Law Office of Frank Bruno, Jr.

Category: Probate

  • What is Probate and How Does it Work?

    When you die, your estate goes through a legal process called probate. Probate is the court-supervised process of distributing your assets to your heirs and settling any debts or claims against your estate.

     

    While the specifics of probate can vary from state to state, the general process is similar across the country.

     

    Here’s what you need to know about probate and how it works:

    Step 1: Filing a Petition

    When someone passes away, the probate process typically begins with the filing of a petition with the court. This petition is a formal request to begin the probate process and is filed by someone who has an interest in the estate.

     

    If you have a will, the person who files the petition is typically the executor that you named in your will. The executor is responsible for carrying out the instructions in your will and overseeing the probate process.

    Step 2: Notifying Creditors and Heirs

     

    Once the probate court has received the petition, it will notify your creditors and your heirs that the probate process has begun. The purpose of notifying creditors is to give them a chance to file a claim against your estate for any outstanding debts or bills that you owed at the time of your death. This includes things like credit card debt, medical bills, and funeral expenses. Creditors have a certain amount of time, which varies by state, to file their claim against your estate.

     

    Your heirs have the opportunity to review your will and contest it if they believe it is invalid. Common reasons for contesting a will include claims that you were not of sound mind when you created the will, that you were under duress, or that the will was forged.

    Step 3: Inventorying Assets

    Next, the executor of your will (or the court-appointed administrator if there’s no will) will be responsible for taking an inventory of your assets. This includes a comprehensive list of all your assets, such as bank accounts, investment accounts, real estate properties, personal property, and any other valuable items you may have owned.

    The executor will need to determine the value of each asset, which may involve obtaining appraisals or other professional opinions.

    Step 4: Paying Debts and Taxes

    Once the assets have been identified and valued, the executor will need to use them to pay off any debts you owed at the time of your death. This involves using the assets identified in the previous step to settle any outstanding obligations you may have had at the time of your death.

     

    This includes debts such as credit card bills, medical expenses, and funeral costs. Additionally, any taxes owed by your estate, such as estate taxes or income taxes, must also be paid.

     

    If your estate does not have sufficient assets to pay off all of your debts and obligations, the executor will need to follow state law to determine the order in which debts are paid. This may involve selling off assets or liquidating investments.

    Step 5: Distributing Assets to Heirs

    Step 5 of the probate process involves distributing the remaining assets of your estate to your heirs. Once all of the necessary payments have been made, the executor will move forward with the distribution of assets.

     

    If you left a valid will, the executor will follow the instructions contained within the document for the distribution of your assets. If you did not have a will, your assets will be distributed according to state law.

     

    The distribution of assets can involve selling assets and dividing the proceeds among your heirs or transferring ownership of assets directly. For example, if you owned a home, the executor might sell the property and divide the proceeds among your beneficiaries or transfer ownership of the property directly to the beneficiaries themselves.

     

    If there are disputes among your heirs regarding the distribution of assets, they are often resolved through mediation or arbitration. However, in some cases, they may need to be settled in court.

    Step 6: Closing the Estate

    The final step in the probate process is closing the estate. After all assets have been distributed and debts have been paid, the executor files a final accounting with the probate court. The final accounting must be approved by the court before the estate can be closed. If the court finds issues with the accounting, it may require additional documentation or a hearing to resolve any disputes.

     

    It’s important to note that closing an estate can take several months or even years, depending on the complexity of the assets involved and any legal disputes that may arise.

     

    It’s the executor’s responsibility to ensure that all required documents are filed and all debts are paid in a timely manner, and to keep all interested parties informed of the progress of the probate process.

    Can I Avoid Probate Completely?

    Probate can be a lengthy and expensive process. Many people prefer to avoid it if possible. Here are a few ways to avoid probate:

     

    • Establish a Revocable Living Trust: Transfer your assets into a trust during your lifetime to maintain control and ensure a smooth transfer to beneficiaries without probate.
    • Designate Beneficiaries for Accounts: Name beneficiaries for life insurance policies, retirement accounts, and payable-on-death bank accounts to enable a direct transfer of assets outside of probate.
    • Joint Ownership: Jointly owning property with rights of survivorship allows automatic transfer to surviving owners, bypassing probate.
    • Consider Gifting: Reduce the value of your estate by gifting assets during your lifetime, potentially minimizing the need for probate.

