Estate planning for your child who just turned 18

Your child has just turned 18. He/she has just graduated high school and is probably off to college in the fall. Your child will always be your baby but in the eyes of the law, your child is now an adult.

This means that your child needs all of the estate planning documents that you do. Although you had the automatic right to make health care decisions for your son/daughter, you do not have that right now. Now your child needs his/her own health care proxy and living will. You do not have the right to see his/her medical records either. Before your daughter goes off to college, make sure that you have him/her sign a document called a “HIPAA Release” (named after the law that created a right to privacy about your medical records) that gives you the right to view her medical records.

Your son will also need a durable power of attorney that names you as his agent to act in connection with his financial affairs in the event he can’t. If he is in an accident and cannot speak or sign his name, the durable power of attorney will allow you to do his banking for him and make decisions for him until he can do so for himself.

Although it may seem strange to have a child make a Will, it may be necessary if that child has significant assets (maybe an inheritance from Grandma) and there are family issues. Without a will, unless your child is married, both parents inherit from their children.

Finally, since your child has reached the age of majority, he/she can act as a guardian to your younger children, if necessary. I’m not sure you want to give that kind of responsibility to a person who you barely wanted to give the car keys to just a year ago, but it can be a temporary solution to the guardian issue if you do not have another adult to whom you want to act in that capacity for your other children.

Dying Unexpectedly

Do you remember what your reaction was when you heard that Tim Russert had died? Mine was “he’s not that old!” In fact, he was 58 and in our society, 58 is not old. My father is 88 and there are plenty of people in their 90s still living.

And yet, every day, people die unexpectedly of heart attacks or in car accidents or who go to the hospital for routine surgery and there are complications that no one could foresee. Along with the grief, the family of the dying person needs to deal with the financial matters of the dead person and possibly family issues. When the family has no idea whether there is a will or where the insurance policy is located or who should get custody of the kids, the agony is increased several times over.

If you are in your 20s, 30s, 40s, or 50s, you are probably going to live a long time more. But you might not. Save your family the heartache of dealing with the personal and financial mess that will result if you die unexpectedly without a will. Give your family peace of mind and call an estate planning lawyer now.

Don’t go on vacation without completing your estate plan

Have you ever bought life insurance before flying or known anyone who has? Is flying safer than driving? Are you more likely to need an estate plan before you start your vacation than at any other time of the year? The answer to the last question is “no” but vacation time seems to bring out the urgency in many parents to get a will done before getting on an airplane.

If going on vacation is the push you need to call an estate planning attorney to get your estate plan done, then I’m all for it. Although you really don’t want to rush to get something, anything in place, chances are it will be better than nothing at all. On the other hand, if you think your estate planning is done if you just download a will form from the internet and fill in the blanks, then you may be unpleasantly surprised by the many unintended consequences your family will face.

Don’t forget that estate planning is not just getting a will done. There are other documents – a durable power of attorney, a living will, a health care proxy, and documents to appoint a temporary guardian for your children – that you need to make sure that your affairs are taken care of in case of an unexpected tragedy. Get some peace of mind before you travel, get your estate plan done.

Do you have a health care proxy and living will?

There is another case in Florida that echoes the Terry Schiavo case that gripped the national news in 2005. Terry Schiavo was 26 years old when she suffered brain damage and diagnosed with persistent vegetative state. She was institutionalized and kept alive by a feeding tube. Her husband and parents argued for 7 years in the court system about whether Terry Schiavo would have wanted to live in that condition. The problem was that she had never written down her wishes.

Now, a case in Palm Beach County is being reported that is similar. A 56 year old woman suffered a stroke, was diagnosed in a persistent vegetative state, and was put on a feeding tube and placed in a nursing home. Again, the husband claims that his wife would never have wanted to live like that and the parents oppose the removal of the feeding tube. She does not have a living will and cannot talk.

