Tag Archives: trust

How do you have that difficult discussion about what’s in your will?

The information in this article so important that we’re copying it verbatim from a Yahoo news story.

Remember, if you die without a will, the state will determine who inherits.

People make a lot of excuses to put off planning for the inevitable. You may be fearful about your own mortality, or think you don’t have enough assets to need an estate plan — or perhaps you just think that things will change so much before your death that you and your spouse can delay making a plan.

But dying without a will or more extensive plan only brings further grief to your family. “You leave heirs in a lurch and risk changing the family dynamic” — and not for the better, says Anchorage, Alaska, financial planner Michael Branham.

Do I Need a Will?

If you want to plan out where your things go after you die, a will is probably a good idea.

Without a will, decisions about who will administer your estate, who will be the guardian of your minor children and who will inherit your money fall to a local probate court, which is bound by state laws, says Cincinnati estate planning attorney David Bross. Start now by talking to your spouse about your intentions.

PREP WORK

It’s impossible to have a detailed conversation about bequeathing assets before you’ve itemized all the property you possess as a couple. “In many houses, one person takes the reins as the family CFO and the other partner is less informed or engaged with the financial picture,” says Raleigh, N.C., financial planner Mike Palmer. “But both spouses need to have familiarity.” Make a list of each of your investment, retirement and savings accounts, as well as all property and other goods like art or collectibles. (For the latter, you may need to bring in an appraiser to help you understand which pieces have monetary value.)

Next, learn which of those assets fall outside the scope of a will. Typically, this includes anything payable to a named beneficiary — such as a life insurance policy, 401(k) account, or IRA balance — as well as assets held jointly. You need to assign beneficiaries for as many accounts as possible, even before putting together the actual will. It’s worth revisiting beneficiary assignments, too, especially for older accounts — you don’t want your ex-spouse to get your 401(k) just because you forgot to change the designation.

OPENING LINE: “I saw what happened to Jill’s family when she died without a will, and I don’t want our kids to go through the same thing.”

Use a friend’s or even a celebrity’s passing without a will to ease into the conversation while providing some emotional distance. Talking about your own or your spouse’s death is hard, so stay focused on the reason you’re really discussing this: your loved ones.

Decide whom you want to include as an heir. Remember, if you die without a will, the state will determine who inherits — likely your spouse or kids. If you want friends, a pet, more distant relations, or a charity to receive part of your estate, you’ll need to clearly spell that out.

Estate Planning

If you have minor children, your estate planning conversation should also include a discussion of who’ll care for them. Then think about whom you trust to carry out your wishes. A will requires that you name an executor, someone who will be in charge of collecting the estate’s assets, inventorying the property, paying claims against the estate (including taxes), and distributing assets to beneficiaries. The job should go to a financially responsible relative or close friend, or a financial institution.

TALKING POINTS: “Kara is old enough to support herself, but what about Jason? Who would look after him if something happens to us in the next five years?”

For couples with young children, the biggest challenge is often assigning custody of the kids, says Bross. “You have two families coming together and two spouses who may have very different ideas about who would be best,” he says. Factor in not only the personal bond between the child and potential guardian, but this person’s location, other dependents (their own children, or an aging parent), age, and other financial obligations. Even if you disagree, there’s strong incentive to come to a decision: If you don’t make a selection, the court will make its own choice.

One couple took four months to decide between their siblings, Bross recalls, ultimately deciding that the sibling who had no children would be in a better position to care for their kids. Don’t make a choice before talking with any potential guardians about their willingness and any concerns you have.

“I don’t feel comfortable letting the children get their inheritance all at once. They are still so young — if they get a bunch of money at 18, who knows what they’ll spend it on?”

Particularly if your kids are still young, think about how you want them to receive their inheritance. Unless you set up a trust to outline who will receive how much property (and under what circumstances), minor children will get a share of the assets for care through the probate court, even with a will, and at 18 receive the remainder, says Bross. Heirs over the age of 18 simply get their inheritance all at once.

If you want to influence either the timing of the inheritance or the way it gets spent, you’ll need to use a trust. Two common kinds are incentive trusts — which might say, for instance, that an heir must earn a degree or pass a drug test before inheriting — or staggered trusts, which let your estate be paid out over a certain time span. Such arrangements can ease concern about young or reckless heirs.

“I know we always talked about splitting the money evenly between the kids, but what if one of them is earning a lot more than the other?”

Deciding how much money should go to each of your heirs can be one of the biggest issues for families, says Seattle financial planner Stacy Gallagher Ployhar. “You need to consider, if the distribution of assets is not equal among the children, how is that compensated for?” she says.

