Can A Trust Benefit Your Family?
December 15, 2010
Most Americans don’t realize that they have an estate. Most people think that an “estate” includes a mansion in the hills, a private jet, or millions of dollars in investment accounts. But the true definition of “estate” is a person’s possessions or property—regardless of the size or amount. Everybody has an estate; and if you own a home, have a retirement account, or have any personal property of value you should consider creating a trust for your “estate.”
Before you scoff that you aren’t wealthy enough to need a trust, consider that there are many different kinds of trusts, each of which may be used for specific situations. Some trusts are complicated and extensive, created by wealthy families to preserve assets through generations. Other trusts are simple and to the point, created by young parents to ensure that their minor children will be provided for. What kind you will need will depend on a number of factors, including the size of your estate, your goals for that estate, the age of your children, your marital status, whether you have a special needs child or grandchild, and many, many more.
Most trusts created for estate planning purposes are revocable living trusts (or RLTs). An RLT is a document created not simply to distribute your property, but to own your property during your lifetime, to be invested and spent for your benefit or the benefit of your named beneficiaries. As such, a trust takes effect as soon as you sign it, and your property is protected by it, as soon as you place your assets in the name of your trust. There is a lot of flexibility available with a revocable living trust, and yours can be created to fit your unique situation. Most RLTs name the trust creator (you) as the initial trustee, nominating individuals or banks to take over as trustee when you become incapacitated or pass away.
One of the primary benefits of a trust is that when you pass away, property is not merely distributed and that’s the end of it; you can instruct the trustee to distribute the money slowly and in any number of ways, for example, keeping it out of the hands of a spendthrift child or protecting it for the benefit of a special needs child.
You may not have a Back Bay penthouse or an Italian villa, but you do have a family to protect. We’d like to help. Contact our office to find out if your family needs a trust.
4 Essential Qualities Your Executor Should Have
December 1, 2010
If you have a Will, you have an executor. You are placing a lot of trust in your executor. After all, this is the person who will be serving in your stead when you pass away—helping your loved ones, overseeing your finances, paying your final bills and distributing your property. Serving as someone’s executor can be a tough job, and choosing the right person for that job can be just as difficult.
Although it is commonly considered an honor, serving as an executor is a lot of work, and often requires a great capacity for organization, attention to detail, meeting deadlines, and more. You may be tempted to name your favorite sibling or eldest child just to keep from hurting any feelings, but your family and heirs will not be well served if you choose your executor based on emotion rather than ability.
Keeping this in mind, here are four qualities to consider when choosing who will serve as your executor:
1. Is the person trustworthy? Your executor will be privy to all of your financial secrets: reviewing estate assets, determining your liabilities and paying off creditors, settling outstanding debts, and making distributions to heirs. Chances are you don’t want all that information spread throughout the family or community.
2. Is this person organized? The person you choose will be in charge of a number of detailed tasks, both large and small. He or she will be making lists of assets, meeting court deadlines, making timely distributions for estate taxes, and more. Missing or being late for one of these many steps can draw out the entire process, costing your heirs both time and money.
3. Is this person financially savvy? One of the responsibilities of executor is to keep the estate viable (making sure the mortgage and fees continue to be paid) during the probate process. If you have investment accounts you’ll want to ensure they won’t languish and lose their value before they can be distributed to your heirs.
4. Is this person compassionate? Although probate can be a difficult and detailed process, it is at its core about the people you love. Your executor should have the ability to be caring and compassionate during this emotional time.
Part of the estate planning attorneys’ job is to help you think through who among your family or friends would be best suited for the job. If you have any questions at all about who to name, make sure to bring it up with your attorney.
Sometimes the Best Thing is to Do Nothing at All
March 15, 2010
Clients came in a few months ago explaining that several years back, the mother had deeded her house into a trust and now she wanted to make a change to the trust. I said that I would review the trust to be sure that such a change would be permitted and would advise them on how to proceed.
