Building Legacies that Last Estate Planning and Elder Law

Life Insurance Trusts

Business_meeting[1]Life insurance is a great way to provide your family with liquid assets after you pass away, but if the policy benefits would put your estate over the estate tax exemption, then you might consider a trust.

When planning the estate of a family's primary breadwinner one of the biggest concerns is providing the necessary cash assets for the rest of the family to live on while everything else gets settled. This is especially the case if the estate is expected to go through probate or if most of the estate assets are difficult to sell quickly.

One of the best ways around this problem is through the use of life insurance. The policies pay out in cash almost immediately. However, as Forbes points out in "3 Considerations for an Irrevocable Life Insurance Trust" the solution is not always perfect.

One of the problems with life insurance policies is that the benefits can be counted for estate tax purposes. This is especially problematic if the benefits would put your estate over the exemption limit when it would not be otherwise.

One way to get the advantages of life insurance while avoiding the estate tax problem is to create an irrevocable life insurance trust. The trust becomes the owner and the beneficiary of the life insurance policy and keeps the benefits out of the estate tax calculations. However, if you transfer ownership of an existing life insurance policy, then you must live for three years to avoid having the IRS include the death benefit value in your estate anyway.

If you have questions about irrevocable life insurance trusts or other ways to provide liquid assets to your family after you pass away, then speak with an estate planning attorney about the options.

Reference: Forbes (Sept. 19, 2016) in "3 Considerations for an Irrevocable Life Insurance Trust."


Should Seniors Get Married?

Happy-old-couple[1]Getting married always comes with challenges and finances that needs to be worked out. This is especially true for people in their retirement years.

When people fall in love and decide that they want to get married, they often do not think of all of the financial consequences of their decision to wed. In the popular imagination this is something that young couples do all the time. They rush into a marriage without having first considered all of the financial implications.

However, elder law experts point out that the tendency does not go away with age.

Senior citizens are just as likely to get married without thinking everything through. That can be a problem, because seniors have more they need to think about than younger people as the Hartford Courant reports in "Fit To Be Tied? Think Twice About Marriage In Your Golden Years."

Senior citizens considering getting married need to think about how marriage will affect all of their other plans, including retirement and estate plans. For example, a retired person might think his well-crafted estate plan to leave his assets to his children is solid and that a new wife with assets of her own will not affect those plans.  Under the law, in Maryland and DC, however, a spouse is given inheritance rights.  Therefore a retired person should contact a Maryland estate plannning attorney to review options to protect his children and the new spouse.  There are several trusts that protect a spouse during life, while leaving the underlying assets to children from a prior marriage.  Call Profit Law Firm, for consultation to find an option that works for your family.

In reality, it is almost impossible to cut a spouse out of an estate plan entirely. Consequently, whether or not the couple intends it, the new spouse is likely to inherit something without very careful planning. An estate planning

That is not to say senior citizens should never get married. They just need to think about it and visit an elder law attorney familiar with estate planning to learn about all the implications and what can be done about them.

Reference: Hartford Courant (Sept. 24, 2016) "Fit To Be Tied? Think Twice About Marriage In Your Golden Years."


How to Get an Estate Plan

Bigstock-Extended-Family-Outside-Modern-13915094[1]People seeking retirement advice often express concerns about needing to leave an inheritance for their loved ones. They should get an estate plan to do that.

Different professionals have different roles in your financial well-being. Accountants can assist you with your tax returns. Retirement planners can assist you with your investments. And, as Morningstar explains in "Get Your Estate Plan in Gear" estate planning attorneys can assist you with an estate plan.

The article discusses a couple looking for retirement advice. They wanted to make sure their daughter with special needs would be adequately provided for after they passed away.

