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.