will | Olivia K. Smith, Attorney at Law

Why Estate Planning Is Important to Younger Adults

January 31, 2022Filed Under: Estate Planning

Most young adults don’t consider estate planning a priority. Young adults in their twenties and thirties often think they don’t own enough to constitute an estate. However, an estate is the total of all you own – money, investments, real estate, vehicles, business interests, digital assets (including cryptocurrency), and other personal belongings. No matter how much or minor, you own your possessions need to go somewhere after you die. You may not think you will die young, but if the coronavirus pandemic has taught us anything, it is that life is uncertain. It is a myth that estate planning is just for the rich and the old.

What legal documents constitute an estate plan?

Some documents may vary depending on your wealth or financial structure; however, everyone should have a will. At the time of your death, everything you own becomes your estate. Your estate will go through a probate process where the court will determine what happens to you everything you own that doesn’t have a co-owner or beneficiary. Because the probate court will inventory your assets and notify and pay creditors, your will is a public record. If you have a will, the probate court will use it as a guide. In the absence of a will (dying intestate), the court will use state intestacy laws to determine who inherits your assets.

What does a will establish in an estate plan?

A will designates two critical things. The first is the naming of your executor. An executor is responsible for carrying out the instructions in your will, making payments on any outstanding debts, distributing assets to named heirs, and filing your final taxes. Second, if you have dependents, your will names the guardian and backup guardian to provide care for them. The naming of an executor and guardian for a dependent can only happen in a will.

The value of establishing an advance healthcare directive for young adults

All young adults should have an advance healthcare directive, also known as a medical directive or living will, which includes a durable healthcare power of attorney. These legal documents specify your healthcare wishes if you are permanently incapacitated or for end-of-life healthcare and designate who will make those decisions on your behalf according to your instructions. In addition, it is imperative to include a HIPAA privacy authorization form for your durable healthcare power of attorney or trustee. The form permits medical and healthcare professionals to disclose pertinent health information and medical records to your healthcare proxy.

While it may be uncomfortable to contemplate being unable to make decisions for yourself as a young adult, accidental injuries, heart disease, cancer, and strokes, to name a few, are becoming all too prevalent in young American adults. Making plans while you are competent and able is a prudent course of action and can bring you a sense of calm, knowing you have confronted the possibility and have a plan in place.

The value of a revocable living trust for young adults

Some young adults will have enough assets, real estate, or business interests to make a revocable living trust worthwhile. This trust type avoids the probate process, ensuring privacy. There is no limit to the number of times you can amend a living trust. You may change asset distribution or add assets as you acquire more throughout your life. An estate planning attorney can help you determine if your financial situation and age warrant the setting up of this type of trust.

You probably have more assets than you realize. To assess your situation, inventory all of your belongings which typically includes but is not limited to:

All bank accounts in your name and their approximate balances
All investments you own
Any property or real estate you own
Any retirement plans you have, including pensions
Any insurance policies you carry
Any retirement plans, including pensions, you own
Businesses you own, whether in part or whole
Valuable personal property such as your grandmother’s wedding ring, a collection of trading cards, or a grandfather clock
Digital assets such as cryptocurrency, income-generating online storefronts, influencer accounts, or income-producing subscription accounts like TwitchTV
Include all email accounts, login URL’s including user names and passwords where you receive critical communications
All outstanding debts

Once you realize the scope of your belongings and assets, you can begin formulating your estate plan. First, consider who you want to receive your possessions and think about secondary beneficiaries, especially over time, as early estate planning requires frequent reviews and updates in the event of deaths, marriage, divorce, or the birth of a child.

Once you have an inventory and have begun thinking about who should handle things upon your passing and who you want as beneficiaries, it’s time to sit down with an estate planning attorney. Working with an estate planning attorney is easier than ever now, as COVID-19 increases the use of video and smartphone conferencing that streamlines legal planning. Estate planning attorneys like us can create a plan that best suits your situation, even if you aren’t sure what to do. Proper legal documents can save your loved ones from an expensive probate trial should someone contest your will. Even as a young adult, it is best to start planning now, even if it is just with some primary documents.

We would be happy to discuss your needs in a confidential setting that you are comfortable with – by video, over the phone, or in person. If you’d like to discuss your particular situation, please don’t hesitate to reach out. Please contact our Cincinnati office by calling us at 513-771-2444 with any questions.

Don’t Let Your Family Feud End up in Court

January 3, 2022Filed Under: Estate Planning

Family disagreements about a parent’s end-of-life care and inheritance can get so serious they may end up in a legal filing and court case. You can take steps moving beyond the possibility this might happen and create (or amend) your estate plan seeking to diffuse these potential issues before they become legal challenges.

Every situation is unique. Everybody’s family has a different mix of personalities, degrees of wants versus needs, and problem-solving skills. The American family system is more complex than ever, with a 2021 divorce rate hovering around 50 percent, divorces, remarriages, committed long-term partner relationships, biological children, stepchildren, and physical decentralization from other family members.