Among the issues to discuss: Did you make a generous gift to one child — say, for a home purchase or advanced degree — that the others didn’t receive? If you have a blended family with “yours, mine, and ours” kids, will biological and stepchildren get treated differently? Families that have a low-earning child and a high-earning one sometimes want to divide assets differently because they believe one needs the support more than the other. “Everyone’s default when planning is to treat heirs equally — but fair isn’t always equal,” says Palmer.

Ultimately, you don’t want heirs to feel hurt or confused by the size of their inheritance. If you are having difficulty agreeing on a plan for the division, consider speaking with your heirs directly about what fair would look like to them. You don’t have to abide by their wishes, of course, but their input could help you and your spouse find common ground.

NEXT STEPS

Once the two of you have agreed to a plan, hire a lawyer to execute it. A will drafted by an attorney averages about $375, according to LegalZoom. Need help finding an attorney? Many bar associations offer lawyer referral services, in which participating lawyers agree to provide half-hour consultations for less than $50.

This is also a good time to put two other estate planning documents in place: a health care proxy, a living will, and a durable power of attorney for finances.

Call a family meeting and tell your children about your general estate plan. You don’t need to spell out how much they’ll inherit or read them a copy, but you should talk about big decisions you’ve made — for instance, if you’re not splitting assets equally among your children, or giving a large portion to charity. “Having this conversation will give you confidence, says Cincinnati financial planner David Nienaber. “People are afraid to tell heirs for fear they will piss someone off, but people are more upset when you die and they’re left to figure out with their siblings why you did what you did.”

ONE FAMILY’S SOLUTION

“I had a client tell me once (without his wife present) that he didn’t want “six-pack abs man” spending his money,” says Palmer. The client was worried that if the estate went outright to the wife, then she could leave it all to someone besides their daughter — and that if his wife remarried, her new spouse would get all the money. “Eventually I was able to get him to share that concern openly with his wife and we addressed that in his estate plan by placing the assets in a trust for their daughter,” Palmer continues. “The wife was unhappy at first that her spouse didn’t seem to trust her, but after listening to his concerns and the benefits of a trust, she decided to go along with the plan because ultimately the two wanted the same thing: their daughter to be the heir.”

This story was originally seen on money.com: Half of Americans Don’t Have a Will. Here’s How to Fix That for Your Family

For more information about estate planning and writing a will, go to www.diesmart.com.

My father left his home to his kids — my stepmother sold it for $1 million

We read this recent column from MarketWatch and found it interesting enough that we are repeating it in its entirety. If you have step children or step parents, you should be aware of what might happen if proper planning isn’t done.

He made his wishes clear, but his second wife had other ideas

Dear Moneyologist,

My brothers and I are mentioned in our father’s will as what he “wishes to happen” with the house he purchased for his second wife. He put the house in her name, but stated that if he should die first, he would like the wife to live in the house till she dies, but wanted the house to be sold and the proceeds to be split among his children.

After he died, my stepmother has sold the house for $1 million. She bought a new house for $500,000 and kept the difference. She has not put all the children on the ownership of the new house. Also, she has children from her first marriage who might want a percentage of the estate, including the new house. The will was made in Taiwan. I live in Texas.

Where do I and my brothers stand in this situation?

Betrayed Daughter

Dear Daughter,

When it comes to family drama, stepmothers fare about as well as mothers-in-law. That is, they get a hard time. Sometimes, it’s deserved, other times I think they fall victim to negative stereotypes. In one case, the stepmother wanted to cut her husband’s children out of his life insurance policy. And another stepmother obsessed over her husband’s children and what might happen to his credit score should he die. It’s easy to come down hard on stepmothers, mostly because of Grimm Fairytales. This 2009 book “Stepmonster: A New Look at Why Real Stepmothers Think, Feel, and Act the Way We Do” tries to debunk that myth. On this occasion, the jury is out.

Your father can’t leave his children something that he no longer owns. That’s not how life or the law works.

Your stepmother has downsized and created a nice nest egg. That was her prerogative. Your father can’t leave his children something that he no longer owns. He put his house in your stepmother’s name and, judging by his will, it seems that he wanted her to give it back. That’s not how life or the law works. If you could prove undue influence, you might have a case. You would need to provide evidence that (a) your father was not of sound mind when he signed over the house and/or (b) your stepmother somehow did not have his best interests at heart and tricked him into signing over the home. That would be an expensive and difficult process.

