Category Archives: Legal

Part of Your Financial Plan: Remember to Update Your Beneficiaries!

Here’s a question: if you’ve made it clear in your will which one of your heirs should inherit money from your estate, how it is possible those funds will end up going to someone else?

The answer is simple: if you’ve forgotten to update the beneficiary information on a life insurance policy, retirement plan, or other financial instrument. It sounds absolutely basic, but, as a recent article in USA Today puts it, “Your ex could get rich if you don’t update your beneficiaries.” We suggest you click here to read this helpful piece.

As the article states, when it comes to keeping their estate plan current, most people think first about what goes into their Last Will and Testament. But they often neglect something even more obvious by failing to make sure their beneficiary designations are up to date. And here’s something you may not have known: beneficiary designations on a 401(k) or IRA are legally binding. As a result, states the USA Today article, they “often take precedence over wishes you’ve put in your will. And that can result in some unpleasant situations if your beneficiary information isn’t updated.”

The article goes on to quote a Dallas financial analyst, Charles Sizemore, who points out a scenario that’s fairly common: an employee establishes a retirement plan beneficiary on the first day of a new job, and never updates the form for ten, fifteen, twenty years or more. Sizemore says, “Your life [today] could look a lot different. You might have divorced and remarried, or you might have kids or grandkids that weren’t around back then.” The big downside is clear: you could end up “accidentally leaving your estate to an ex-spouse or disinheriting stepchildren.”  If you fail to update your beneficiaries, your financial plans might go out the window.

Here’s a list from the USA Today article of significant life events that should cause you to double check your beneficiary designation:

  • Marriage or divorce
  • Birth of a child or grandchild
  • Death of a previous beneficiary
  • When a minor beneficiary comes of legal age to inherit

Which financial products are most likely to require updates on beneficiary designation? According to USA Today, here’s a basic list:

  • Retirement accounts like a 401(k) or IRA
  • 529 college saving plans
  • Life insurance
  • Annuities with a death benefit
  • Corporate profit-sharing plans
  • Pension plans
  • CDs, checking accounts or other bank accounts
  • Some stocks, bonds or mutual funds

Protecting your assets in retirement is a key part of a sound retirement strategy – and part of that protection involves making certain your wishes are carried out at every stage of your life as well as after you’re gone.   We work with our clients to help them establish a comprehensive retirement plan, called a LifePlan, dealing with all five pillars of planning for a sound future: finances, legal affairs, health care, housing choices and family relationships. With a LifePlan in place, you and your loved ones will face the future with greater confidence and peace of mind.

We invite you to begin the planning process by attending one of our free LifePlanning Seminars, held in locations all over the Puget Sound area. You’ll gain a valuable amount of very helpful information in one highly enjoyable, fast-paced evening. Simply click on the Upcoming Events tab on this website for dates and times.

Of course, should you wish to make an appointment for an in-person consultation, contact us. It will be a pleasure to work with you to establish a solid plan for your retirement years!

(Originally reported at www.usatoday.com)

 

 

To Avoid Fights Over Your Inheritance, a Will May Not Be Enough

You’ve prepared a Last Will and Testament to make certain your inheritance goes to your heirs in accordance with your wishes. So you think that you’ve done enough to avoid family squabbles over your estate, right? Maybe – but maybe not.

According to estate planning experts, even a simple will that divides a significant estate can frequently result in long, expensive legal battles than can ruin family relationships forever. As one expert put it, “Family fights among children after death occurs in a large percentage of families.” This expert, Kansas attorney Tim O’Sullivan, adds “If the No. 1 goal is to create family harmony, then the estate plan ought to be designed in a way that preserves it. It’s so sad to see what happens in these situations.”

Click on this link to read How to Avoid Fights Over Inheritance, a helpful article from a few years ago, published on the website money.usnews.com. The points in the article are highly relevant even for modest-sized estates.

