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How Do I Disinherit My Child?

How Do I Disinherit My Child?

Disinheriting a child or any person trying to gain access to your assets after you have died requires skilled estate planning. The things that can be done before you die to protect your estate are the subjects of a recent article “Disinheriting a child” from Westfair Online. It should be noted that if you anticipate a challenge to your will, or if you suspect claims will emerge after you pass, it will be wise to prepare your estate and family members for the legal, financial and emotional aspects of an estate battle.

Here are some of the steps to consider.

Avoiding probate. The probate estate includes assets that are controlled by your Last Will and Testament on the day you die. It does not include assets where there are named beneficiaries. Such assets pass directly to beneficiaries.

Before a will can be executed, it must go through probate. Part of the probate process is the notification of any individuals who may be entitled to receive assets. If you pass away without a will, the estate still needs to be probated and those individuals must still be provided with a notice of your passing and the distribution of your assets. If you had intended to disinherit someone and did not take the necessary steps, it is as if you have issued an invitation to them.

Using a revocable trust. Trusts are used to remove assets from probate estates. A revocable trust is a trust that allows you to maintain complete control over the assets in the trust, while you are living. When you die, the trust does not go through probate and no one needs to be notified of the trust’s existence or its terms, if you so specify and state law permits. Your wishes and assets may remain private. This is especially useful, if you want to disinherit someone.

The revocable trust is not immune from contest, but it makes the challenging more difficult.

Changing titles to joint ownership and naming beneficiaries. Changing your bank, investment and real estate property ownership to joint ownership is a way to avoid probate and have assets pass directly to your intended beneficiaries. However, there are complications to this strategy. If the person you add to an account has money problems, your assets are now available to their creditors. If the person on the account goes through a divorce, your assets are legally available to their spouse. And if the joint owner should die before you, any protection you may have obtained is gone. A trust may be a better solution.

Review your retirement plans and any other assets that allow you to name a beneficiary to ensure that the person who will receive these assets is still the person you want.

What about a no-contest clause? It seems like a simple solution—by including a no-contest clause, often referred to as an “in terrorem” clause, anyone who seeks to contest the will immediately forfeits any distribution to that person, if they are not successful in the will contest. However, what if they are successful in the will contest?

Talk with an experienced estate planning attorney about these and other strategies to defuse a disinherited person’s potential claims. Disinheriting a child sparks many estate battles, so preparations need to be made to protect the family and the estate.

Reference: Westfair Online (Jan. 26, 2021) “Disinheriting a child”

Read more related articles at:

A Step-by-Step Guide to Disinheriting a Child

Factors to Consider Before Disinheriting a Child

Also, Read one of our previous Blogs at :

How Can You Disinherit Someone and Be Sure it Sticks?

Click here to check out our On Demand Video about Estate Planning.


Advanced directives

What Do I Need to Know about End-of-Life Care?

What Do I Need to Know about End-of-Life Care?

What Do I Need to Know about End-of-Life Care? An advance directive is a legal document that can provide instructions about the type of medical care you want, if you become seriously ill and are at the end of your life.

You can state the types of medical treatments you do and do not want to receive and can name a person to make certain that your health care decisions are followed.

US News & World Report’s recent article entitled “With COVID-19, It’s Time to Talk End-of-Life Care” explains that as the coronavirus pandemic continues to hit the U.S., and patients are filling ICU beds, you might not consider the fact that you should have an advance directive because you’re young and healthy. However, COVID-19 can strike a person of any age. Those at higher risk of becoming seriously ill due to COVID-19 have usually been the elderly and those with chronic conditions, such as obesity and diabetes. However, the coronavirus has also claimed the lives or seriously afflicted younger people and professional athletes.

You can make a number of decisions about your end-of-life care. They include whether you want everything possible done to keep your vital organs working—sometimes called “heroic measures”—like as being placed on a ventilator to support breathing or initiating dialysis for failing kidneys. There also are decisions to make, if your heart stops beating due to cardiac arrest and whether you would like to have CPR or defibrillation performed to revive you.