     

    Please note that these strategies may vary in effectiveness depending on state laws and your individual estate. An experienced estate planning attorney can provide personalized guidance to help you navigate probate and probate avoidance.

    We Can Help with Probate and Estate Administration

    While probate can be a complex and time-consuming process, it’s an important part of ensuring that your assets are distributed according to your wishes after you die.

     

    If you want to avoid probate, there are estate planning strategies you can use, such as setting up a trust or making gifts to your heirs during your lifetime. Our experienced estate planning attorney team can help you explore your options and create a plan that’s right for you. Contact us to get started today.

  • Preserving Your Legacy: A Guide to Protecting Assets and Inheritance

    Preserving Your Legacy: A Guide to Protecting Assets and Inheritance

    Navigating an elder law estate plan revolves around crucial questions that shape your choices. Firstly, it addresses the fate of your assets after you pass away.  How does a person bequeath their assets, their personal treasures and lifetime of personal belongings to their loved ones, family, house of worship and charities? Is it through the use of a Last Will and Testament or one or several Trusts?

    Secondly, it anticipates the scenario of needing long-term care and how it might impact your assets. The days of living and dying still occur except it is living longer and dying more slowly. Looking at your own family and the family of friends, we have all seen death preceded by a long-protracted illness.  The type of illness and lack of proper medical insurance or the need for long-term medical insurance is what depletes family assets.

    A well-rounded plan seamlessly addresses both aspects, ensuring not only the smooth transfer of assets to your beneficiaries or loved ones but also safeguarding them from being depleted by long-term care expenses.

    Securing long-term care insurance stands as the most effective defense against the financial challenges associated with extended care needs. When contemplating this insurance option, critical considerations involve defining an appropriate daily benefit amount and incorporating an inflation rider to match the escalating costs of nursing home care. Notably, long-term care insurance goes beyond by covering the expenses of home health aides, empowering individuals to gracefully age within the familiarity and comfort of their own homes, steering clear of the need for relocation to a facility.

     

    In case you’re unable to obtain long-term care insurance, there’s a backup plan called Medicaid Asset Protection (MAPT). Assets held in MAPT for at least five years are shielded from nursing home expenses, and upcoming laws may extend protection to two and a half years for home care.

    Explore the option of using trusts instead of wills to bypass probate, which is a legal process initiated when you pass away with assets solely in your name. Trusts are harder to challenge than wills, especially if you’re disinheriting a child. In general, trusts streamline the estate settlement process, saving both time and money.

    Opt for Inheritance Protection Trusts when leaving assets to your children instead of direct distributions. These trusts serve as a protective measure during your children’s divorces, ensuring that in the unfortunate event of your child’s passing, the inheritance is preserved for your grandchildren rather than being vulnerable to claims from your children’s spouses.

     

    As I practice it, Elder law estate planning is a comprehensive approach tailored to address the unique legal and financial concerns that individuals face as they age. Moreover, elder law estate planning aims to mitigate potential tax liabilities, ensuring that as much of the estate as possible goes to the intended heirs rather than being depleted by taxes or other financial burdens.

     

    In essence, an elder law estate plan does three main things: (1) safeguards your assets from long-term care expenses, (2) passes assets to your heirs while minimizing taxes and legal fees, and (3) ensures your grandchildren inherit while shielding the legacy from your children’s divorces.

     

    Elder law estate planning offers a holistic approach to secure the well-being of seniors, protect their assets, and provide a clear roadmap for the distribution of their estate according to their wishes. By taking a proactive stance, individuals can steer the complexities of aging with confidence and ensure a legacy that aligns with their values and go

  • Avoiding Skilled Nursing Facilities

    Avoiding Skilled Nursing Facilities

    Nursing homes strike fear into the hearts of the elderly and families of the elderly. Although these institutions have been re-branded as skilled nursing facilities (SNFs) and they play a crucial role in providing specialized care for individuals requiring intensive medical attention and rehabilitation. These facilities offer a range of services from post hospital rehabilitation to long term care to cater to the diverse needs of residents.