As the article explains, and as we tell our clients and guests at our frequent Life Planning Seminars, a will is nothing more than a piece of paper that’s given to a probate judge. It’s a set of instructions for the court. However, once your estate goes to probate, you’ve opened the proverbial Pandora’s Box. Probate is a process which varies from state to state, usually requires the expense of an attorney and often takes months, and once it begins the stage is set for legal battles between your heirs that can destroy the harmony you had hoped to leave behind.

 

The US News article advocates something we talk about frequently in our seminars and on the radio: establishing a trust instead of relying on a will. While we won’t go into the details here, the fact is that a carefully prepared and well-planned trust can avoid conflict entirely and ensure that your wishes for your estate are followed.

One professional quoted in the article, Wichita attorney Dan Peare, says he now recommends trusts for just about every client. “As a younger attorney, I thought a trust was better for an older person with a lot of wealth,” he says. “But over the years, I’ve come to believe that a trust is better than a will in every way for every person.”

Let us help you plan for a seamless, conflict-free transfer of your estate by discussing a trust with you. A good place to begin is by attending one of our frequent Life Planning Seminars. You can find the date, time and location that’s best for you by clicking on the Upcoming Events tab on this website

(Originally reported at www.money.usnews.com)

Best defence against the misinterpretation of HIPAA Law

The below article in New York Times suggests that the use of HIPAA codes are often misinterprets the law and often families have to struggle accessing the information on behalf of their love ones during the crisis situation. I recommend the best defense is not necessarily to rely on the law, but to have HIPAA release language in your Health Care Power of Attorney in place. Here is the recommended language:

I intend for my agent to be treated as I would be with respect to my rights regarding the use and disclosure of my individually identifiable health information or other medical records. This release authority applies to any information governed by the Health Insurance Portability and Accountability Act of 1996 (a.k.a. HIPAA), 42 USC 1320d and 45 CFR 160-164. I authorize any physician, healthcare professional, dentist, health plan, hospital, clinic, laboratory, pharmacy, or other covered health care provider, any insurance company and the Medical Information Bureau, Inc. or other healthcare clearinghouse that has provided treatment or services to me or that has paid for or is seeking payment from me for services to give, disclose, and release to my agent, without restriction, all of my individually identifiable health information and medical records regarding any past, present, or future medical or mental health condition, including all information relating to the diagnosis and treatment of HIV / AIDS, sexually transmitted diseases, mental illness, and drug or alcohol abuse. The authority given my agent shall supersede any prior agreement that I may have made with my health care providers to restrict access to or disclosure of my individually identifiable health information.

http://www.nytimes.com/2015/07/21/health/hipaas-use-as-code-of-silence-often-misinterprets-the-law.html?ref=health&_r=0

 

The 4 steps you need to take if you inherit a brokerage account

Brokerage accounts allow an individual investor to deposit funds and place investment orders through a licensed brokerage firm. Through a brokerage account, you can buy or sell stocks, bonds, mutual funds, etc. Brokerage firms must abide by strict legal guidelines governing access to account information. The result is that sometimes heirs can’t even see account statements. It’s been enough of a problem that Financial Industry Regulatory Authority (FINRA) set up a toll-free number to help senior investors who have concerns or issues with brokerage accounts or investments. FINRA also provided tips for making the transfer process as smooth as possible. Here are some advance planning steps to take to make the transition to a beneficiary easier.

Communicate your intention to family members. Family members need to be aware of your brokerage account holdings and selected beneficiaries. Keep beneficiary information up to date and heirs should have an idea about investments in the brokerage account and why you selected those investments.

Beneficiary designations prevail over those in a Will. In a contest between a Will and a beneficiary designation, the designation always wins. If you cannot remember who you have designated, contact your brokerage firm and ask who has been recorded as a beneficiary for each account and make any changes to conform to your Will or estate plan. If you transfer your account to another firm, double-check that the beneficiary designations also transfer.

Provide a quick, easy way for heirs and beneficiaries to contact the brokerage firm. In order to distribute money from an account your brokerage firm will need your tax identification number, the account holder’s death certificate and proof or their own identity. Trade confirmations and account statement can help heirs quickly locate contact information.