Some people will sign a “do not resuscitate” or “DNR” order. That means that no measures are to be taken to revive the patient. Many who have a DNR believe that they have enjoyed a good life and do not want to live their final days in an incapacitated state.

They only ask to pass away without suffering and with “comfort care,” which focuses on symptom control and pain relief.

You should make these types of decisions after you have some frank conversations with your family, so they understand your wishes.

You can modify an advance directive document, and that for some states, a living will and health care proxy forms are combined into one document. For other states, the forms are separate.

Reference: US News & World Report (Jan. 5, 2021) “With COVID-19, It’s Time to Talk End-of-Life Care”

Read more related articles at:

Living wills and advance directives for medical decisions

What are Advance Directives and Why Are They Important?

Also, read one of our previous Blogs at:

Why Do I Need an Advanced Healthcare Directive?

Click here to check out our On Demand Video about Estate Planning.

Estate Planning

Do We Need Estate Planning?

Do We Need Estate Planning?

Estate planning also referred to as an EP, is not just about making a will, nor is it just for people who live in mansions. It is best described in the title of this article “Estate planning is an important strategy for arranging financial affairs and protecting heirs—here are five reasons why everyone needs an estate plan” from Business Insider. Estate planning is a plan for the future, for you, your spouse and those you love.

There are a number of reasons for estate planning:

  • Avoiding paying more federal and state taxes than necessary
  • Ensuring that assets are distributed as you want
  • Naming the people you choose for your own care, if you become incapacitated; and/or
  • Naming the people you choose to care for your minor children, if you and your spouse left them orphaned.

If that sounds like a lot to accomplish, it is. However, with the help of a trusted estate planning attorney, an EP can provide you with the peace of mind that comes with having all of the above.

If those decisions and designations are not made by you while you are alive and legally competent, the state law and the courts will determine who will get your assets, raise your children and how much your estate will pay in death taxes to state and federal governments. You can avoid that with an EP.

Here are the five key things about estate planning:

It’s more than a will.  It includes creating Durable Powers of Attorney to appoint individuals who will make medical and/or financial decisions, if you are not able to do so. The estate plan also contains Medical Directives to communicate your wishes about what kind of care you do or do not want, if you are so sick you cannot do so for yourself. The estate plan is where you can create Trusts to control how property passes from one person or one generation to the next.

Estate planning saves time, money, and angst. If you have a surviving spouse, they are usually the ones who serve as your executor. However, if you do not and if you do not have an estate plan, the court names a public administrator to distribute assets according to state law. While this is happening, no one can access your assets. There’s a lot of paperwork and a lot of legal fees. With a will, you name an executor who will take care of and gain access to most, if not all, of your assets and administer them according to your instructions.

Estate planning includes being sure that investment and retirement accounts with a beneficiary designation have been completed. If you don’t name a beneficiary, the asset goes through the probate court. If you fail to update your beneficiary designations, your ex or a person from your past may end up with your biggest assets.

Estate planning is also tax planning. While federal taxes only impact the very wealthy right now, that is likely to change in the future. States also have estate taxes and inheritance taxes of their own, at considerably lower exemption levels than federal taxes. If you wish your heirs to receive more of your money than the government, tax planning should be part of your estate plan.

The estate plan is also used to protect minor children. No one expects to die prematurely, and no one expects that two spouses with young children will die. However, it does happen, and if there is no will in place, then the court makes all the decisions: who will raise your children, and where, how their upbringing will be financed, or, if there are no available family members, if the children should become wards of the state and enter the foster care system. That’s probably not what you want.

The estate plan includes the identification of the person(s) you want to raise your children, and who will be in charge of the assets left in trust for the children, like proceeds from a life insurance policy. This can be the same person, but often the financial and child-rearing roles are divided between two trustworthy people. Naming an alternate for each position is also a good idea, just in case the primary people cannot serve.

Estate planning, finally, also takes care of you while you are living, with a power of attorney and healthcare proxy. That way someone you know, and trust can step in, if you are unable to take care of your legal and financial affairs.