Fights occur in families that are rich and poor. It turns out the dollar amount is often irrelevant. Problems stem from mismatched expectations, including but not limited to:

Sibling rivalry – Tensions between siblings tend to boil over after the passing of a parent. This situation can be especially true when inheritable assets go to step-siblings. Grief often triggers reflection, and memories of clashes and disagreements never settled tend to present themselves in real-time. The settlement of your estate can become the battleground to settle the score of a long-time feud. Avoid the situation by appointing a professional fiduciary as your trustee. If you do not prefer this option, select a family member trustee with no stake in the rivalry to mitigate its effects.

The economic disparity among beneficiaries – Socio-economic imbalances of estate heirs can destabilize the entire process. A wealthier heir may afford to hold an inheritable asset, while less economically stable heirs may want to sell for immediate financial gain. The problem seems to become compounded by the number of inheritors. You can avoid these disputes by leaving specific instructions as to the preservation or sale of real property. You may opt for “cash-out” provisions that will pay the less financially stable heirs the value of their stake in the real property and allow the more financially stable heir to retain full ownership.

Co-trustees – Even family members with great relationships and the best of intentions can clash as to the administration of your estate. All it takes is two inheritors and one grandfather clock. Executors must move quickly and decisively to administer an estate because all inheritors are waiting for their share of the payout. Avoid this problem and name only one to administer your estate.

Beneficiary dependency or mental illness – Irrational behavior that becomes part of an already sensitive situation, like your death and the settlement of your estate, will slow progress and create ill will. Any history of psychological instability or substance abuse threatens to derail an orderly process. To avoid situations with chemical dependency, create contingencies for that heir to test clean for a specific time or establish a discretionary trust where a competent trustee handles access to assets on behalf of the addicted individual. In the case of mental illness, establish a special needs trust or build specific provisions into your base trust. This protection permits the beneficiary to qualify for government assistance and still receive trust disbursements.

Undue influence – End-of-life care for a parent usually falls to one person (often a sibling) handling most of the caretaking. The uneven workload and intimate daily contact can leave the caretaker believing they are entitled to more and coerce the parent to change documents to the caretaker’s benefit. Undue influence is more often than not a product of the other offsprings’ apathy. Prevention includes paying close attention to the increasing susceptibility of an aging parent and using digital means, audio-video cameras, digital monitors that track change in blood pressure et al., to identify parent stress and prevent caregiver coercion for personal gain.

Late marriage – Love knows no bounds. Late in life, marriages happen, and you can expect resentment of your new spouse by existing heirs, particularly in a blended family with children who are primarily, or only, on the settlor’s side. Divorces, remarriage, and deaths make updating your estate planning documents a must. Upon remarrying, it is essential to place assets in your trust or modify your existing trust and Will to clarify the division of assets.

Advance benefits to one heir and not others – If one of your children needs financial assistance now or another is starting a fledgling business, yet another might require a down payment for a first home or bailout money from suffocating college debt, you may opt to provide financial help. These scenarios are common but can strain relations during probate among heirs not receiving the same benefit. Avoid this situation by noting in your trust language which heir received an advancement to their inheritance and how to deduct that previously received amount from your estate assets. If you do not, some inheritors may receive a double payout, ruffling the feathers of other heirs.

Estrangement or disinheritance – Children and other potential heirs left out of inheritance typically have nothing to lose by challenging their exclusion. This situation becomes worse in the case of blended families and their complexities, particularly if the sidelined heir pairs the challenge with a secondary claim like undue influence. You can avoid this by keeping your trust updated. A more recent trust will include a more modern disinheritance clause covering changes in this area of law. Make sure you understand the specific language in your trust regarding disinheritance.

A carefully crafted estate plan that accounts for your heirs and potential relationship problems is the first step to reducing a legal challenge stemming from a family feud. An elder law estate planning attorney knows the problems that may crop up among family members and can address these issues using the appropriate legal entities with clear and specific language. Reducing the possibility of a legal challenge to your estate brings peace of mind to you and your future heirs. If you’d like to discuss your particular situation, please don’t hesitate to reach out. Please contact our Cincinnati office by calling us at 513-771-2444 with any questions.

A Guide for Understanding the Probate Process

December 27, 2021Filed Under: Elder Law, Estate Planning

The probate process involves authenticating the deceased individual’s will, assessing the assets, settling debts and taxes, and overseeing the allocation of the inheritance. After an asset-holder dies, the court will appoint a valid will’s executor to administer the probate process. In the absence of a will, the court will appoint a state administrator to handle probate. Probate law varies by state, but there are steps in the process that are common.

First, an executor is appointed and is normally the person named in the will. It is the executor’s responsibility to initiate the probate process. An executor can be a family member, a financial advisor, or any person the testator deemed capable of administering their estate. The executor files the will with the probate court, which initiates the probate process. A court officially appoints the executor as named in the will, giving the executor legal authority to act on the testator’s behalf.