    Many seniors wish to steer clear of nursing home placement and continue residing in their family homes, where they have built decades of memories. However, a significant number of older adults may not have adequately prepared for the future, including changes in daily routines, adapting to new lifestyles, and making the necessary decisions to avoid nursing home placement.

    The reluctance to discuss these topics often stems from the uncertainty of unforeseen health issues or accidents that might necessitate a move to a nursing home. Unfortunately, by avoiding these conversations, individuals inadvertently place burdens on their family members and limit their own choices. Successfully sidestepping nursing home placement requires proactive planning and consistent, deliberate actions on a day-to-day basis.

    Avoiding skilled nursing facilities may not be something you can plan for and is out of our hands, but upon realizing the intricacies of estate planning along with the considerations of elderly care, it can be proactively undertaken well before crisis situations, strategically preparing for aging in place and circumventing the need for admission to a long-term care skilled nursing facility.

    I recommend considering participation in one of our monthly Estate Planning Workshops / Webinars. You might also want to explore the option of retaining our law firm to aid you and your family in formulating a personalized Estate Plan. By doing so, you can explore strategies to cover in-home care expenses and establish arrangements that significantly improve the likelihood of avoiding placement in a nursing facility.

    Collaborating closely with your attorney and your family members is also important. This partnership will help identify your goals, research, and secure relevant services, and establish a plan tailored to keep you in the least restrictive setting of your choice. Early planning is essential to avoid a skilled nursing facility, and initiating the process well in advance ensures the highest likelihood of success. While we can assist in crisis situations, initiating your Estate Planning journey before a crisis emerges is even more beneficial.

  • Securing Tomorrow’s Promise: Expressing Unwavering Support with a Thoughtful Estate Plan

    Securing Tomorrow’s Promise: Expressing Unwavering Support with a Thoughtful Estate Plan

    In contemplating the inevitable, death stands as an undeniable truth that looms over every individual. However, departing from this world without an estate plan serves as a disconcerting choice, unleashing a cascade of uncertainties and potential chaos onto the lives of those left behind.

    The absence of an estate plan transforms the legal aftermath into a labyrinth of confusion. State laws take charge of asset distribution, often disregarding an individual’s unique wishes. A lack of will or trust leads to prolonged legal battles and disputes among heirs, fostering emotional distress and financial strain.

    For example, in numerous instances involving celebrities, their demise occurs without a comprehensive estate plan, an inadequate Will, or a document claiming to be a Will. This often leads to disputes and provides the public with a glimpse into the deceased’s personal and financial matters. Otherwise, this likely won’t happen if the deceased already prepared a Revocable trust.

    One good example was the case of Matthew Perry. He was widely recognized for his portrayal of the sarcastic and witty Chandler Bing on the immensely popular TV show “Friends,” passed away suddenly at the age of 54. Unmarried and without children, he left behind grieving parents, five half-siblings, and a vast fan base. Perry’s Estate Plan presents a unique scenario with the potential absence of a significant courtroom battle over his considerable fortune. This is attributed, at least in part, to his creation of a Revocable Trust, with no additional documents identified at the time of this writing. While the absence of public contention may suggest a smoother process, it doesn’t negate the opportunity to glean valuable lessons from this particular situation.

    At the time of Matthew’s passing, it is estimated that his estate surpassed $120 million, primarily accumulated through his contributions to “Friends” and ongoing royalties from the show. Despite the tragedy of Matthew’s demise, a closer look at his Estate Plan underscores a crucial lesson: irrespective of the estate’s size, having a tailored and comprehensive plan is imperative. Although Matthew had a Revocable Trust, the absence of a Will serves as a reminder of the importance of addressing all facets of estate planning to meet individual needs. Moreover, the manner in which Matthew’s assets will be distributed remains uncertain due to the privacy protections offered by the Revocable Trust. It is evident however that unless specific provisions addressing tax implications were incorporated into the Revocable Trust, substantial tax burdens are anticipated.