Once your  plan is in place, remember that it is like your home: it needs to be updated every three or four years, or when there are big changes to tax law or in your life.

Reference: Business Insider (Jan. 14, 2021) “Estate planning is an important strategy for arranging financial affairs and protecting heirs—here are five reasons why everyone needs an estate plan”

Read more related articles at:

Do you need an estate plan?

5 Reasons You Need an Estate Plan

Also, read one of our previous Blogs at:

What Kind of Estate Planning Do I Need During the Pandemic?

Click here to check out our On Demand Video about Estate Planning.

VA Caregiver Program

Some Veteran Caregivers Eligible for COVID-19 Vaccine through VA

Some Veteran Caregivers Eligible for COVID-19 Vaccine through VA

The move is the result of a coalition of veterans groups that lobbied for the caregivers to be sent to the top of the vaccine list, arguing that they deserved to be included in the first wave of medical professionals being protected against the deadly illness, says Military Times’ recent article entitled “Tens of thousands of veteran caregivers now eligible for the coronavirus vaccine through VA.”

Dr. Richard Stone, executive in charge of the VA, released a memo stating that those registered with the department’s Program of Comprehensive Assistance for Family Caregivers can be given the vaccine “in a coordinated manner with the veterans for whom they provide care.”

More than 6,700 VA patients have died from COVID complications in the last 10 months. Stone’s memo states that decisions will be made “in balance with site-specific resources, needs, vaccine availability, hesitancy to accept the vaccine and status of the pandemic locally.”

In an interview with Military Times, Stone commented that he is shifting many of those vaccination decisions to local officials to give coverage to more individuals.

“We need to leave it up to people at the bedsides, to make sure they are making the best decisions for veterans,” he said. “When someone brings a veteran in to give them the vaccine, they can easily identify what the other needs are.”

Roughly 20,000 veterans are registered in the caregiver program at the Department of Veterans Affairs. This program provides monthly stipends and other support to individuals providing regular medical assistance to infirm veterans.

The data shows that the majority of this group are family members of post-9/11 veterans. The caregiver assistance program was expanded last fall to veterans who served before May 1975.

And recently, a coalition of veteran groups, including The Independence Fund, Military Order of the Purple Heart and the Non-Commissioned Officers Association sent a letter to Federal Emergency Management Agency officials asking them to authorize the VA to administer the caregiver vaccines, under its role as the lead coordinator of federal response to the pandemic.

Dr. Stone said as of January 13, VA officials had administered the first dose of the two-part vaccine to more than 332,000 department health care employees and veterans at high-risk of contracting coronavirus. Another 45,000 individuals have already received their second dose. The vaccine has been sent to nearly 200 department facilities. However, officials have warned that it could be months before they can administer the more than 7 million vaccines they expect to be requested by veterans and staff.

Reference: Military Times (Jan. 14, 2021) “Tens of thousands of veteran caregivers now eligible for the coronavirus vaccine through VA”

Read more related articles here:

Veteran caregivers can receive COVID-19 testing, vaccinations

VA to provide COVID-19 testing and vaccinations to caregivers of Veterans in the Program of Comprehensive Assistance for Family Caregivers

VA to vaccinate veteran caregivers after policy change

Also read one of our previous blogs at:

What are the Issues with COVID Vaccinations Sign-ups for Seniors?

Click here to check out our On Demand Video about Estate Planning.



Did Larry King have an Estate Plan?

Did Larry King have an Estate Plan?

Larry King’s health was not good the past few years before he died in the hospital last week. He was 87, with a history of heart trouble, a stroke and then he got sick with the coronavirus. He was also paying spousal support as part of a lengthy divorce negotiation.

This was his seventh wife who outlasted all the others. Since the divorce wasn’t final, she’ll inherit much of his estimated $50 million estate, says Wealth Advisor’s recent article entitled “Two Bankruptcies, Seven Wives: Larry King’s Estate Planning Miracle.”

The King of Talk wasn’t an early success. He was bankrupt before he was 30 and filed again at 45, when most successful people start eying early retirement. However, Larry had large gambling debts, grand larceny charges for defrauding a business partner and many professional setbacks.

