Organizing Your Estate for Your Loved Ones
One of the biggest issues that most people over look is how their assets and estate are organized. If your estate plan is a mess of documents or if you do not have an estate plan, you are making it harder on loved ones to be able to efficiently aid you in your time of incapacity or distribute your estate on your passing. The is power point will describe ways your last will and testament, your power of attorney and advanced medical directive work together and how to safely store those documents along with other aspects of your estate to consider
Content
Organizing Your Estate for Your Incapacity and Beyond:
Making It Easy for your Love One’s to Oversee You Estate By Christopher Guest
February 4, 2012
Famous Quotes
• "In this world nothing can be said to be certain, except death and taxes“ • "Death, taxes, and childbirth! There's never a convenient time for any of them.“ • “Everyone gets organized at some point, they just might not be around for it.”
• Benjamin Franklin, Founding Father • Margaret Mitchell, Author in Gone With the Wind
• Sue DeRoos, Professional Organizer
2
The Three Legs of the Estate Planning Tri-Pod
• Your Last Will and Testament
– Could also include a Revocable Living Trust or other estate planning entity. – A will only controls probate assets and directs who should receive those probate assets. – Typically, does not control IRA’s, Life Insurance, Mutual Funds and other financial instruments that have designated beneficiaries.
• Advanced Medical Directive
– Allows the person(s) you appoint to authorize or not authorize a variety of medical treatments if you are unable to speak for yourself. – Not the same as a Living Will.
• Power of Attorney
– A legal document giving an agent the power to manage your finances. – The authorized person(s) steps into your shoes and makes decisions only on those matters that you authorize that person to act on your behalf.
3
With Planning
While living, if you should become incapacitated: At death:
• How should your affairs be managed? • Who makes the decisions on managing your affairs? • Designate who should make financial decisions if you are unable to make them for yourself. • Designate who should make healthcare decisions if you are unable to make them for yourself.
• To provide instructions concerning the physical and financial care of loved ones. • Distribute assets according to your desires. • Reduce costs of settling your estate, if possible. • Potentially minimize estate tax and income tax liability. • Leave a legacy.
4
Without Planning
• Probate estate is distributed pursuant to intestate rules.
– Intestate distribution is based on familial relationships to the decedent.
• Intestate priority rules treat everyone equally. • Distant relatives may receive assets that you would prefer to go to someone else or to charity. • Intestate estates that enter probate administration generally have additional and potentially unnecessary expenses. • If minor children receive assets, the court must appoint a conservator to manage the assets and will turn those assets over to the child when they turn 18 or 21 years of age. • If you have become incapacitated and lack planning:
– No one will be able to manage your financial affairs. – Someone will need to go to court to institute a guardianship or conservatorship proceeding to be authorized to manage your affairs or make healthcare decisions for you.
5
Advanced Medical Directive (AMD)
• Legal document that allows you to do the following:
– state what level of medical care you want if you are unable to make decisions for yourself. – direct that a specific procedure or treatment be provided, such as artificially administered hydration (fluids) or nutrition (feeding); – direct that a specific procedure or treatment be withheld; and – appoint a person to act as your agent in making health care decisions for you, if it is determined that you are unable to make health care decisions for yourself.
• Your agent should:
– understands what level of care you would want; and – be a person that can be trusted and you have spoken to about end-of-life decisions.
• A Living Will is different than an AMD.
6
Power of Attorney (POA)
• The principal, creates a legal document giving another person, called the agent or attorney-in-fact, power(s) to act in the principal's place. • The Agent:
– is in a fiduciary relationship with the principal; – the law requires the agent to act in the best interests of the principal, even over the agent’s interests; – must also be completely honest with the principal; and – must be loyal to the principal in their dealings with each other.
• Powers can be very diverse, broad or restrictive, and can include, but not limited, to:
– – – – – – – – Buy, manage, or sell real estate, Enter into contracts, File tax returns, Handle banking transactions, Handle matters related to government benefits, Make gifts, Make transfers to revocable trusts, or Settle claims.
7
Power of Attorney (POA)
• Durable v. Non-Durable
– In a non-durable power of attorney, the powers vested in the agent by the principal are revoked if the principal becomes incapacitated, incompetent or dies. – A durable POA is effective from the moment of execution of the document and will last until the durable power is revoked by principal or the principal dies.
• Durable POA will also remain in effect for the time the principal remains incapacitated.