The executor’s function is to locate and oversee all of the estate’s assets and to determine each asset’s value. The majority of the deceased’s assets are subject to the probate court, where the deceased lived at the time of their death. Real estate is an exception, and probate may extend to any county where the real estate is located.

The executor will pay any taxes and debts owed by the deceased from the estate. A notice of death is published and creditors are given a limited time to make claims against the estate for any money owed to them. If the executor rejects the claim, the creditor may take them to court, where a probate judge will determine the debt’s validity. The executor is responsible for filing the deceased’s final, personal income tax returns. The executor’s last task, via court authorization, is to distribute what remains of the estate to the beneficiaries.

Probate is required for any asset or account that does not have a joint owner or beneficiary named. If a joint owner or beneficiary is named then title changes automatically and probate becomes unnecessary.

If a person dies without a will, they are said to have died intestate. An estate can also be deemed instate if the will presented to the court is found to be invalid. The decedent’s assets of an intestate estate follow a similar probate process, beginning with the appointment of an administrator. An administrator functions like an executor, receiving all legal claims against the estate, paying outstanding debts, and the decedent’s taxes.

Administrators must also seek out legal heirs, including surviving spouses, parents, and children. The probate court will determine the distribution of the estate among its legal heirs. In the absence of any family or other heirs, remaining assets go to the state.

The more complex or contested an estate is, the longer the probate process can take to finalize. The longer the process, the higher the cost. Probate without a will typically costs more than probate with a valid will, but neither scenario is inexpensive. Probate court files an estate’s assets as a matter of public record, so if you want to keep your estate private, it is best to pursue other estate planning options such as a trust.

As estate planning attorneys, we can help you determine what planning tools are best for you. Contact us to schedule time for a private conversation to further determine how we can help. Please contact our Cincinnati office by calling us at 513-771-2444 with any questions.

What Role Your Will Plays in Estate Planning

June 28, 2021Filed Under: Estate Planning

A will is a legally binding directive stating who will receive your property upon your death and is an important part of a comprehensive estate plan. If you die without one (intestate), the state will distribute your assets and property via state law and quite possibly at odds with your wishes. Having a will allows you to appoint a legal representative or executor to carry out your bequests and name a guardian for your children. There is no doubting the importance of having a will, however there are some limitations you should be aware of.

Although a will can be the primary mechanism to transfer property on death, it does not cover all property situations. Some classes of property you are unable to distribute through a will are:

Property held in trust – A trust will have named beneficiaries who will receive the trust’s property according to the trust terms and not based on what is in your will (unless specifically stated in the trust).
Pay on death accounts – Informally known as PODs, the original account owner names a beneficiary(s) to whom the assets in the account pass automatically upon the owner’s death.
Life Insurance – Life insurance benefits pass to your named beneficiary(s) in the life insurance policy and are not affected by your will.
Jointly held property – Co-owned property is not distributed through your will. Joint tenants have an equal ownership interest in the property, and when one joint tenant dies, their interest ceases to exist. The other joint tenant now fully owns the entire property.
Retirement plans – In a similar manner to life insurance, money in an IRA or 401(k) passes to the named beneficiary(s). According to federal law, a surviving spouse is generally the automatic beneficiary of a 401(k); however, there are some exceptions. An IRA permits you to name a beneficiary(s).
Investments in transfer on death accounts – Some accounts holding stocks and bonds will transfer on death to the named beneficiary(s). Like POD accounts, transfer on death accounts bypass probate and go directly to the beneficiary(s).

A will does not allow you to avoid probate. By necessity, a will must go through the probate process in order to allow beneficiaries to inherit property. It can take months to get through probate, and it involves expenses like an attorney, executor, and court fees. Also, your will and everything associated with it (property you own, who your beneficiaries are, etc.) becomes part of the public record that anyone can access.

Keep funeral instructions outside of your will. The reality is your funeral may have already taken place before someone finds and reads your will, which can take days, even weeks. If your funeral or memorial service is important to you, the best way to help your family is to pre-plan, making arrangements with a funeral home. You can leave written instructions with the family as to your plans.

Your pets cannot inherit through your will. An animal is legally unable to inherit money or property from you. If you want your pets to be cared for after you die, leave money to a person willing to take care of your animals. The person you select can inherit your pets since a pet is considered property. You can also set up a pet trust or a pet protection agreement, either of which provides for your pet’s care.

Provisions for a child on government benefits are best in a trust. It is best to create a special needs trust to provide for a child with special needs or a child who is receiving government benefits. The trust can hold money for your child’s care without affecting those benefits.

There are ways to circumvent the limitations of a will by creating trusts, setting up pay-on-death accounts, and ensuring a beneficiary is named on all accounts that permit them. Your will is an important component of a comprehensive estate plan, but it can’t do everything.

We would be happy to discuss the pros and cons of having a will and other options available to you as part of your overall estate plan. If you’d like to discuss your particular situation, please don’t hesitate to reach out. Please contact our Cincinnati office by calling us at 513-771-2444 with any questions.

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