Very few people know when there is even the possibility that they might lose consciousness and go into a persistent vegetative state. If you want every medical measure taken in the event you lose consciousness, let your spouse and family know this. Put it in writing in a living will. Likewise, if you would not want a feeding tube under certain conditions, or wouldn’t want a breathing tube or CPR if your heart fails, let your spouse and family know that in a living will. You can have one document that appoints a person to speak for you when you cannot speak for yourself (a health care proxy), and a different document that specifically or generally states what treatment, if any, you want under different scenarios. The more general the instructions, the harder it is for your health care proxy to know what to do for you. The two documents can also be merged into one. Be sure to pick a back-up proxy in case your first choice is also rendered unconscious (you may be in a car accident in which you and your spouse are both seriously injured). Let everyone in your family have copies of these documents.

No one plans to be left unable to tell the doctors what kind of medical care and long-term case they would want if they could not speak for themselves. Do yourself and your family a favor. Get all of your estate planning documents properly done so your family is not left to scramble under the most horrible circumstances.

California Gay Marriage – Does It Affect Us Here?

Does the decision in California to permit the marriage of gay couples affect us in New Jersey? Not yet. Even if a gay couple travels to California and gets married there, when they return to New Jersey, the marriage will not be recognized as a “marriage”.

This means that gay couples must file for a civil union in order to get certain New Jersey state benefits that married people have – such as adoption, inheritance, hospital visitation and medical decision-making rights and the right not to testify against a partner in state court. They do not get any federal benefits, such as social security benefits from a deceased partner or the unlimited gift and estate tax breaks that married couples enjoy.If you are a gay couple in New Jersey, you must still get all of the estate planning documents in place – a will, durable power of attorney, health care proxy and living will (with your wishes about how much or little treatment you want if you cannot speak for yourself in writing), and a release for your partner to gain access to your medical records, called a HIPAA Release. The laws are always changing so contact your estate planning attorney at least once a year to make sure that your partner gets the property that you intend to give to him/her.

 

 

 

Keep Your Documents Up-To-Date

You have a will, a health care proxy, and a durable power of attorney. But you signed the documents five years ago. In the meantime, you had 2 children and your mother died (she was your back-up health care representative), leaving you $1 million dollars. You haven’t looked at your estate planning documents since you signed them. Will your documents carry out your current wishes?

Probably not. You cannot disinherit a spouse but you can definitely disinherit your children, even if you didn’t mean to. If you do not have any bequests to any children, then none of your children will inherit. If you left money to one child and now you have more than one child, you’ve probably disinherited all later-born or other children.

If you had a simple will that left everything to your spouse and you have assets of more than $675,000, if you both die together, your estate will be paying New Jersey estate taxes. And that will cost your children a chunk of change from their inheritance.

You and your spouse are in a car accident and both of you are unconscious. Your health care directive (assuming someone knows that it exists) named your spouse as your proxy, with your mother as the back-up. Do you have someone to make health care decisions for you? No, you do not.

Lives change so your estate planning must change. How often should you do estate planning? I’m cautious – I’d recommend checking your documents once a year. If you think that is too often, every 3 years is advisable. You should also consult your lawyer if you’ve had a major life event – marriage, birth of a child, or death of anyone named in any of your estate planning documents.

 You have a will, a health care proxy, and a durable power of attorney. But you signed the documents five years ago. In the meantime, you had 2 children and your mother died (she was your back-up health care representative), leaving you her $1 million dollar estate. You haven’t looked at your estate planning documents since you signed them. Will those documents carry out your current wishes?

Probably not. You cannot disinherit a spouse but you can definitely disinherit your children, even if you didn’t mean to. If you do not have any bequests to any children, then none of your children will inherit. If you left money to one child and now you have more than one child, you’ve probably disinherited all later-born or other children.

If you had a simple will that left everything to your spouse and you have assets of more than $675,000, if you both die together, your estate will be paying New Jersey estate taxes. And that will cost your children a chunk of change from their inheritance.

You and your spouse are in a car accident and both of you are unconscious. Your health care directive (assuming someone knows that it exists) named your spouse as your proxy, with your mother as the back-up. Do you have someone to make health care decisions for you? No, you do not.

Lives change so your estate planning must change. How often should you do estate planning? I’m cautious – I’d recommend checking your documents once a year. If you think that is too often, every 3 years is advisable. You should also consult your lawyer if you’ve had a major life event – marriage, birth of a child, or death of anyone named in any of your estate planning documents.

