the Estate." Estate Administration, Estate Litigation

June 8, 2017September 16, 2024

Protect Your Digital Assets

Technology is changing so rapidly that people and the law are not keeping up. This creates problems in estate planning.

It was not that long ago when the Internet was new and primarily seen as nothing more than a source of entertainment for most people. That has changed dramatically.

More and more people are now conducting business online and our digital accounts have become a large part of our personal lives. This has become a problem in estate planning because most people manage their finances online and after death their heirs cannot access these digital files, which are password protected. A generation ago, heirs could discover financial information relatively easily through paper statements.

Laws have also not kept pace, as Investment News discusses in “Most estate plans aren’t dealing with digital assets properly.”

By default, what happens to digital accounts and assets after we pass away is a patchwork of the individual terms of services of the different websites that we use.

Every website has different rules about the accounts and whether they can be passed to heirs and under what circumstances they can be passed down. And whether passwords and accounts can be accessed.

Some states have attempted to address this problem by adopting proposed uniform laws, but there is a long way to go for the law to catch up with technology. Maryland and DC have passed new laws.

If you would like to make sure your heirs can access your digital financial information or have a say in what happens to your digital accounts after you pass away, it is important that you speak with an estate planning attorney about it, so you can make appropriate plans.

Reference: Investment News (May 11, 2017) “Most estate plans aren’t dealing with digital assets properly.”

June 7, 2017October 25, 2023

Why Trusts Are Better Than Wills

Most estate planning attorneys believe that trusts are generally a better way to distribute an estate than wills. It is important to know the reasons why that is.

If you spend any time at all talking to estate planning attorneys or researching estate planning online, it will not be long before you hear that trusts are usually better than wills for estates. This has become such a truism, that even many non-attorneys instinctively suggest a trust when a friend asks them about estate plans.

While it should be noted that trusts are not always better, it is true that they almost always are. Particularly, in Maryland and the District of Columbia, which have Maryland estate taxes and DC estate taxes, which are lower than federal estate taxes, trusts are especially helpful.

Recently, Wicked Local Norwood listed some reasons why that is the case in “Five Ways in which a trust is better than a will,” including:

With a trust you can avoid probate, which can be expensive and time-consuming. Most wills have to go through probate court.
A trust can be drafted that protects your beneficiaries from creditors. If you give heirs money outright in a will, then any creditors they have can go after that money. Trusts avoid this problem.
Special needs trusts can be used to give assets to people with disabilities without making them ineligible for government benefits.
Trusts can be used to reduce estate taxes in ways that are impossible to do with wills.
With a trust, you can leave assets for minor children that are managed by a third-party without the unnecessary intervention of probate courts.

All that noted, wills have the benefit of a neutral judge overseeing the process and “testamentary trusts” can be created under wills that accomplish the same ends as those available through a revocable living trust that avoids probate.

Regardless, consult with a qualified estate planning attorney to evaluate the best approach for your unique circumstances.

Reference: Wicked Local Norwood (May 14, 2017) “Five Ways in which a trust is better than a will.”

May 29, 2017

Treating Your Children Fairly

One of the biggest problems in estate planning is figuring out how to treat children fairly in circumstances when fairly does not necessarily mean equally.

The default estate planning option for people with more than one child is to divide their estates equally between their children. That is the most common thing that is now done in estate planning.

It is easy and simple.

Most of the time it is a fair way to divide a parent's estate and one that the children accept. That does not always work, however, because as every parent eventually learns, treating children fairly does not always mean treating them equally. That holds true in estate planning.

Adult children can wind up in very different life circumstances for a variety of reasons. For example, if one child became wealthy after receiving a large gift from his parents to start a business, it might not be fair to treat that child the same in an estate plan as another child who went into public interest work.

Figuring out how to divide an estate unequally but fairly between children can be difficult, as the Wills, Trusts & Estates Prof Blog discussed in "Dividing Your Wealth Among Your Children."

The biggest problem is figuring out how to make the unequal division without causing any of the children to dispute the estate. Trusts are extraordinarily helpful in these situations, since they are much more difficult to challenge.

Parents can create a trust with an independent trustee and give the trustee the power to make distributions to the children based on their circumstances and needs. It is also important that parents who are leaving unequal inheritances for their children talk to the children and let them know the reasons for doing so.

If you want to leave your children unequal inheritances, you need to seek the advice of an experienced estate planning attorney to make sure you do so in a way that your children will think is fair and not seek to challenge.

Reference: Wills, Trusts & Estates Prof Blog (May 5, 2017) "Dividing Your Wealth Among Your Children."

Building Legacies that Last Estate Planning and Elder Law

Category: Maryland Estate Planning