By the time he really became a household name on CNN, he’d already had five divorces to four women as well as one youthful annulment.

Under normal circumstances, this would mean depleted bank accounts, since the households multiplied, and income continues to be split among the exes. However, King continued to work, and while each bankruptcy reset his official net worth to zero, every contract negotiation kept the income flowing.

Since he died before finalizing the divorce, his current wife Shawn is believed to receive everything not otherwise assigned in his will.

If the divorce were a done deal, she would have gotten a lump sum payment and $300,000 in annual support. Shawn had argued that she needed $1 million a year, but now it looks like she inherits everything.

Shawn lists $7 million in assets in her own name, including a house in Utah. That’s usually a good start to a divorce settlement division of property, but she wanted more because Larry was still working.

In fact, only last year, he signed a trial podcast deal worth at least $5 million.

Reference: Wealth Advisor (Jan. 25, 2021) “Two Bankruptcies, Seven Wives: Larry King’s Estate Planning Miracle”

Read more related articles here:

Larry King had a secret will that excluded his wife — estate planning gets messy

Larry King’s Wife Shawn Contests His Amended Will, Claims He Had a ‘Secret Account’

Also, read one of our previous Blogs at:

Will James Brown’s Estate Finally Be Settled after 15 Years?

Click here to check out our On Demand Video about Estate Planning.


What Is a Conservatorship?

What Is a Conservatorship?

A conservator is appointed by a judge. This person handles the estate of an incapacitated adult, as well as their finances, their basic affairs and everyday care. Administrative matters such as Medicare, insurance, pensions, and medical coverage are all also managed by the conservator. The conservator must keep meticulous records that are subject to review by the judge.

The Advocate’s recent article entitled “Alzheimer’s Q&A: What is adult guardianship?” explains that a conservatorship typically lasts as long as the individual lives. The conservator may change because of death, relocation, or an inability to manage the conservator duties and responsibilities. A judge also has the power to replace the conservator, if he or she is repeatedly making poor decisions or neglecting required responsibilities.

A conservator can be wise in some situations because it lets family members know that someone is making the decisions. It also provides clear legal authority to deal with third parties. There is also a process in which a judge will approve any major decisions. However, appointing a conservator can be expensive. An experienced estate planning or elder law attorney must complete court paperwork and attend court hearings. A conservatorship can also be time-consuming due to the required ongoing paperwork.

A big question is when it is appropriate to seek conservatorship. If the individual has become mentally or physically incapable of making important decisions for himself or herself, then it would be smart to have a court-appointed guardian. Moreover, if the person does not already have legal documents in place, like a living will or power of attorney, then the conservatorship would benefit in covering decisions about personal and financial matters.

Even if the individual has a power of attorney for both health care and finances, he or she might need a conservator to make decisions about his or her personal life. This can include topics, such as living arrangements and who is allowed to visit. It is not always easy to determine if an individual can make decisions, but a judge understands that a conservator is viable for those with advanced Alzheimer’s or other forms of dementia.

Families that want to set up a conservatorship need to file formal legal papers and participate in a court hearing before a judge. Evidence of the physical and mental condition of the individual requiring conservatorship must be clearly presented. The person who is the subject of the conservatorship has the opportunity to contest it. Ask an experienced estate planning or elder law attorney who specializes in conservatorships about your specific situation.

Reference: The Advocate (Jan. 25, 2021) “Alzheimer’s Q&A: What is adult guardianship?”

Read more related articles at:

What Is a Conservatorship, and How Does It Work?

What Is a Conservatorship and What Does It Mean for Your Finances?

Also, read one of our previous Blogs at:

Britney Spears’ Conservatorship Battle with Father Continues

Click here to check out our On Demand Video about Estate Planning.


What Can We Expect from President Biden on Social Security Reform?

What Can We Expect from President Biden on Social Security Reform?