    The Revocable Trust sidesteps many of the issues commonly linked with celebrity estates. A Revocable Trust functions as a viable alternative to a Will, effectively avoiding the probate process mandated by the Will. Furthermore, the Revocable Trust offers centralized asset management, facilitates disability planning throughout one’s lifetime, and ensures the confidentiality of the decedent, the estate plan, and its beneficiaries.

    A proficient Trust and Estate practitioner consistently advises clients to establish both a Will and a Revocable Trust, as each document serves distinct purposes in guiding posthumous affairs.

    The Will, uniquely capable of tasks such as nominating guardians for minor children, serves as a crucial fallback to the Trust. In cases where the decedent neglects to retitle assets in the name of the Revocable Trust before passing, the Will contains provisions directing the asset distribution to the Trust. However, this necessitates the assets to undergo probate, a potentially protracted and costly process contingent on the state of residence. It’s important to note that, with rare exceptions, probate is a public process.

    Blogs about celebrity estates are interesting because they show what can go wrong without proper Estate Planning. Everyone, no matter how much they own, needs an Estate Plan. Talk to a qualified Estate Planning attorney about your situation. Many suggest using Revocable Living Trusts instead of Wills to avoid probate and simplify things during disability. But, as this article explains, Revocable Trusts may not cover everything.

    If Matthew had planned his estate properly, he could have made sure his legacy lived on as he wanted, maybe through his foundation or a charity. Get help from an Estate Planning expert to create your plan, and your family will thank you for being a true “Friend.”

  • Understanding Probate in New York: What You Need to Know

    Understanding Probate in New York: What You Need to Know

    Probate is the legal process in which, following your death, a Surrogate’s Court Judge (the Surrogate) reviews the Petition and legal documents submitted and approves the terms outlined in your Wll. Subsequently, your assets, property, and possessions are distributed to your beneficiaries once any outstanding debts have been settled.

    Upon the passing of a New York resident, the distribution of their assets to heirs and beneficiaries is governed by New York probate law. Initially, the probate courts (Surrogate’s Court) in New York appoint a representative, often referred to as an executor, to oversee the estate affairs. The appointed executor’s responsibilities include the collection and documentation of all assets, settling outstanding debts, and validating the authenticity of any existing wills. Following the completion of these necessary steps by all parties involved, the rightful heirs then receive their designated inheritance.

    Is Probate Required in New York?

    Yes, in New York, the probate process is required when a decedent passes away with an asset in his or her individual name, particularly for individually owned assets such as cash, homes, electronics, checking accounts, jewelry, and cars. Notably, life insurance policies and bank accounts with named beneficiaries, as well as jointly owned assets, are exempt from the New York probate process. Estates held within a living trust are classified as non-probate assets.

    Small estates jointly owned with a value below $50,000 may be eligible for a Voluntary Administration proceeding, irrespective of the existence of a Last Will. Administration, in this context, pertains to the court’s authorization for an heir to manage the property of the deceased.

    In instances where the deceased solely owned real estate, a Voluntary Administration proceeding cannot be initiated. Moreover, if the decedent possessed both real estate and a Last Will, heirs are required to initiate a probate proceeding. Additionally, when dealing with a wrongful death lawsuit, the estate must undergo the probate process.

    How Much Time Does the Probate Process Take in New York?

    The duration of the probate process in New York hinges on factors like estate size, the number of beneficiaries, the executor’s capabilities, and potential Will contests. According to the American Bar Association, the typical duration for probate ranges from six to nine months. In a post-Covid world, estates are lasting a year or longer. While some heirs may receive their inheritance within six months, the typical probate period for most estates is around one year and then some. The process tends to be shorter when the Will is uncontested, and debts are swiftly resolved. While there is no specific legal deadline for initiating probate after death, it is advisable to commence the filing at the earliest opportunity. Probate procedures often extend over several months to a year, underscoring the importance of early filing.