Consider placing the brokerage account in a trust. Trusts eliminate the need for the heirs to go through the probate process and provide a quick doorway for trustees to get access to the accounts.

An elder law attorney can work with your brokerage firm to explain your options for transferring your brokerage account upon your death. Since this is an area governed by estate law, it’s important to remember that if you move or you have property in more than one state that your documents must be updated accordingly.

Here’s an article from the Wall Street Journal.

If you inherit a brokerage account, here are some steps you need to take.

  1. Gather documents. Documents may include trade confirmations, receipts or statements. The documents may be electronic so check the deceased’s online investing and banking sites.
  2. Create a list. You’ll need a list of investment accounts, account numbers and contact information.
  3. Contact the investment firm. For each account, contact the firm and freeze the account. This may be easy if you are an authorized account holder since they may do this with just a phone call. Otherwise, ask for the documentation you need to transfer the investments. According to Vanguard, beneficiaries of a Vanguard account may need a notarized or court-certified small-estate affidavit, a certified death certificate or proof of authority (certified letters of testamentary dated within 90 days), and supporting documentation depending upon the account type and circumstance. Contact the company to get specifics. At the very least, you’ll need the account owner’s full name and address of record and his or her last four digits of their Social Security number to even get started with the process.
  4. Fill out any required forms and mail to the investment firm. This may be extremely time consuming. Be prepared for the fact that if you are inheriting a brokerage account, transfer of that account will take time.

You may want to dispose of an inherited brokerage account without selling it. For instance, you could donate it to a charity, gift them to someone other than a spouse or transfer the account to an irrevocable trust. The point is that inheriting a brokerage account just might be the time to consider hiring a tax accountant or a lawyer.

Unitrusts: Balancing the interests of the current beneficiary with those of the remainder beneficiary

When you pass away and leave your spouse with your estate, your assumption might be that your spouse will leave your estate to your children upon his or her passing. But, what if your spouse is from a second marriage? One way to deal with a situation in which you leave behind more than one level of beneficiary and in which the beneficiaries at each level may be at cross-purposes from each other is to use a Unitrust.  Unitrusts recognize that the income beneficiary, that is the first level of beneficiary, has a financial goal that may not align with the remainder beneficiary, that is the one who receives the trust assets after the current beneficiary’s interest ends.

To make this clearer, imagine that you are the income beneficiary. As the income beneficiary, your financial goal may be to increase income now, a plan that often increases risk and does not provide an adequate inflation hedge. The remainder beneficiary seeks to have the principal grow. These two mutually exclusive objectives must be reconciled.

There are other times the two sets of beneficiaries may be in conflict with each other. For instance, a family dispute might leave one person’s inheritance at the mercy of another. To protect the interests of all the parties, a Unitrust can be set up so that a beneficiary receives a set percentage and doesn’t have to worry about whether there will be enough income. Attorney Bob Pittman said, “It can make a lot of sense to say that a beneficiary will receive a set percentage and not worry about whether there is enough income.  It leaves the trustee free to invest for total return.” Investing for total return eliminates the need to generate income while allowing the assets to grow for the remainder beneficiary.

Here’s how that works. A Unitrust provides a means for the income beneficiary to receive a set percentage of the net asset value of the trust as it is determined annually. If the trust is set to pay out say 4 percent and the trustee invested in such a way that income on investments achieves that goal and is enough to pay the investment advisor 2 percent and still retain 2 percent for growth, the result is that the initial value of the trust doesn’t fall. If the investments exceed that goal, the income beneficiary receives the 4 percent and the additional income is added to the principal. The addition is a win for both the income beneficiary and the remainder beneficiary because the income beneficiary will now realize greater income while the remainder beneficiary also sees the principal grow.

There are many issues to consider before deciding if a Unitrust is a good option for you. It’s important to see a good estate planning or elder law attorney to see if a Unitrust is permitted under state law and whether issues such as asset protection warrant a different approach.