The author suggested that they get an estate plan and gave some tips about how to do it, including:

  • Hire an attorney who specializes in estate planning. If you want to make sure that your loved ones are taken care of, then you do not want to create an estate plan on your own.
  • Take stock of all the assets you own so you know what needs to be distributed in your estate plan.
  • Figure out who you want to include in your estate plan as heirs, beneficiaries and in key roles, such as executors and trustees.
  • Try to learn what type of estate planning documents you might need. If you are not certain, then make sure that you let your attorney know that.
  • After you get an estate plan from the attorney, make sure you manage the physical documents themselves so they are in good shape and can be found if anything happens to you.
  • Keep your estate plan up to date and makes changes whenever your life circumstances change.

Reference: Morningstar (Sept. 23, 2016) "Get Your Estate Plan in Gear."


What Is Your Estate Planning Attorney Talking About?

Bigstock-Financial-consultant-presents--14508974[1]Estate Planning Attorneys talk about a lot of different legal documents. You need to know what those documents are.

When you visit with an estate planning attorney, the attorney is likely to mention the names of several different legal documents. If you want to understand what the attorney is talking about, then you will need to know what those documents are.

Most attorneys would be happy for you to ask if you do not know. Answering questions is what the attorney is there for. However, if you are not comfortable asking basic questions, then you should learn some basics beforehand.

Recently, the Ventura County Star published a list of basic estate planning documents and what they do in "Get to know estate planning documents." The list includes:

  • Advance Directive – Tells doctors and other health care professionals what procedures not to perform if you are terminally ill and have no chance of recovery.
  • Asset Inventory – A list of all of your assets to let your estate executor know what you have after you pass away.
  • Beneficiary designations – Life insurance, retirement accounts, and other financial accounts you designate to go to a specific person after you pass away.
  • Power of Attorney – Allows for someone else to handle your finances if you are incapacitated.
  • Power of Attorney for health care – Allows for someone else to make medical decisions for you if you are incapacitated.
  • Record of Locations – A list of where your heirs can find all the important financial and legal documents after you pass away.
  • Trust agreement – A method of passing assets to others while having those assets maintained by a third person.
  • Will – The most common estate planning document that says how assets should be distributed after you pass away via probate.

A qualified estate planning attorney can help you decide the best legal documents to use for your unique circumstances.

Reference: Ventura County Star (Sept. 17, 2016) "Get to know estate planning documents."


Rise of the Super Rich

Bigstock-Extended-Family-Relaxing-On-So-13907567[1]More and more Americans are amassing large fortunes. That means that more and more Americans are concerned about how passing that wealth on to their children could impact their children's lives.

In "Penta Millionaires: The New Rising Class" Barron's reports that the number of American families with wealth is growing and diversifying. More families have wealth of over $5 million than ever before. Many more of these wealthy are female and younger than ever before.

What many of the new wealthy are discovering is the old truth that having money in and of itself does not necessarily translate into a worry-free life. Instead, being wealthy comes with its own set of worries about maintaining that wealth and how best to pass it on to the next generation.

Wealthy people, especially those who have earned the wealth themselves, often fear that if they leave it to their children, it could ruin their children's lives.

The children might inherit the wealth and decide they do not need to work hard at their own careers and they can just live off of their parents' money. Some parents also fear their children will waste their inheritances on frivolous pursuits and possessions.

There are several ways to help alleviate these concerns about the effect of large inheritances on children.

One way is to make sure the children receive a proper education in how to handle finances. Another complimentary way is through proper estate planning.

Inheritances can be structured to ensure that assets are not squandered and that the children who inherit wealth continue to pursue their own careers.

Contact a qualified estate planning attorney about how to bless your heirs instead of curse them with your wealth. Profit Law Firm can provide information on how to pass wealth in a manner that encourages children to handle it responsibly. 

Reference: Barron's (Sept. 17, 2016) "Penta Millionaires: The New Rising Class"


What is a Simple Will? When do you need more?

Bigstock-Beautiful-woman-looking-throug-20311445[1]The term "simple will" is often used to describe a certain standard type of will that many people get. Before getting one for yourself, you need to understand what it means.