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Reasons to have a will even if you don’t have huge amounts of money

So many people die without a will because they either think they don’t need one, can’t face thinking about their death, or don’t want to spend the money to hire a lawyer to write their will. None of those are great reasons and not having a will can lead to consequences you never intended. Even if you are not a millionaire, you should have a will. It is especially important if you have children who are still young.

If you die without a will, the state law decides how and to whom your assets will be distributed. If you have a child with special needs or a child who will need a large fund for medical school, you may not like the state’s plan of distribution. If your parent is in a nursing home that is paid for by Medicaid, and your parent inherits from you, Medicaid will take your money and your parent will not get any benefit from it. The state’s plan does not allow you to leave money to any but your blood relatives. If you have stepchildren or friends that you would leave your money or possessions to, they would be left out. If you are in a committed relationship, but not married, your partner will not inherit any of your money. If you write a will, you decide who will get your money and possessions and when they will get them.

If you die without a will, the court will appoint a legal guardian for your children. This might be a spouse that you are divorcing, your brother who has totally different values from you, or your parents who are a little too old to take care of your children but the judge doesn’t know that your best friend would be a better choice. If you write a will, you name your children’s guardian and a back-up, just in case.

If you don’t have a will, the law requires that your executor and trustee (any money left to minor-aged children must be held in trust) buy an administrator’s bond. This causes them to spend money you may not have wanted them to spend. It also causes delay while they get the bond. Also, they must get court permission to do certain things with your money, so they spend more money on lawyers’ fees. A will can state that no bonds will be required and list the powers of a trustee so that he doesn’t need court permission to carry out your intentions.

If you don’t have a will, none of your money can go to charity or a church or synagogue. The state plan for distributing your assets does not have any provision for charitable giving. A will allows you to give your money to any charity that you designate.

Although you might think wills are for rich, old people, there are unexpected deaths that happen to young people every day.  Make sure you protect your loved ones from your failure to plan for them by calling an estate lawyer today.  Your family will thank you. 

 

Talk about your estate plan to your beneficiaries

Most people who have a will or living have never mentioned it to their family. So when you become incapacitated or unexpectedly die, no one knows where to look for your estate plan documents and how to go about carrying out your wishes.

Estate planning is hard because it makes most people uncomfortable to think about what medical decisions they would make if they were in a car accident and unable to talk to the doctors. It forces them to make choices about their family and their assets that they would prefer not to have to decide. But not making an estate plan and not letting your family know about it does not make things easier for them if you become incapacitated or die unexpectedly.

A health care proxy and a living will (these might be incorporated into one document) names a person to make medical decisions for you when you can’t. That person needs to know what kinds of care you want and what kinds you would reject if you are unconscious and can’t speak for yourself. Would you want to be on a respirator? Be fed through a stomach tube? Continue your life in a persistent vegetative state? Be kept alive through every means possible? Talk to the persons who you will appoint as your health care proxy (and back-up proxy) so they know what you would want. Also tell your doctor what your wishes would be and give him/her a copy of the health care proxy and living will.

When you sign a will you name an executor, a guardian for your minor children, and a trustee for the trusts for your minor children (and back-ups for each of these persons). Do they know they have been named in your will? Do they know what you would want them to do for your family in terms of running any family business, selling the house, raising your children with your values and religion (or no religion). If you cannot talk bluntly about these issues, be kind and leave written instructions to your executor, guardian and trustee. Your executor should know where to find your original will (do not leave it in a safe deposit box). It would be enormously helpful if you left a document that details where bank accounts are located, what life insurance policies you own, what brokerage accounts you have, and the computer password to get information that is stored in your computer. I give my clients an Estate Planning Document Locator so that all of the important information is listed in one place. You should also advise your executor about how to contact for your lawyer, accountant, insurance agent, and financial planner so that your executor doesn’t spend hours looking for this information.

You may want a full discussion about your estate plan and who gets what. This serves the purpose of educating all parties so that they will know your intent, goals and objectives, while at the same time “clearing the air” of any misinformation that may have been implied or presented to any party in the past. If someone asks a question that you are not willing to answer, the issue can be delicately averted if that is what you desire. But saying nothing to your family does not allow them to do their own planning and will leave them unnecessarily confused, possibly angry, and wasting time looking for things when they are grieving for you.