    Heirs and beneficiaries named in the will are officially notified of the probate proceedings. They may have the opportunity to contest the will during this period if they believe there are grounds to do so.

    Is Going Through Probate Necessary?

    It depends. Surprisingly, there is an option to bypass the probate process. Yet, choosing this route implies forfeiting access to the assets specified in your loved one’s will. It is crucial to note that no heir gains official recognition until the probate process is successfully completed. This proceeding might seem cumbersome, but it still remains a preferable option to inheriting nothing. Fortunately, there are proactive measures one can take in advance to avoid the necessity of probate.

    While the probate process can be seen as complex and time-consuming, its importance lies in bringing transparency, order, and legal validity to the distribution of an individual’s estate. Seeking legal guidance and planning ahead can help simplify the probate process, making it a valuable component of a comprehensive estate planning.

  • Why Do I Need an Executor?

    Why Do I Need an Executor?

    What would happen if someone you were close to, asked you to be their Executor? Would you be honored, or would you be uncomfortable with the responsibility? What do you need to do, when do you need to handle these tasks and how much time will it take?

    These are the questions often asked about the role of an Executor, as reported in The Huntsville Item in the article “Role of an executor.”

    A person having a will prepared is called the “Testator” if male and a “Testatrix” if female. The person they appoint to take care of distributing their assets and carrying out the instructions in their will is called the “Executor” if male and the “Executrix” if female. That person also pays the estate’s debts and taxes. Note that the debts and taxes are not paid from the Executor’s personal accounts, but from the proceeds of the estate.

    Why Do I Need an Executor? The Executor has several responsibilities and power. Therefore, it’s important to choose an individual who is organized, good with finances and knows how to get things done. An Executor could be a person or an institution, like a bank. Here are some things to consider when selecting an Executor:

    • Are they good with handling their own personal business?
    • Do they have some familiarity with your business, finances and property?
    • Are they willing and able to act as your Executor?
    • Do they have the time to devote to serving as Executor?
    • Can they work with your estate planning attorney and your accountant?
    • If you own a business, will they be able to keep it going during a transition period?

    There should always be a Plan “B” and perhaps even a Plan “C,” if the first person you wish either cannot or will not serve as Executor. If you do not have a Plan “B” or “C,” the court may name an Executor. That may be a person you don’t know, who does not know you, your family or your business.

    Why Do I Need an Executor? The Executor’s tasks vary, depending upon the laws of the state. However, in general, these are the Executor’s tasks. Note that an estate planning attorney usually assists with this process.

    • The will is probated, which requires filing an application with the probate court in the decedent’s jurisdiction.
    • The court issues Letters Testamentary to the individual designated in the will as the Executor.
    • A general notice is given to unsecured creditors within 30 days of being appointed Executor.
    • Notice is given to each secured creditor, by certified or registered mail.
    • Documents need to be gathered, including insurance policies, bank statements, income tax returns, car titles, leases, home deeds, home titles, mortgage paperwork, property tax bills, birth, death and marriage certificates and unpaid bills.
    • The post office, relatives, friends, employers, insurance agents, religious, fraternal, veterans’ organizations, unions, etc., all need to be notified.
    • The personal property of the estate needs to be collected, preserved and appraised.
    • The residence needs to be secured and maintained, including a review of insurance coverage.
    • An inventory of the estate’s assets needs to be prepared.
    • The Executor needs to apply for Social Security benefits and an employee identification number (EIN) for the estate’s bank account.
    • Once the EIN number has been created, open a bank account on behalf of the estate and pay all valid debts from the estate account.
    • Determine any tax liability and prepare for a final tax return to be filed.
    • Distribute the assets and property of the estate, according to the directions in the will.

    Usually the estate planning attorney handles many of these tasks and works closely with the Executor. Some Executors are compensated by the estate for their time and effort, but that is not always the case. Talk with your estate planning attorney in advance, about any compensation for your Executor.