Experts think that one issue promised by President Biden, Social Security reform, could also become a focal point as soon as this year. CNBC’s recent article titled “Biden has promised to reform Social Security — some changes could come as soon as this year” says that the program’s funds have been running low. The latest official estimate from the Social Security Administration shows that just 79% of promised benefits will be payable in 2035 because of the depletion of its trust funds and this does not add in the impact of the pandemic, which experts say could move that date up even sooner.

Under his plan, eligible workers would get a guaranteed minimum benefit equal to at least 125% of the federal poverty level. Those who have received benefits for at least 20 years would get a 5% bump. Widows and widowers would receive about 20% more per month.

Biden also proposes changing the measurement for annual cost-of-living increases to the Consumer Price Index for the Elderly, or CPI-E, which could more closely track the expenses that retirees have. To pay for this, Biden would apply Social Security payroll taxes to those making $400,000 or more.

The COVID-19 pandemic has produced what has been called a “notch” that would decrease benefits for those turning 62 and claiming retirement benefits in 2022, as well as those who file for disability or survivor benefits that year. However, Congress is expected to act to prevent those reductions before they can happen.

However, even with a Democratic majority in the House and Senate, there could be roadblocks to getting major Social Security reform approved. The Democrats have proposed their own legislation designed to bolster the program, the Social Security 2100 Act.

This bill aims to boost benefits and restore the program’s solvency for the next 75 years, by raising payroll taxes. Another proposal, the Social Security Expansion Act from Senator Bernie Sanders, also seeks to up benefits for low earners while raising taxes for those with higher wages.

On the Republican side, Senator Mitt Romney says he would like to seek the TRUST Act passed, which would allow lawmakers form bipartisan committees to address programs, like Social Security, that face a shortfall in funding and fast track changes to improve them.

Reference: CNBC (Jan. 23, 2021) “Biden has promised to reform Social Security — some changes could come as soon as this year”

Read more related articles at:

Big Changes Likely for Social Security, Medicare Under a Biden Presidency

What Will President Biden Do to Social Security and Medicare?

Also, read ne of our previous Blogs at:

What Will Biden Do with Medicaid, if Elected President?

Click here to check out our On Demand Video about Estate Planning.

Nursing Home Costs

Protect Your Estate from Nursing Home Costs

Protect Your Estate from Nursing Home Costs

Nursing home care is expensive, costing between $12,000 to $20,000 per month, so most seniors should do all they can to prepare for this possibility. According to a recent article from the Times Herald-Record, “Elder Law Power of Attorney can save assets that would go to nursing home costs,” this is something that can be done even when entering a nursing home is imminent.

A Power of Attorney is used to name people, referred to as “agents,” to conduct legal and financial affairs, if we are incapacitated. Having this document is an important part of an estate plan, since it reduces or completely avoids the risk of your family having to go through guardianship proceedings, where a judge names a legal guardian to take over your affairs.

The guardian likely will be someone you have never met, who does not know you or your family. It’s always better to plan in advance, so you know who is going to be taking charge of your affairs.

Then there’s the Elder Law Power of Attorney, a stronger form of a Power of Attorney that includes unlimited gifting powers. Having this unlimited gifting power lets a single person who applies for Medicaid in a nursing home to protect their assets, by using a gift and loan strategy.

Here’s an example: Amy, who is single, can’t live on her own and even having home health care aides is not enough care anymore. She has $500,000 in assets and does not qualify for Medicaid to pay for her care. Medicaid will allow her to keep only $15,900.

One option is for Amy to spend down all of her money on nursing home costs, until all she has is $15,900. All of her savings will go to the nursing home, with very little left for her daughter, Ellen.

However, if Amy has an Elder Law Power of Attorney, a gift and loan strategy can protect her assets. Half of the money, $250,000, can go to Ellen as a gift under the unlimited gifting powers. The other half goes to Ellen as a loan, under a promissory note with a set rate of interest.

Any gifts made in the past five years, known as a “five year look back,” cause a penalty period. Amy will have to pay for the nursing home for about twenty months. Every month during that period, Ellen will pay Amy a monthly payment that, with her income, is used to pay the nursing home bill. At the end of the 20 months, Amy qualifies for Medicaid to pay for her care for the rest of her life, and Amy may keep the $250,000. Saving half of her assets by using the gift and loan strategy is sometimes called the “half a loaf is better than none” strategy.