As I dug into the trust, it turned out to be quite a doozy. It was poorly drafted. It was clearly put together by someone who didn’t understand the intersection of estate tax planning, Medicaid planning, property law, and fulfilling a mother’s wishes. It took me weeks of research, several pages of notes, and a lot of head-scratching to finally put together a 5-page letter to the client explaining her options for moving forward.
I often say that elder law and special needs planning involve juggling a lot of different balls and that we will never be able to get them all to land in a perfect line. It’s a matter of choosing which of the many issues are most important to you and letting the other ones slide into second place.
In this case, the clients and I reviewed the pros and cons of all of her options. Because of the poor drafting of the original trust, we were very limited in what we could do. If we did A, she would achieve B, but she would lose C. If we did B, we would achieve C, but lose A, and so on. The client weighed all the different things that she had hoped to accomplish and chose the one that was most important to her. And to accomplish that particular goal, the required action was to do nothing.
In the end, she walked out of my office with the same trust document she had when she came in – we didn’t change a thing. But she now has something else – knowledge. She now understands, much better than she did from the attorney who drafted the trust years ago – what will happen to her home if she wants to sell the house and move, what happens if she ever needs nursing home, and who in her family will inherit it after she passes away.
Sometimes, after examining all the angles, you realize that the best thing to do is to do nothing.
More Reasons to Write up a Caregiver Contract
November 13, 2009
Howard Gleckman’s Caring for Our Parents
October 23, 2009
Howard Gleckman’s New Book: Caring for Our Parents
August 25, 2009
Driving to work on Friday, I had the treat of listening to NPR’s Robin Young interview Howard Gleckman on his new book, Caring for Our Parents: Inspiring Stories of Families Seeking New Solutions to America’s Most Urgent Health Crisis. I only caught the end of the interview, but it was so reassuring to hear him close with this message: we should all have our health care proxies and end of life wishes in order.
This is what I talk about when I give presentations and when I meet with clients. I’ve blogged about it – read about health care proxies here and about end of life wishes here. This is such an important message to get across to people. A health care proxy lets someone else make health care decisions for you when you cannot make or communicate them yourself – anesthetic fog? dementia? shock from an accident? Without a health care proxy in place, your family could very well be forced to go to court and waste a lot of money, time, and emotion.
And making your end of life wishes clear will save your family a tremendous amount of anxiety, guilt, grief, and arguments. Give your family the gift of peace by taking the burden off of their collective shoulders – tell them ahead of time what you would want in a difficult situation.
It gives me hope to hear Mr. Gleckman advising a national audience to get their health care proxies and end of life statements in order. So many families would have such an easier time caring for their loved ones with these documents in place.
End of Life Wishes & Living Wills
Clients are always asking about living wills. Massachusetts law does not recognize a living will, and it’s also impossible to write a thorough, well balanced statement of your end of life wishes in just a few paragraphs.
I provide clients with a solution to their goal, but in a much better form. I give my clients a workbook called Your Way. It is published by a nonprofit in California, H.E.L.P.: Helping People Meet Aging-Related Legal & Care Challenges.
This workbook is twelve pages long and very thoughtfully walks the reader through various scenarios you could confront in an end of life situation and what kind of comfort and care you would like to receive. For example, what matters to you the most – being with friends and family? Listening to music? Being able to help dress yourself? Under various scenarios, would you want curative care or to be kept comfortable? Who do you want with you as you are dying? Where would you want to be? A twelve-page work book written by heath care professionals does a much better job elucidating your wishes than an attorney can do in a one-page living will.
If you are not a client of this office, then log onto the Your Way website and order a workbook. If you are my client, then you already have a copy. Complete the exercises and give your family the gift of knowing exactly what you would want them to do in a crisis situation.
My Spouse Died – What Do I Need to Do to Protect Myself?
July 24, 2009
After a spouse dies and the family gets through the funeral, the immediate concern is to square away the couple’s assets and make sure the surviving spouse has enough to live on. After that, there is one more step to take: protecting yourself.