    Reference:

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  • How The Ancient Ones Handled Their Estate Planning

    “I love money. I love everything about it. I bought some pretty good stuff. Got me a $300 pair of socks. Got a fur sink. An electric dog polisher. A gasoline powered turtleneck sweater. And, of course, I bought some dumb stuff, too.” Steve Martin.

    “I made my money the old-fashioned way. I was very nice to a wealthy relative right before he died.” Malcolm Forbes.

    It’s not unusual for a family member to find an old bank account or painting, years after someone has passed and the estate has been closed. If it’s not something of great value, says Above the Law in the article “Old Money, Same Issues: Lessons from the 5th Century in Organizing Your Estate,” it’s easy to handle. Contacting a few members of the family to see who wants a small item, can be a simple task.

    However, if it’s of high value, the family may need to petition a bank, the probate court or even an unclaimed funds bureau for access to the asset, so it can be distributed to beneficiaries or heirs. The testator needs to appoint a meticulous administrator so no stone is left unturned, when the time comes for marshalling all of the assets, before the estate can be closed.

    Israeli archeologists recently unearthed deeply buried stones related to the estate of an ancient Samaritan named Adios. The stone had an inscription that read “Only God help the beautiful property of Master Adios, amen.” The estate is reported to date back 1,600 years to the 5th century. The estate contained stone mechanisms for making wine, flour and oil, including a mill. It was fairly well organized.

    We have now organized people who take care of their heirs and beneficiaries, by listing all of their assets and taking the time to have an estate plan created that includes a detailed will, among other important documents. We are centuries away from inscribed stones, but the game plan is the same: write down the assets, have a will that details what assets go to either people or charitable organizations and prepare for the future.

    If there is no list of assets, there are ways to uncover them. However, it creates a lot of work for the executor and stress for the family, that could be avoided with an estate plan.

    The best evidence of asset holdings are often a decedent’s tax returns. General supporting documentation can reveal useful information about a person’s financial status. A look at a decedent’s paper files can reveal bank accounts, investment accounts and insurance policies.

    If the assets are not properly documented in an estate plan, the monies may end up in a state’s unclaimed funds depository. Real estate, if taxes are not paid, may be seized. Many of the concerns for unclaimed funds can be addressed, by taking the time to create a spreadsheet of information and sharing it with the executor.

    Whether your assets include a stone mill or bank accounts, how the ancient ones handled their estate planning may in fact be different than a modern American. An estate plan that includes clear and organized information about your assets will increase the likelihood that your assets will be distributed and not disappear, until they are uncovered centuries later.

    Related Articles:  “Old Money, Same Issues: Lessons from the 5th Century in Organizing Your Estate,”

  • How Do Trusts Work in Your Estate Plan?

    How Do Trusts Work in Your Estate Plan? A trust can be a useful tool for passing on assets, allowing them to be held by a responsible trustee for beneficiaries. However, determining which type of trust is best for each family’s situation and setting them up so they work with an estate plan, can be complex. You’ll do better with the help of an estate planning attorney, says The Street in the article “How to Set Up a Trust Fund: What You Need to Know.”

    Depending upon the assets, a trust can help avoid estate taxes that might make the transfer financially difficult for those receiving the assets. The amount of control that is available with a trust, is another reason why they are a popular estate planning tool.

    First, make sure that you have enough assets to make using a trust productive. There are some tax complexities that arise with the use of trusts. Unless there is a fair amount of money involved, it may not be worth the expense. Once you’ve made that decision, it’s time to consider what type of trust is needed.

    Revocable Trusts are trusts that can be changed. If you believe that you will live for a long time, you may want to use a revocable trust, so you can make changes to it, if necessary. Because of its flexibility, you can change beneficiaries, terminate the trust, or leave it as is. You have options. Once you die, the revocable trust becomes irrevocable and distributions and assets shift to the beneficiaries.

    A revocable trust avoids probate for the trust, but will be counted as part of your “estate” for estate tax purposes. They are includable in your estate, because you maintain control over them during your lifetime.

    They are used to help manage assets as you age, or help you maintain control of assets, if you don’t believe the trustees are not ready to manage the funds.

