No will or estate plan? Big problem for you and your heirs

Estate planning isn’t just for the wealthy. Financial advisors say that most Americans can benefit from it. Read on and see how you can benefit even if you are not worth millions.

Sarah O’Brien | Tuesday, 9 Aug 2016 | 7:50 AM ET

About 10 years ago, financial advisor Andrew Rafal was involved in helping a husband and wife create an estate plan. Six days after all the documents were in order and signed, the husband unexpectedly died from an aneurysm.

Thanks to the couple’s planning, the surviving wife was able to access and assume ownership of assets that otherwise would not have been available immediately.

“It would have been a very different situation if they hadn’t finalized their estate plan,” said Rafal, founder and president of Bayntree Wealth Advisors. “In a time of grieving, it’s one less thing to go through.”

While estate planning is often associated with the wealthy, financial advisors say that most Americans can benefit from it.

Senior man pensive

Lee Edwards | Getty Images

“It’s not just for the wealthy; it’s for all of us,” Rafal said. “And the earlier you start, the better.”

The most basic part of estate planning is a will, which more than half of Americans die without, according to various data. Advisors caution that dying intestate (having no will) will result in a state court deciding who gets your assets and, if you have children, who will care for them.

This means that if you have an unmarried partner or a favorite charity but no will, your assets won’t end up with them. Typically, the courts will pass on assets to your closest blood relatives, even if that wouldn’t have been your first choice.

“Everyone should have a will,” Rafal said. “It allows assets to go to beneficiaries you name. And if you have children who are minors, it names a guardian, which is extremely important.”

“As people go through different milestones in life, they need to change their beneficiaries. The beneficiary trumps any other estate planning you do.”-Andrew Rafal, founder and president of Bayntree Wealth Advisors

Another often-overlooked element of estate planning is updating beneficiaries on financial assets such as individual retirement accounts, 401(k) plans and life insurance policies. Regular bank accounts, too, should have beneficiaries listed on a payable-on-death form, also known as a POD, which your bank can supply.

“As people go through different milestones in life, they need to change their beneficiaries,” Rafal said, explaining, “If you had your parents listed and then you get married, those assets go to your parents. The beneficiary trumps any other estate planning you do.”

Certified financial planner Aaron Graham had a client who, after a divorce, updated his will to exclude his ex-wife. But because the client’s beneficiary designations were not updated, his ex-wife received his retirement account assets.

“Thankfully, the ex-wife was cooperative with the children of the deceased, but that’s not always the case,” said Graham, a financial advisor at Abacus Planning Group.

If no beneficiary is listed on those assets or the beneficiary has already passed away, the assets automatically go into probate. That’s the process by which all of your debt is paid off and then the remaining assets are distributed to heirs.

Each state has its own laws governing how long creditors have to make a claim against the decedent’s estate, but it typically is about six months to a year.

In the case of Rafal’s client, for instance, if the wife had not been listed as a beneficiary on her husband’s retirement and stock accounts, those assets would have first gone into probate and she would have had no claim to them until probate was completed.

Another part of estate planning involves what Rafal calls “lifetime management.” That is, for starters, creating legal documents that give powers of attorney to specific people in your life if you are alive but incapacitated.

A medical power of attorney lets the chosen person make important health-care decisions if you cannot; a person with durable power of attorney will act as your agent if you become unable to tend to your finances.

Granting your own wishes

Rafal said those people could be one and the same, but most often, people name two separate people.

“You might have someone who’s not great with finances but you trust the person to make medical decisions for you, or vice versa,” Rafal explained. “Durable power of attorney lets a person step in if you are unable to make decisions.”

Tied to that is a living will. It states your wishes if you are on life support or have a terminal condition.

“Do you want to prolong [your] life at all costs, or do you have specific instructions on when and how you would like for life-saving measures to be implemented?” Graham said.

The idea is that it will be your wishes, not someone else’s.

Have you made your annual financial checklist?

   WIN-Initative | Getty Images

As far as taxes go when it comes to estate planning, chances are, you won’t have to worry about the estate tax.

“It’s important to remember that 99 percent of all people don’t need to focus on the tax aspects of estate planning,” said Pete Lang, president of Lang Capital. “For the vast majority of the population, there will be no gift or estate tax.”

For 2016, the Internal Revenue Service will impose taxes on estates whose assets exceed $5.45 million. Roughly 0.02 percent of the population ends up paying the estate tax in any given year.

Estate planning also “helps protect against families fighting, or someone potentially contesting the wishes of the deceased,” Rafal said. “We’ve had new clients come to us who didn’t have proper planning, and their families have been torn apart.”

Rafal said it’s also important to make a list — handwritten or electronic — of all your assets and where they are.

“It makes it so much easier upon death or incapacity so your family isn’t running around wondering what you have or don’t have,” he said.

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When Should You Update Your Estate Plan?

Estate Planning, RaphanOnce you’ve created an estate plan, it is important to keep it up to date. You will need to revisit your plan after certain key life events.

Marriage

Whether it is your first or a later marriage, you will need to update your estate plan after you get married. A spouse does not automatically become your heir once you get married. Depending on state law, your spouse may get one-third to one-half of your estate, and the rest will go to other relatives. You need a will to spell out how much you wish your spouse to get.