More than a third of all millionaires trust that dying without an estate plan will not hurt their families

At what point do you think you’d finally reach the point where you thought having a Will or other end-of-life legal documents was an important part of your planning? Would you say that if you had a million dollars that you would for sure make sure to have documents outlining who your beneficiaries were? A CNBC.com report found that 38 percent of all millionaires didn’t have an estate plan. The report found that of those with $5 million or more, 32 percent didn’t have an estate plan. Even those who do have estate plans in place often don’t revisit them once they are done but laws change frequently enough and people’s circumstances change as well that an old Will may not be any better than not having a Will at all.

CNBC.com suggests that the frequency of those changes in the past may have caused estate-planning fatigue among clients. However, the permanent change in 2013 to federal estate-tax law should have been enough to make people consider finally putting their estates in order. One expert suggests that the reason people aren’t creating Wills and other documents is that they think of estate planning as a means to reduce estate taxes and with the federal estate tax exemption set at $5.43 million, many people may think they no longer have to worry about their estates.

However, federal estate taxes while being a significant reason to address end-of-life concerns isn’t the only reason to have legal documents in place. Just ask the families of Robin Williams or Casey Kasem if their fathers’ planning resolved all their problems when they died.

Attend one of our seminars and find out for yourself why traditional planning fails and what you can do to protect your assets, avoid institutional care and not be a burden on your family.

 

IRS could take away key estate planning tactic

Partnerships and LLCs allow families to pass on assets such as minority shares in a family business to heirs in a tax-efficient way. It’s a popular estate planning tactic because the transfer of assets deemed illiquid receive a discount on the value of the asset. Here’s how this works. You have a family business and decide to pass on a minority share of the business to a daughter. The current IRS rules allow you to discount the shares up to 35 percent, so instead of passing on $6.25 million, you pass on shares valued at $4.6 million, essentially making the transfer of those shares tax-free since the transfer is below the current $5.43 million gift-tax exemption. Originally created to prevent the family of a minority shareholder from having to sell for a bad deal in order to pay a tax bill, estate planners have seized on it as a method to transfer assets that while technically in compliance violated the spirit of the law.

The Treasury Department has strongly suggested that by September, or possibly sooner, new rules will be put in place to close that option. This is all still conjecture since the Treasury has wanted to change the rules before but had to back down. Still many wealth managers are advising clients to act now.

Here’s the original article.

Does your college-bound child need an estate plan?

Most people wouldn’t necessarily think of their 18 year old child as an adult but in the eyes of the law, with few exceptions, he or she is. A handful of states require graduation from high school or reaching 19 years of age.  Mississippi doesn’t consider someone fully adult until they reach 21.  But everywhere else, including in Washington state an 18 year old is considered an adult.  Let’s think about that for a moment.  That means an 18 year old can sue or be sued, agree to a surgery, sign a contract and a whole host of other things that indicates having reached adulthood.   It also means that if your college-aged adult child is in an accident, you are no longer entitled to make medical decisions.  In fact, because of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), you may not even be able to ascertain even basic information about their medical condition.  This goes as well for financial information even if you are still supporting them.

Regardless of how much support you are still providing, the law protects all adults from invasion of privacy and gives them the right to govern their own lives.  This leaves them with some major amounts of responsibilities requiring them to give someone the authority to make medical and financial decisions for them in the event that they are unable to do so.  This is why college students (or any other adult child) should consider some basic estate planning.

Most people think of estate planning and automatically jump to wills.  Most college students won’t need wills but they will need some of the other documents that make up an estate plan.  Here are some of the documents he or she may need:

  • Financial Power of Attorney-If your student decides to study abroad or even in another state, someone may have to take financial actions in his or her name.  Even in this age of cell phones and internet access not every corner of the world is covered with reliable access to our important accounts.
  • Health Care Power of Attorney-A serious illness or accident can quickly take away the ability to make decisions about any end-of-life or care decisions.  This document will allow someone else to make those decisions should your child be unable to do so.
  • HIPAA Release-In Washington state, parents never have the right to view and amend the medical records of their adult, married or emancipated children, except in the event of death.  The HIPAA release form gives parents or other proxy the right to talk to doctors and get information about the health of their adult child.  Without it, parents may not even be able to get information about whether their children have been admitted to health care facilities or what happened to their children.
  • Living Will-This document states the preferences for care in case an individual becomes permanently unconscious or contracts a terminal illness.