    Irrevocable Trusts cannot be changed once they have been implemented. If estate taxes are a concern, it’s likely you’ll consider this type of trust. The assets are given to the trust, thus removing them from your taxable estate.

    Deciding whether to use an irrevocable trust is not always easy. You’ll need to be comfortable with giving up complete control of assets.

    These are just two of many different types of trusts. There are trusts set up for distributions to pay college expenses, Special Needs Trusts for disabled individuals, charitable trusts for philanthropic purposes and more. Your estate planning attorney will be able to identify what trusts are most appropriate for your situation.

    Here’s how to prepare for your meeting with an estate planning attorney:

    List all of your assets. List everything you might want to place in a trust: including accounts, investments and real estate.

    List beneficiaries. Include primary and secondary beneficiaries.

    Map out the specifics. Who do you want to receive the assets? How much do you want to leave them? You should be as detailed as possible.

    Choose a trustee. You’ll need to name someone you trust implicitly, who understands your financial situation and who will be able to stand up to any beneficiaries who might not like how you’ve structured your trust. It can be a professional, if there are no family members or friends who can handle this task.

    Don’t forget to fund the trust. This last step is very important. The trust document does no good, if the trusts are not funded. You may do better letting your estate planning attorney handle this task, so that accounts are properly titled with assets and the trusts are properly registered with the IRS.

    How Do Trusts Work in Your Estate Plan? Creating a trust fund can be a complex task. However, with the help of an experienced estate planning attorney, this strategy can yield a lifetime of benefits for you and your loved ones.

    Reference: The Street (July 22, 2019) – “How to Set Up a Trust Fund: What You Need to Know”

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  • Forgot to Update Your Beneficiary Designations? Your Ex Will Be Delighted

    Forgot to Update Your Beneficiary Designations? Your Ex Will Be Delighted

    Your will does not control who inherits all your assets when you die. This is something that many people do not know. Instead, many of your assets will pass by beneficiary designations, says Kiplinger in the article “Beneficiary Designations: 5 Critical Mistakes to Avoid.”

    The beneficiary designation is the form that you fill out, when opening many different types of financial accounts. You select a primary beneficiary and, in most cases, a contingency beneficiary, who will inherit the asset when you die.

    Typical accounts with beneficiary designations are retirement accounts, including 401(k)s, 403(b)s, IRAs, SEPs, life insurance, annuities and investment accounts. Many financial institutions allow beneficiaries to be named on non-retirement accounts, which are most commonly set up as Transfer on Death (TOD) or Pay on Death (POD) accounts.

    It’s easy to name a beneficiary and be confident that your loved one will receive the asset, without having to wait for probate or estate administration to be completed. However, there are some problems that occur and mistakes get expensive.

    Forgot to Update Your Beneficiary Designations? Your Ex Will be Delighted. Here are mistakes you don’t want to make:

    Failing to name a beneficiary. It’s hard to say whether people just forget to fill out the forms or they don’t know that they have the option to name a beneficiary. However, either way, not naming a beneficiary becomes a problem for your survivors. Each company will have its own rules about what happens to the assets when you die. Life insurance proceeds are typically paid to your probate estate, if there is no named beneficiary. Your family will need to go to court and probate your estate.

    When it comes to retirement benefits, your spouse will most likely receive the assets. However, if you are not married, the retirement account will be paid to your probate estate. Not only does that mean your family will need to go to court to probate your estate, but taxes will be levied on the asset. When an estate is the beneficiary of a retirement account, all the assets must be paid out of the account within five years from the date of death. This acceleration of what would otherwise be a deferred income tax, must be paid much sooner.

    Neglecting special family considerations. There may be members of your family who are not well-equipped to receive or manage an inheritance. A family member with special needs who receives an inheritance, is likely to lose government benefits. Therefore, your planning needs to include a SNT — Special Needs Trust. Minors may not legally claim an inheritance, so a court-appointed person will claim and manage their money until they turn 18. This is known as a conservatorship. Conservatorships are costly to set up. They must also make an annual accounting to the court. Conservators may need to file a bond with the court, which is usually bought from an insurance company. This is another expensive cost.