• “Springing” Power of Attorney
– Is a special kind of Durable POA. It becomes effective when the principal becomes incapacitated. The Durable POA must expressly state that requirement and what constitutes incapacity.
• All Powers of Attorney become obsolete on death of the principal. • Banks and financial institutions take a hard look at POAs.
8
Guardianship/Conservatorship/Custodianship
• Guardianship is a legal mechanism by which one individual or entity (a guardian) is appointed by a court to exercise certain decision making functions on behalf of, and in the place of, an individual that is legally “incapacitated.”
– Several types of guardianship:
• Guardian of the person – usually only concerned with the nonfinancial issues like healthcare, support, etc. • Guardian of the estate – usually only concerned with financial issues. • Guardian of the estate and person - both • Limited v. full guardianship; joint; temporary; etc.
• Conservatorship is alternative to guardianship and concerned with the financial affairs of the ward/subject.
– a conservatorship is limited to the management of the property and financial affairs of a protected person. As with guardianship, a conservatorship may be full, limited, temporary, or joint.
• Custodian deals with a person overseeing funds that are owned by a minor (someone under 18 years of age).
9
Will Only Controls Probate Assets
Probate Assets
• Individual assets:
– all property titled in the decedent's sole name, without any other owners or a payable on death or similar type of beneficiary designation. – Cars, stocks, boats, real estate, etc.
Non-Probate Assets
• Direct transfer with specific beneficiary, including:
– Payable-on-death accounts. – 401(k) and other retirement plans. – IRAs and Roth IRAs. – Tax-deferred annuities. – Life insurance proceeds
• Tenant in common assets:
– all property titled in the decedent's individual name as a tenant in common with others. – Cars, stocks, boats, real estate, etc.
• Beneficiary assets with predeceased beneficiaries, no designated beneficiary, estate is named beneficiary, or joint ownership property is no longer owned jointly.
• Joint Ownership:
– Joint tenancy with right of survivorship property. – Tenants by entireties property.
• Trusts
Trusts
• Trusts are legal documents that often are used to control the management and transfer of specific assets.
– Trusts divide the legal ownership of an asset from beneficial ownership of an asset which is why trusts help avoid probate.
• Grantor/Settlor – is the person that creates the trust and transfers ownership of assets to trust. • Trustee – is the legal owner of the assets, manages the trust pursuant to grantor’s instructions in the trust document and manages the assets for the benefit of the beneficiaries.
– Has a fiduciary relationship to trust and beneficiaries including remainderman beneficiaries.
• Beneficiaries – receive the income or proceeds under the terms of the trust document. • There are several types of beneficiaries – income, vested, remainderman, etc. • One person can play all three roles – Trustor/Trustee/Beneficiary at the same time.
11
Trust v. Only a Will
Reasons for a Trust
• • • • Avoids probate and its expenses. Avoids court involvement. Easier to control assets. Real estate owned in two or more states
– – Ancillary probate needed. If intestate estate, potential for different results.
Reasons for only using a will
• • • • • Age of testator. Time to fund a trust. Testator’s financial situation. Relatively simple assets. Complexity in ownership of assets. • Low or little chance for contentious issues arising in probate. • Only own real estate in 1 state. • The desire for public review of proceedings.
•
• • • • • •
Contentious family relationships and second marriages. Desire for privacy. Difficult to contest/challenge. Complexity and size of estate. Health of grantor. Belief that beneficiaries are unable to make good decisions. Trust funds more readily available to beneficiaries than to will beneficiaries.
12
What are Fiduciaries?
• Fiduciaries are those people that take act for you when you can no longer act. Fiduciaries have different names depending on document naming fiduciary, including:
– POA/AMD – the agent – Last Will and Testament – personal representative, executor, administrator – Trust – Trustee – Guardianship – guardian/conservator
• Depending on the type of fiduciary, the fiduciary has a variety of duties/responsibilities. These duties could include:
– loyalty, care, act within document’s terms, impartiality, segregate property, confidentiality, preserve property/assets, keep records, account, delegate, enforce/defend claims, furnish information and communicate.
13
Other Considerations for Naming Fiduciaries
• Basic Characteristics of a Fiduciary – integrity, responsible, good judgment, organized, age • Question: Can the person appointed as a fiduciary fulfill the duties and responsibilities in their appointment?