With a Standard Power of Attorney, there are no unlimited gifting powers.

A Medicaid Asset Protection Trust (MAPT) created five or more years before Amy needed a nursing home could have saved her entire nest egg for Ellen.

Preplanning is always the better way to go. An elder law estate planning attorney is the best resource for determining what the best tools are to protect a nest egg if and when a person needs the care of a nursing home.

Many people make the mistake of thinking that it “won’t happen to me.” However, injuries and illnesses often accompany aging, and it is far better to plan for this eventuality in advance than waiting and hoping for the best.

DISCLAIMER: Medicaid planning is complex and the case hypothetical above with “Amy and Ellen” is provided for purposes of illustration. Whether this strategy would work for you or your loved ones depends on the laws of your state of residence given your unique circumstances. Consult with an experienced elder law attorney admitted to practice law in your state of residence before engaging in any Medicaid planning!

Reference: Times Herald-Record (Jan. 8, 2021) “Elder Law Power of Attorney can save assets that would go to nursing home costs”

Read more related articles at:

How Can a Trust Help You Avoid Nursing Home Costs?

Top 5 Strategies for Protecting Your Money From Medicaid

Also, read one of our previous Blogs at:

How Do I Keep My Assets from the Nursing Home?

Click here to check out our On Demand Video about Estate Planning.


Are Retirement Accounts Divided in a Divorce?

Are Retirement Accounts Divided in a Divorce?

Divorce is different for older couples. They must focus on retirement accounts instead of college savings plans, explains a recent article from Kiplinger titled “Considering Divorce? Beware of Retirement Account Breakups.” After retirement accounts, the marital home is usually the second largest asset.

Older couples with separate retirement accounts often combine the balances to divide them, along with any other savings accumulated during the couple’s lifetime. However, IRAs, 401(k)s and pensions are complicated financial tools and there are equally complex rules as to how the accounts are divided. Transferring retirement funds to a former spouse can have large tax consequences, if they are not done correctly.

Couples should have their matrimonial attorneys work with an estate planning attorney to protect their retirement funds from any mishaps. A qualified domestic relations order, or QDRO, is needed to transfer a 401(k) or pension rights in a divorce. The QDRO is issued by a court or state agency and recognizes the divorcing spouse’s right to receive all or part of a portion of the account owner’s defined contribution plan or pension.

Dividing assets with a QDRO occurs in two different ways. One awards a separate interest in the account balance, and the second permits the divorcing spouse to share in the payment of benefits. Once an agreement is reached, the account owner gives the document to the plan administrator. Drafting a QDRO can be costly, so it is recommended that the plan administrator be asked to provide model QDRO language to ensure that the document aligns with that particular plan’s requirements.

A 401(k) is easier to divide. Once the couple has negotiated who is getting what, the monies can be transferred to the other spouse’s IRA, with no federal income taxes or penalties. However, if the spouse receiving the money takes the money directly and it does not go by direct transfer, then income taxes will be owed. There won’t be a 10% penalty for early distribution, as long as the QDRO is correctly prepared. Once the money is transferred from one spouse to another’s IRA, then early withdrawals will require the payment of income taxes and a 10% penalty.

Pensions are more complicated. Each employer plan has different rules for dividing up a pension, and an actuary is needed to determine present value of future benefits to ensure a fair distribution. It’s easier to split a pension when the pensioner spouse has already begun taking benefits. In that case, the QDRO can be used to divide payments by a dollar or percentage amount.

There is no need for a QDRO for dividing an IRA. The terms for the division of the accounts must be specified in the divorce or separation agreement, which the account owner must provide to the IRA sponsor. If the money is to be divided with no taxes or penalties, the agreement must specify that a percentage or dollar amount of the account owner’s balance goes to the spouse’s IRA in a direct trustee-to-trustee transfer. The language matters to avoid taxes and penalties.