Estate planning attorneys are used to clients saying they just need to get a simple will. Many people are told by others, long before they visit an estate planning attorney, that a simple will is what they need to get.  However, what a client might mean by a simple will is not necessarily what the attorney thinks it is.

Estate planning attorneys use the term to normally mean a particular type of will that has standard features.

Recently, the Courier Journal explained what those features are in "Thank You and Simple Wills."

A simple will normally refers to a relatively short document the primary feature of which is directing that all of the testator’s assets should go to a spouse. In the event the spouse has predeceased, then a simple will almost always directs that all assets be shared between the testator's children in equal shares. A simple will might also include basic information about who should be the guardian of any minor children the testator has.

That is normally all that a simple will contains, but there might be a few more basic provisions in some circumstances.

It should be obvious that a simple will is not the appropriate estate planning document for everyone.  Particularly in Maryland and DC, which are among the minority of states with either a state estate tax or an inheritance tax a simple will does not reduce tax liability or defer taxes.  In the District of Columbia which has an estate tax of $1 million and in Maryland which has BOTH an estate tax o $2 million and an inheritance, an individual may need more protection that  simple will provides.  Middleclass homeowners, for instance, based on the value of their house and insurane or IRAs, often exceed these thresholds and need more complex wills and/or  trusts to reduce state tax liability.  Consult Profit Law Firm, for a consultation to see if a simple will provides enough protection for your heirs.

Essentially, before telling an estate planning attorney you need a simple will, tell the attorney what you hope to accomplish with your estate plan. The attorney can then help direct you to the proper legal instrument for your needs.

Reference: Courier Journal (Sept. 13, 2016) "Thank You and Simple Wills."


Do You Need a Revocable Living Trust in Maryland?

Bigstock-Financial-consultant-presents--14508974[1]Contrary to popular belief estate planning is not one-size fits all and not everyone needs a revocable living trust. However, they are a good option for many people.

When you start asking around for estate planning advice, you will probably find the first thing many non-experts say about it is that you need to get a revocable living trust. They are extremely popular instruments and articles abound on the Internet extolling their virtues. They are so popular that a common belief is that everyone should get one.

That noted, they do have drawbacks and these drawbacks might make some people decide to go another route. Contrary to popular belief, revocable living trusts do not offer tax protection.  Different trust and estate planning tools can be used to reduce tax liability.  Another drawback, is that revocable living trust give take assets out of probate, and sometimes you lose valuable benefits found in probate.  For example, in Maryland, creditos can only come after assets in the estate for six months after death, versus the usual three year period.  Placing assets in revocable trusts take them out of probate and give them longer exposure to unwarranted creditor claims.

Specifically, the Motley Fool looked at the benefits and drawbacks of revocable living trusts in "Is a Revocable Living Trust Right for You?"

The biggest benefit of a revocable living trust is that your primary assets, as long as they are transferred into the trust, do not have to go through probate when you pass away. As probate can be an expensive and time-consuming experience, this can make handling your estate much easier for your heirs.  In Maryland, probate is relatively inexpensive and less lenghty, so some people may find it to their benefit to be in probate.  Probate is also normally a public process, but if you have a trust you can keep your estate details private. Probate is public in Maryland and DC.  Finally, should you become incapacitated a successor trustee can take over your finances instead of having to go through court to get a guardian.

On the other hand, trusts can be more expensive to set up than other estate planning instruments, but they might save your estate money in the long run depending on probate costs. Transferring assets into your trust can also be very time-consuming depending on what you own. Having a revocable living trust also does not mean you do not need a will. You will still need a simple will to deal with anything left out of the trust.  If you want a consultation on whether  revocable living trust is right for you, contact the Profit Law Firm.

Reference: Motley Fool (Sept. 10, 2016) "Is a Revocable Living Trust Right for You?"


Basic Estate Planning Mistakes to Avoid

Bigstock-Extended-Family-Relaxing-On-So-13907567[1]If you would like to make sure that your estate goes to the people you want it to go to, then it is important to avoid making some basic estate planning mistakes.