Nearly everyone should have the bare bones of an estate plan in place in case of the rare but not unknown occurrence of a serious medical emergency.  Without these documents, parents cannot take care of emergencies should they arise and in the case of the medical documents they would potentially need to apply for guardianship, a time consuming and potentially costly process.

How do you revoke a Power of Attorney?

By the time most people get to the point that they consider going to see an elder law attorney, they’ve seen a lawyer for something else like a Will if they have kids or possibly even a Power of Attorney (POA) especially in this area with its high number of military personnel. Maybe they’ve purchased a Legal Zoom form or bought some other legal software program. The point is that at one point you may have drawn up a POA and because the circumstances that caused you to draw up the document in the first place no longer exists or because you’ve changed your mind, you want to draw up another POA or at least revoke the current one. What do you have to do to revoke the old POA?

Our documents usually void any prior POA but should the attorney you see not include such language then depending upon the language both POAs could theoretically be active. If the POA hasn’t been recorded, revocation could be as simple as tearing up the old document. But, if it has been recorded say by a bank or other institution of if you’ve given a copy of the document to your Attorney-in-Fact, you may need to revoke the POA in writing. To cancel a POA, you must sign a document cancelling the powers you gave to another person and notify the parties. The revocation of Power of Attorney should be notarized. If you have property that was covered by the POA, the revocation should be filed in the county clerk office of any county where you have property that was covered by the POA.

POAs are automatically revoked when you pass and when you become incompetent (except if the POA specifically states that it will continue if you become incompetent). Once you become incompetent, you cannot revoke a POA.

You should consult with an elder law attorney if you have any questions about your specific circumstances.

Understanding capacity from a legal perspective

Every day, people leave this firm with documents in hand that leave another person in charge of their health care or finances or transfers title to their property to someone else on their death. While that’s an oversimplification of what occurs in any law office, whether the document is relatively simple or it took hundreds of hours and several trees to produce, these are pretty weighty decisions and every one of them requires that the person signing the document have capacity. Capacity is a basic legal term but I thought I would cover for those of us not in the legal profession just what the law refers to when it’s talking about capacity and when a person lacks capacity.

First let’s talk about who doesn’t have capacity at all. Some people may lack the legal capacity to enter into a legally binding contract for reasons beyond mental incapacity. For instance, minors (those under the age of 18) lack the capacity to make a contract in most cases. Another example of a person unable to create a legally binding contract is someone under the influence of drugs or alcohol if the party is unable to understand the nature and consequences of the agreement and the sober party is taking advantage of his or her condition. And finally, a person can be considered unable to enter into an agreement if he or she lacks mental capacity. One indicator that someone doesn’t have mental capacity is if that person has a guardian.

To muddy the waters further, there are several kinds of capacity. Some legal requirements involve needing only a basic understanding of what’s occurring while others require a higher level of understanding. There are several legal standards of capacity but the ones we’ll pay attention to here are the testamentary capacity and contractual capacity as other forms of capacity often refer back to one or the other of these two.

Testamentary capacity refers to the legal and mental ability to make or alter a valid Will. A lawyer may ask a client if they know what day it is, ask questions to determine if the client has a basic understanding of what the contract has in it (what property is involved and who is named in the contract for instance) and the overall plan for disposing of property. Testamentary capacity does not end if the client needs assistance in managing day-to-day affairs. Attorneys drafting Wills have an ethical obligation to assess whether the client has capacity but the requirement only requires the attorney’s own judgment rather than a professional opinion. In general, the courts are looking for two specific signs that the testator lacked capacity. The first is whether a Will contains provisions that need explanation and the second is that the client was under undue influence meaning that the defender received most of the estate, had a confidential relationship with the testator or was not of sound mind but the onus is on the beneficiary to prove incapacity. A person signing a Will does not have to have consistent capacity over time.  Capacity is determined on the day the Will was executed during a “lucid” interval.