One area where you need to be proactive is to consider who will be able to assist you with financial and health matters if you become ill or incapacitated. Before, you and your spouse relied on each other to serve in these roles. Now you need to legally appoint someone to be able to step in and help you. At this point, you definitely need to execute a Durable Power of Attorney and Health Care Proxy. And many people like to add a child to their bank account so she can easily help with paying bills. See my blog post on how to do this appropriately (don’t add her as a joint owner!).
If you go to see your elder law attorney after your spouse has passed away, in addition to helping you transfer your spouse’s assets to your name, she will also help you put in place these fundamental documents that will serve to protect you, should you ever become unable to handle your affairs or medical decisions yourself.
Don’t Add Your Child as a Joint Owner on Your Bank Account
May 22, 2009
So many clients tell me that they want to add a child to their bank account so that the child can help them pay bills and manage their finances, and also so someone will have access to the bank account should anything happen to the parent. I agree – but I don’t agree with the bank’s usual approach which is to just name a child as joint owner and send the customer on her way.
Naming a child as a joint owner is dangerous. A joint owner has complete rights to the full amount of money in that account. If your daughter wants to withdraw it all, move to Aruba, and never speak to you again, she is well within her rights to do so – the bank can’t stop her. If she gets divorced, gets in a car accident, makes a bad business deal – that money is on the table and you had better believe the opposing attorney will chase after it. “Not fair,” you cry. Technically, there are laws to deal with these scenarios, but it is much easier to avoid them to begin with.
Don’t let the bank tell you to name a joint owner. Instead, patiently explain your two goals: (1) someone should be able to help with your account while you are living, and (2) someone should have access to the account after your passing (ex. to pay final bills or for a funeral). To accomplish the first, the bank can add your child under a Durable Power of Attorney. I acted as Power of Attorney for a client who had no family, and his checks were printed: “George Clooney, Alexis Levitt, IFF.” I was on the account, but clearly as a Power of Attorney and not a joint owner.
As for the second goal of allowing access to the account after your passing, there are several ways to do this. Some banks list a “beneficiary,” others use “payable on death to,” some use “in trust for.” Note that if you name someone as Power of Attorney, their authority ends at your passing, so you need this second category listed on your account, as well. (And this has the added bonus of allowing this account to pass to a beneficiary without going through probate.)
This will take persistence on your part, and you may have to insist on working with a manager. Most customer service folks at the banks only know to offer you the option of joint ownership.
Putting Assets in Joint Names to Avoid Probate – Will It Work?
May 21, 2009
Lots of people want to avoid probate. That’s the court process that a family must go through to distribute anything that was in the decedent’s name alone upon her passing. Despite its bad reputation, probate isn’t the end of the world. Yes, it’s a hassle, and yes, there are hoops to go through, but you can hire an attorney to do most of the work for you.
If you still want your family to avoid probate, many people opt to make all of their property into “nonprobate” assets. This is anything that has someone else’s name on it in addition to yours at your passing. For example, many people purchase homes together with the spouse. We name beneciaries on life insurance policies and IRA’s. So why not just put someone else’s name on all of your assets and be done with it?
Because that quite likely will not result in the distribution that you would like. Let’s say Ophelia has an IRA valued at $100,000 and a life insurance policy with a death benefit of $100,000. She puts her son’s name on the IRA and her daughter on the life insurance. Easy, right? Not really. Her health care needs increase over the years and she taps into the IRA. By the time she passes away, her son inherits an IRA worth $50,000 and her daughter cashes in the life insurance policy for the full $100,000.
The best way to make sure people will inherit as you would like, while also helping them to avoid probate, is to work with an elder law attorney who can draw up the appropriate trust (if that is the right solution for you), help you properly list beneficiaries on your assets, and match you up with a qualified financial advisor who can make sure there will be enough in your estate to treat all the beneficiaries in the way you would like.
See tomorrow’s post on why it is dangerous to list a child as a joint owner of a bank account.