It is impossible to avoid making mistakes in every aspect of your life. No one can always be perfect at everything. Estate planning is no different.

CNBC recently wrote about some of the common estate planning mistakes we can avoid in "Don't drop the ball when planning your estate."

They include:

  • Many people do not make a will. Without a will, then you cannot decide who gets your property. Every estate plan should have a will of some sort.
  • After making a will some people never update it. This is a mistake as a will should be changed whenever there is a significant change in circumstances to make sure the will reflects the new circumstances.
  • It is a mistake to not consider how your heirs will handle their inheritances and whether they are capable of being responsible with anything you leave them.
  • It is a mistake to not consider getting a trust, especially if your heirs have the potential to be irresponsible. A trustee can oversee the inheritance and make sure it is used appropriately.
  • Finally, it is a mistake to not think carefully about who to appoint as an executor of a will or as a trustee.

If you realize that you need a will or trust, call Profit Law Firm for a consultation.

Reference: CNBC (Sept. 13, 2016) "Don't drop the ball when planning your estate."

Librarian Leaves Millions to University

Giving-to-charity2[1]Every once in a while a story comes out about a person who lived frugally and managed to amass a fortune. The latest example is a librarian from New Hampshire.

Robert Morin loved books. It is believed that with only a few exceptions he once read every book published in the U.S. between 1930 and 1940 in chronological order. Thus, it was probably fitting that when he graduated from the University of New Hampshire in 1963 he went to work in the school’s library.

Librarians do not normally make a lot of money, so it came as a surprise to everyone when Morin left the university his entire fortune when he passed away, which was approximately $4 million.

Apparently, Morin lived simply and invested well. He stipulated that $100,000 should go to the library where he worked, but the university can use the rest for other purposes.

My Central Oregon reported this story in “Librarian Quietly Saved $4 Million, Left it to School Where He Worked.”

Similar stories come up every few years. For example, grade school teachers have been known to save and leave millions to charity. In another recent case, a janitor left a small fortune to the school where he worked.

What this shows is that anyone who has the desire to do so can make a fortune by living simply and investing money well.

Of course, not everyone wants to live that way. Those who do, however, should not neglect to spend some of their money visiting with an estate planning attorney so they can makes sure the money goes where they want after they pass away. It does not make sense to save all the money only to have it go to someone you do not want to have it.

Reference: My Central Oregon (Sept. 4, 2016) “Librarian Quietly Saved $4 Million, Left it to School Where He Worked.”


What You Need to Know About Estate Planning

Business_meeting[1]Estate planning can be a complicated topic to learn. However, most people only need to know the basics and where to find a good attorney.

If you are trying to research estate planning online, you will be forgiven if you get a headache. There are many articles written on the subject, but they often have confusing terminology and long lists of various legal documents most of the public have never heard of. This turns many people off of an important subject that they need to consider.

On the other hand, most people need to know only enough of the basics of estate planning so they know enough to hire a good estate planning attorney.

Recently, published a list of those basics in “7 Things Your Estate Planner Wants You to Know Before You Die,” including:

  • You are going to die someday so you need to think about it and think about what will happen to your property when you do.
  • If you die without an estate plan, sorting out your estate will be far more complicated for your family than it needs to be. This is true even if you do not have many assets.
  • One of the first steps to estate planning is simply to take an inventory of your important assets.
  • Naming a qualified executor to oversee your estate is one of the best things you can do to make sure everything goes well for your family.
  • If you own a home, the property tax issues can be complex after you pass away. It is important that you have the advice of a local estate planning attorney.
  • After you get an estate plan, you need to review it periodically to make sure everything is still up to date.
  • Should you ever need long term care in a nursing home, you may not need to sell your home to pay for it. However, long-term care planning is complex, so consult with a qualified elder law attorney.

Reference: (Aug. 28, 2016) “7 Things Your Estate Planner Wants You to Know Before You Die