If the receiving spouse decides to take cash out in the transfer, they will still owe taxes on the withdrawal. If they are younger than 59 ½, they’ll also owe a 10% penalty. In the same way, the account owner who takes money from the IRA to give to a spouse in a divorce will have to pay taxes on the payout and the 10% penalty, if they are under age 59 ½.

Reference: Kiplinger (Jan. 4, 2021) “Considering Divorce? Beware of Retirement Account Breakups”

Read more related articles here:

How Retirement Plan Assets are Divided in a Divorce

How To Divide Retirement Plan Assets In A Divorce

Also, read one of our previous Blogs at:

What Does My Estate Plan Look Like after Divorce?

Click here to check out our On Demand Video about Estate Planning.

Sweetheart Wills

Why and When a Sweetheart Will (Or No Will at All) Is Not Enough

Why and When a Sweetheart Will (Or No Will at All) Is Not Enough

In a an article by Starvos S. Giannoulias of Chicago writes: WHY AND WHEN A SWEETHEART WILL (OR NO WILL AT ALL) IS NOT ENOUGH

Young couples at the stage where they are having children and purchasing their first home may not realize that they need estate planning.   The assets a couple is likely to acquire in the early stages of building wealth, such as a home, retirement accounts and life insurance, often do not pass according to the terms of a Will.

Property passing by beneficiary designation, such as life insurance and retirement accounts, is distributed to the persons named in the beneficiary designation when the account owner dies.  Similarly, when a couple purchases a home, they often choose to title the home in both of their names as joint tenants with a right of survivorship or as tenants by the entirety.   When one of the owners dies, the surviving joint tenant automatically owns all of the property, without the need for a probate process.

A couple owning assets that pass by beneficiary designation and joint tenancy may think – “Why do I need any estate planning at all if everything passes automatically at my death?” or “Why not have a simple Will in which I leave all of my assets to my spouse?”  (also known as a “Sweetheart Will”).   To answer those questions, a person needs to understand what happens when he or she dies without a Will and the problems that can arise when a person has a Sweetheart Will that does not include other planning.

When a person dies without a Will:

  • His or her property (other than property passing by joint tenancy or beneficiary designation) is distributed according to the default distribution laws of the state in which that person resides;
  • Usually the default distribution laws provide for some portion of the estate to be distributed to the children, though most people assume it will all pass to the spouse; and
  • If the decedent does not have a spouse or children, his or her property is distributed to other family members, such as parents and siblings.

A Sweetheart Will has several disadvantages.

  • Because a Sweetheart Will may not provide for any trusts, minor children may inherit wealth outright before they are mature or capable enough to handle it in the event both spouses are deceased, which can add to guardianship costs;
  • A Sweetheart Will does not incorporate tax planning and can lead to unexpected tax liability;
  • The estate may need to go through the probate process (a court process which is time consuming and expensive); and
  • Wills, once filed with the court, are documents that are accessible to the public.

Couples with minor children that do not even have “Sweetheart Wills” may be putting their loved ones in an even more difficult position if both spouses die in a common accident.

  • A Will not only directs how a person’s assets are to be distributed at death, but also designates the persons who are to act as the guardians of minor children if both parents are deceased.
  • The designation of guardians is not binding on the court, but courts typically honor the deceased parents’ wishes unless there is a compelling reason not to do so.

Some basic estate planning can solve many of the problems mentioned above.

  • A Will can give the court direction with respect to the persons you want to act as guardians of your minor children;
  • A Will can incorporate provisions that create trusts for children if both spouses have died and allow you to control a child’s access to wealth until he or she is old enough to manage the funds responsibly;
  • Trusts for children can reduce the time and expense of formal guardianship proceedings; and
  • The addition of a revocable trust or an insurance trust, when appropriately funded, can eliminate the need for probate proceedings at death, provide tax planning and keep the terms of your estate plan private.

Read more related articles at:

Sweetheart Wills Aren’t Sweet

Also, read one of our previous Blogs at:

What Do I Need to Know about Creating a Will?

Click here to check out our On Demand Video about Estate Planning.

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