Your estate plan will get more complicated if your marriage is not your first. You and your new spouse need to figure out where each of you wants your assets to go when you die. If you have children from a previous marriage, this can be a difficult discussion. There is no guarantee that if you leave your assets to your new spouse, he or she will provide for your children after you are gone. There are a number of options to ensure your children are provided for, including creating a trust for your children, making your children beneficiaries of life insurance policies, or giving your children joint ownership of property.

Even if you don’t have children, there may be family heirlooms or mementos that you want to keep in your family. For more information on estate planning before remarrying, click here.

Children

Once you have children, it is important to name a guardian for your children in your will. If you don’t name someone to act as guardian, the court will choose the guardian. Because the court doesn’t know your kids like you do, the person they choose may not be ideal. In addition to naming a guardian, you may also want to set up a trust for your children so that your assets are set aside for your children when they get older.

Similarly, when your children reach adulthood, you will want to update your plan to reflect the changes. They will no longer need a guardian, and they may not need a trust. You may even want your children to act as executors or hold a power of attorney.

Divorce or Death of a Spouse

If you get divorced or your spouse dies, you will need to revisit your entire estate plan. It is likely that your spouse is named in some capacity in your estate plan — for example, as beneficiary, executor, or power of attorney. If you have a trust, you will need to make sure your spouse is no longer a trustee or beneficiary of the trust. You will also need to change the beneficiary on your retirement plans and insurance policies.

Increase or Decrease in Assets

One part of estate planning is estate tax planning. When your estate is small, you don’t usually have to worry about estate taxes because only estates over a certain amount, depending on current state and federal law, are subject to estate taxes. As your estate grows, you may want to create a plan that minimizes your estate taxes. If you have a plan that focuses on tax planning, but you experience a decrease in assets, you may want to change your plan to focus on other things.

Other

Other reasons to have your estate plan updated could include:

  • You move to another state
  • Federal or state estate tax laws have changed
  • A guardian, executor, or trustee is no longer able to serve
  • You wish to change your beneficiaries
  • It has been more than 5 years since the plan has been reviewed by an attorney

Contact me, your elder law attorney to update your plan or if you have any questions.

Regards,

Brian

http://www.raphanlaw.com  Email: info@RaphanLaw.com

Download a Free Guide to Medicaid’s Asset Transfer Rules:

This handy guide explains “countable assets” and “qualifying expenses” and also provides case studies as examples. Know who can give and receive and how.

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Plan Wisely

Lacking access to alternatives like long-term care insurance or Medicare, most people pay out of their own pockets for long-term care until they become eligible for Medicaid. Since few people have long-term care insurance or can
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Be sure you plan accurately and wisely. Any errors can cause Medicaid to deny your claim, impose a penalty period–setting back your plans for you and your family, and cost you money. Let me know if you have any further questions. Our Free Medicaid Planning Consultation (a $450 value) ends 8/31/13.

Regards,

Brian

http://www.RaphanLaw.com

Question: “I want to revise my Will… but it was prepared by another attorney”

Last Will & TestamentMany of my clients come to me by referral from other clients and other lawyers. And, many have had another lawyer prepare their Will years ago. It is not necessary for you to contact that lawyer or law firm if you want to make a revision. Changes in marital status, relationships, tax laws, assets, relocation or simply having different feelings are all valid reasons for you to review your Will and make a change if you desire. Once done you’ll feel better knowing your wishes will be met. Our documents are drafted using effective, but simple non-legalease “mumbo jumbo”, so that you can understand what you are signing.

Additionally, if you are the executor named in a Will of a friend or loved one, which was prepared by another Law Firm, you do not have to use that Law Firm to assist you with the estate proceedings when that friend or loved one dies. Often that firm, or the attorney, will be a stranger to you, may be in another state, may not have a helpful personality, may be non-responsive, or just may no longer be a practicing law.

Feel free to give me a call or email me in either situation. As your attorney I can be helpful in consolidating and simplifying the legal process for you.

Brian A. Raphan

braphan@RaphanLaw.com
http://www.RaphanLaw.com

Why everyone needs a Will.

iStock_will

Not everyone has a Will. Here’s why everyone should:
If you die without a Will, the people who inherit may not be those you want to get your money or personal property when you die!  This could include remote relatives who you haven’t spoken to in years.  If the Public Administrator is appointed, they will auction or dispose of your intimate personal property.  If so, your family may never have an opportunity to receive, and pass on, irreplaceable items which may have been left to you.

If you die without a Will, your estate will pass under the laws of the State of NY.  Also, your estate may be handled by the Public Administrator, rather than a trusted person you select.  If so, your heirs may be required to partake in potentially lengthy and costly legal proceedings to prove their relationships before they can inherit.  The Court will also appoint a “Guardian” for “unknown” persons.  This Guardian, along with the Public Administrator, will get a fee from your estate!  If your heirs can not prove their relationship to the Court, your estate will be paid to the State of NY.

Having a Will can ensure those you select inherit from you, reduce expenses, and expedite handling of your estate.  It also allows you to nominate an Executor, who is the person who collects your assets and delivers them to your beneficiaries.  If you have the right Executor, your estate should move swiftly. Lastly, if you already have a Will and haven’t reviewed it in over two years, now’s the time to do so to ensure your current wishes are carried out.

-Brian A. Raphan, ESQ.