Contractual capacity often requires a higher level of understanding since the party must understand the effect of the contract and the nature of the business being transacted, which may or may not be complicated. People who lack contractual capacity include the list already presented (mentally challenged, those under the influence of an intoxicating substance and minors) but can also include incarcerated convicts. For a contract to be binding the contract must be legal and thus not contrary to statute (i.e. usury, gambling, contracts to commit a crime etc.). Contractual capacity refers to the individual’s ability to understand the significant benefits and risks, as well as alternatives. A typical requirement for contractual capacity is for those making advanced directives or other health care decisions.

Typically, a person in the beginning stages of dementia with the dementia minor or non-existent is still deemed competent under the law, but he or she should draft a Will and Powers of Attorney soon.  The Durable Power of Attorney is not possible if the subject is already mentally incompetent at which point he or she will need to have a legal guardianship drafted–a much more complicated process.

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Category Archives: Legal

Part of Your Financial Plan: Remember to Update Your Beneficiaries!

Here’s a question: if you’ve made it clear in your will which one of your heirs should inherit money from your estate, how it is possible those funds will end up going to someone else? The answer is simple: if you’ve forgotten to update the beneficiary information on a life insurance policy, retirement plan, or…

To Avoid Fights Over Your Inheritance, a Will May Not Be Enough

You’ve prepared a Last Will and Testament to make certain your inheritance goes to your heirs in accordance with your wishes. So you think that you’ve done enough to avoid family squabbles over your estate, right? Maybe – but maybe not. According to estate planning experts, even a simple will that divides a significant estate…

Best defence against the misinterpretation of HIPAA Law

The below article in New York Times suggests that the use of HIPAA codes are often misinterprets the law and often families have to struggle accessing the information on behalf of their love ones during the crisis situation. I recommend the best defense is not necessarily to rely on the law, but to have HIPAA release language in your…

The 4 steps you need to take if you inherit a brokerage account

Brokerage accounts allow an individual investor to deposit funds and place investment orders through a licensed brokerage firm. Through a brokerage account, you can buy or sell stocks, bonds, mutual funds, etc. Brokerage firms must abide by strict legal guidelines governing access to account information. The result is that sometimes heirs can’t even see account…

Unitrusts: Balancing the interests of the current beneficiary with those of the remainder beneficiary

When you pass away and leave your spouse with your estate, your assumption might be that your spouse will leave your estate to your children upon his or her passing. But, what if your spouse is from a second marriage? One way to deal with a situation in which you leave behind more than one…

More than a third of all millionaires trust that dying without an estate plan will not hurt their families

At what point do you think you’d finally reach the point where you thought having a Will or other end-of-life legal documents was an important part of your planning? Would you say that if you had a million dollars that you would for sure make sure to have documents outlining who your beneficiaries were? A…

IRS could take away key estate planning tactic

Partnerships and LLCs allow families to pass on assets such as minority shares in a family business to heirs in a tax-efficient way. It’s a popular estate planning tactic because the transfer of assets deemed illiquid receive a discount on the value of the asset. Here’s how this works. You have a family business and…

Does your college-bound child need an estate plan?

Most people wouldn’t necessarily think of their 18 year old child as an adult but in the eyes of the law, with few exceptions, he or she is. A handful of states require graduation from high school or reaching 19 years of age.  Mississippi doesn’t consider someone fully adult until they reach 21.  But everywhere else, including…

How do you revoke a Power of Attorney?

By the time most people get to the point that they consider going to see an elder law attorney, they’ve seen a lawyer for something else like a Will if they have kids or possibly even a Power of Attorney (POA) especially in this area with its high number of military personnel. Maybe they’ve purchased…

Understanding capacity from a legal perspective

Every day, people leave this firm with documents in hand that leave another person in charge of their health care or finances or transfers title to their property to someone else on their death. While that’s an oversimplification of what occurs in any law office, whether the document is relatively simple or it took hundreds…