So, do not be shy about talking with your family about your estate plan. They will thank you for it.

Life Insurance as Part of Your Estate Plan

If you don’t have a lot of cash in the bank and all of your wealth is in your house, how will your spouse or the guardian of your children have any funds to raise your children and send them to college? Life insurance can help.

Life insurance proceeds will pay out an immediate sum of cash that can be used in many immediately necessary ways – to pay the medical bills, the funeral costs, or if you die without doing any estate planning, federal or state estate taxes. The proceeds will also create funds to pay for the sports activities your children enjoy, the music or dance lessons that they take every week or the dozens of other small expenditures that will be difficult to pay for if one breadwinner or both of you die now. Even if you are a stay at home mom, your husband will need to hire a housekeeper/nanny/chauffeur to replace you and she doesn’t come cheap.

There are two kinds of life insurance: term insurance which is pure insurance (like your auto insurance) or whole life, which is insurance plus an investment vehicle. Start to assess what type of insurance you need by getting information about both types.

You do not want to name your minor-aged children as beneficiaries. If they are under age 18, a guardian of their property will have to be named by the court. Even if the guardian is your spouse, he/she will need to make regular reports to the court to show that he/she is spending your children’s inheritance wisely. And if your children are in college, do you want them to have a large sum of money suddenly in their bank account? Would they invest it wisely or blow it on a cool car and a terrific spring break vacation for all their friends? The insurance proceeds should go into a trust and you can dictate when the funds can be distributed and at what age the final distribution will be.

Your life insurance proceeds may be taxable if you own the policy. If you can change the beneficiary, or can borrow from your policy’s cash value (if you bought whole life insurance), or if the policy will pay out to your estate, then you own the policy. You want to have someone else own the policy. The safest owner is a trust. Remember, in New Jersey, we start paying state estate taxes if our estate is more than $675,000. That may be easily reached by the amount of your insurance proceeds plus the equity in your house.

Talk to your estate planning attorney about how life insurance fits into your estate plan and how best to structure the payout so that your family is fully protected.

If I Die Now, How Will My Children Pay for College

 

Estate planning is done to ensure that your plans for your children are carried out, even if you die now. So, how do you accomplish your goal for guaranteeing that your children will have the funds to attend the college that you have in mind for them?

There are 2 ways to accomplish this goal. The first is a Section 529 college savings plan. Every state offers at least one of these plans. Contributions grow tax-deferred. Withdrawals are tax-free when used for qualified education expenses. The name “Section 529″ is derived from the part of the Internal Revenue Code that governs the requirements for each plan. Anybody can contribute to a Section 529 plan, including grandparents and friends of the family. This lets people give the gift of education. The money in the plan is controlled by the account owner, not the child. So if the child decides to not go to college, they do not have access to the funds as they would with a Uniform Gift to Minors Act (UGMA) account. But the funds are there for your child’s use if he/she is named as the account beneficiary. You must set up a separate account for each child. If one child does not use the funds in his/her account, the account owner can switch the beneficiary to another child. Currently, the funds in the Section 529 account grow tax-deferred. If they are used for college tuition, room, board, fees, and books, the withdrawals are federal tax exempt. Funds in the Section 529 plan are not part of your estate, so they are not subject to estate tax. You should consult a financial professional and an estate planning lawyer to understand how a Section 529 plan fits into your plan to amass the large amount needed to pay for college these days.

If you don’t have a college savings fund, your will can establish a trust fund for your children’s college education. Trusts are not just for the wealthy. They can be funded with the proceeds from a life insurance policy. Trusts allow you to control how and when the money will be used and how and when the money will be distributed. You can create a trust that will continue through a child’s undergraduate education and any money left over could be distributed to that child after graduation or could then be transferred to another child. Or, the trust could be used for both undergraduate and graduate or professional education. You can have the trust created so that the trustee has no discretion over the distribution of the trust funds or total discretion.

So, do not think that, just because you might die early that your children will not have the funds to attend college. But, you must take action to put your plan into effect. Your lack of action leaves your children without the proper protections and funds.