    If you follow this course of action, at age 18 your heir may have access to a large sum of money. That may not be a good idea, regardless of how responsible they might be. A better way to prepare for this situation is to have a trust created. The trustee would be in charge of the money for a period of time that is determined by the personality and situation of your heirs.

    Using an incorrect beneficiary name. This happens quite frequently. There may be several people in a family with the same name. However, one is Senior and another is Junior. The person might also change their name through marriage, divorce, etc. Not only can using the wrong name cause delays, but it could lead to litigation, especially if both people believe they were the intended recipient.

    Failing to update beneficiaries. Just as your will must change when life changes occur, so must your beneficiaries. It’s that simple, unless you really wanted to give your ex a windfall.

    Failing to review beneficiaries with your estate planning attorney. Beneficiary designations are part of your overall estate plan and financial plan. For instance, if you are leaving a large insurance policy to one family member, it may impact how the rest of your assets are distributed.

    Forgot to Update Your Beneficiary Designations? Take the time to review your beneficiary designations, just as you review your estate plan. You have the power to determine how your assets are distributed, so don’t leave that to someone else.

    Related Article:  “Beneficiary Designations: 5 Critical Mistakes to Avoid.”

    “Life Insurance in My Estate Plan?”

  • A Big Red Binder of Information

    Life happens, when we’re not prepared. A woman is recovering at home from minor surgery when her older sister dies unexpectedly, thousands of miles away. She can’t fly from her home to her sister’s home for weeks. What will happen, asks Considerable in the article “This is the most helpful thing you can do for the people who love you” ? If you’re not prepared, the result is a mess for those you love.

    The task of untangling someone’s financial responsibilities and their legal matters is emotionally and mentally draining, when they have not prepared any kind of plan to convey the information. It’s not just making the calls and explaining who you are and why you are calling but having to constantly be starting at the death certificate of someone you love. That’s why people should consider making themselves a Big Red Binder.

    That’s the name many people give to their folder of names and numbers and important documents that are assembled for such an occurrence, a reference book for their lives that contains every bit of information that their loved ones will need, in the event of a sudden death or illness.

    It’s admittedly old school, but there are advantages to using a large three-ring binder. You can put documents in pocket pages and use loose-leaf paper for your important information. Consider going whole-hog and also buying dividers—anything you can do to make it easier for the person who is going to have to tackle all of these tasks.

    Don’t rely on digital only: if your family can’t get into your computer or access your cloud storage, they won’t be able to help. You could keep a copy of the information in a secure location in the cloud or on your computer, in addition to on paper.

    Tell at least two people about the Big Red Binder of Information and let them where you have located it. If possible, give one of them a copy, so that they have it available. This is what you should include in it:

    Medical Information: Include surgeries, medications, recent test results, treatments and the name and contact information of healthcare providers.

    Health Insurance Info: The name of the company, a copy of your health insurance card, your Medicare card and any recent bills.

    Recurring Bills: Recent bills and contact information about your mortgage payments or rent, utilities, car lease or loan and life insurance policies. You should do the same for regular bills and for subscriptions, memberships.

    Insurance Contacts: A list of all insurance agents, policy numbers and the agent’s contact information.

    Investment Information: Your financial adviser’s contact information and account numbers.

    Financial and Legal Information: Contact information for your estate planning attorney and your CPA. I t should include where your prior year’s tax records can be found. Make a copy of the front and back of your credit and bank cards. Include recent credit card bills and note when payments are generally due.

    Pet Care: Contact info for the vet, any medication information and info for a trusted friend who can care for a pet on a short-term basis. A pet trust, if you have one.

    Personal Lists: Who should be notified in the event of a serious illness or death? A list of names, phone numbers and email addresses will be invaluable.

    A personal binder like this relieves children or friends, who are in probably still in shock, and gives them the ability to have the information they need right at their fingertips, without having to dig through files or drawers of paper. It’s a gift to those you love.

    Reference:

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