It’s still unclear whether U.S. or Taiwanese law would apply here. According to Taiwanese law, “The making and effect of a will are governed by the national law of the testator [your father, in this case] at the time of the making of the will.” But that may prove fruitless. “If you can prove that the testator was the true owner, you can file a litigation against your father’s second wife,” says Ou Yang, Hung, managing attorney at Brain Trust International Law Firm in Taipei, Taiwan and adjunct assistant professor of law at Soochow University. “It will be very hard to prove that the testator was the true owner of the house.”

Put it in simpler terms: You may have to kiss that $1 million goodbye.

For information about estate planning, check out our website www.diesmart.com.

Will you get a call from a debt collector?

Did you know that if someone dies with unpaid bills like a balance on a credit card account, a family member or close friend will get a call or letter from a debt collector.

A few years ago, the FTC (Federal Trade Commission) issued new guidelines related to this subject. The guidelines “widen the universe of people who could receive collection calls or letters”. This makes it very important that anyone receiving such a call or letter knows his legal rights and obligations.

Debt collectors read the obituaries and then check to see whether the person who just died has any surviving relatives. If so, they immediately begin sending out letters or making phone calls and harassing them for whatever is owed.

Rules vary from state to state but, in general, here are a few things that usually apply.

Family members or friends are not obligated to pay out of their own pockets for debts incurred by a deceased person.
If a family member or friend has co-signed a credit card or loan application with the now deceased person, that relative or friend is probably obligated to repay the debt.
If the deceased left a will and the estate is in probate, debt collectors can attempt to collect their money from the assets of that estate.
Assets that are specifically bequeathed to someone or that were jointly owned by the deceased and another person generally go to that person outside of the estate and are usually not reachable by debt collectors. In the 10 community property states, assets are generally considered joint property and can’t be touched by a debt collector.

What does this mean for you? If someone close to you dies and you are contacted by a debt collector, don’t give that person any information or commit to anything. See assistance from a local credit counselor or attorney to get guidance on how to proceed. Otherwise, you may find yourself paying money to a debt collector unnecessarily.

For more information about settling an estate, go to www.diesmart.com.

Want to avoid probate?

You may think that if you have a will and in it you name the person who should inherit your home, that’s all you have to do. Yes, it is if you’re willing to have the home go through a probate process. That probate process will cost the beneficiary a lot of money as well as time and will be a public record.

However, there’s now a way that many can avoid the whole probate process and that’s thru the use of a transfer on death (beneficiary) deed.

There are several states that have a similar law and California just joined their ranks in January of this year.

If you live in one of these states, you now have the option to complete a Revocable Transfer On Death Beneficiary deed and name a beneficiary for your home. After your death, the beneficiary can directly claim ownership rights to the property without involving the probate court and paying probate fees.

The deed can be completed and filed without hiring a lawyer or paying a third party to record the deed with the county recorder.

For some homeowners, a TOD Deed can be a cost effective way to avoid probate on the death of the last owner. If you own a home and have it listed in your will, you might want to consider this new option.

For more information about probate and estate planning, go to www.diesmart.com.

Just living together can cause unwanted estate planning problems

Many couples, especially those who get together later in life, are just living together. For whatever reason, they’ve decided not to get married. Living together, they accumulate stuff but who owns what?

One of the biggest problems with just living together is estate planning. If you’re one of these couples and you’re not careful, your loved ones might end up losing their home and getting nothing.

If a partner dies without a will, this is called dying intestate. In this instance, state intestacy laws determine who will inherit that partner’s assets. In most cases, that means a biological relative may inherit those assets, not the surviving partner. This is probably not what either of the partners really wanted. To alleviate this problem, a will should be drafted and executed by each of the partners. It should include a statement that directly disinherits biological relatives and leaves the assets to the surviving partner.

Another document each partner should prepare is an advance healthcare directive and durable power of attorney. Unless these documents specifically name the other partner to make their medical decisions for them, a physician will not follow the instructions of anyone except a biological relative because of potential family objections.

A further document that should be considered – a revocable trust. This will enable the partners to transfer property and money between them and will allow one partner to transfer control of his or her assets upon death.

A last point you should be aware of – the unlimited marital estate inheritance exclusion. This exclusion cannot be used by an unmarried couple. Instead, there may be sizable inheritance tax repercussions if estate planning is not done correctly.

It would be smart for any couple living together without the protection of marital laws to consult an estate attorney to find out what the best plan of action is for them.

For more information about estate planning, check out our website www.diesmart.com.