– Do you want to appoint your 67 year old parents as guardians of the person to your minor children. – Do you want to name someone across the country to a fiduciary role the requires daily decisions on a continued basis? – Do you want to name more than one person in that role?
• Does the fiduciary even know the have this role?
– Have you spoken with potential fiduciary? – For AMDs have you discussed end of life decisions?
• Does the fiduciary want to fulfill that role?
– Think about successor fiduciaries.
14
Estate Planning Documents and Organization
• Generally, three types of people with respect to estate planning documents: the planners, the messy Marvin’s and those in between. • Each has pro’s and con’s with respect to organization. Even the planners can create problems.
– The Planners
• Pros: all the documents are kept together, organized, usually easily locatable. • Cons: documents are kept in safe deposit box, safe or other secure location. Gaining access is a concern. Purging too many documents could be concern.
– Messy Marvin’s
• Pros: generally keep everything. • Cons: generally keep everything, hard to find, hoarding; generally throw estate planning documents in drawer, under a bed, in the ceiling, almost anywhere.
– Everyone Else
• Pros: largest group, are somewhat organized. • Cons: are somewhat organized and don’t know what aspect of their life is organized.
• Depending on type of document and the need to access those documents determines where document should be kept.
15
Accessibility and Organization of Documents
• Make sure your fiduciaries are told where documents are and ensure fiduciaries have access. • Where to keep documents:
– Some type of binder with other important documents. – At home: put it in a safe location, like
• A home safe.
– – – Make sure safe is fire-rated for at least 1 hour. No real preference for wall, moveable, floor, etc. type of safe, client choice Issue is opening safe. Fiduciary has to be able to open it. Ease of access: if fiduciary knows location and can open safe - yes
•
Drawer, library, etc.
– – obvious security and destruction risks but if that is only option. Ease of access: easy if fiduciary knows location.
– Safe Deposit Box
• Gaining access. SD boxes are not the most easy to access for non-owners. Fiduciary needs rights to access.
– – – Keeping funeral instructions in safe deposit box with will is a bad idea. Problem with updating documents kept in safe deposit box Ease of access: very difficult and maybe impossible with out court order.
– Lawyer’s office
• Gaining access could be an issue. Lawyer could have retired. You could have moved.
• Communication is key.
16
Digital Estate Planning Issues
• What are digital assets?
– Blog, Facebook™, ITunes™, Twitter™, Flicker™, online bill paying, email account. – Digital assets have financial value as well as an emotional value.
• Accessing accounts for the non-account holder is usually the biggest hurdle:
– Do you have the User Id and Password? – How can you get that information to see account? – If you are a fiduciary, you need access to the account to determine what bills to pay, name of bank account, etc. – Services Providers make it difficult to access account due to privacy rules. See Justin Ellsworth/Yahoo email story.
• Some states have stepped but not many or no precedential case has determined validity of digital estate planning codes.
17
Organizational Steps For Digital Assets
• Digital assets, cloud computing, etc. is where most of this information is going. • How to store documents to meet the push-and-pull between security and access • Options
– Do nothing? – Low-tech solutions:
• Piece of paper • Safe Deposit Box
– Hi-tech solutions
• Computer file • Zip Drive • Commercial service
– Cloud Based Systems: » Drop Box™, ICloud™ – Password security system » LegacyLocker™, Securesafe™
18
Questions?
19
Christopher M. Guest Law Office of Christopher M. Guest, PLLC
888 16th St., NW, Suite 800 Washington, DC 20007 202.349.3969 Email: [email protected] Twitter: @vaestateplanner Northern Virginia Office Arlington, VA 22207 703. 237.3161 Website: www.guestlawllc.com Blog: vaestateplanner.wordpress.com
20
Making It Easy for your Love One’s to Oversee You Estate By Christopher Guest
February 4, 2012
Famous Quotes
• "In this world nothing can be said to be certain, except death and taxes“ • "Death, taxes, and childbirth! There's never a convenient time for any of them.“ • “Everyone gets organized at some point, they just might not be around for it.”
• Benjamin Franklin, Founding Father • Margaret Mitchell, Author in Gone With the Wind
• Sue DeRoos, Professional Organizer
2
The Three Legs of the Estate Planning Tri-Pod
• Your Last Will and Testament
– Could also include a Revocable Living Trust or other estate planning entity. – A will only controls probate assets and directs who should receive those probate assets. – Typically, does not control IRA’s, Life Insurance, Mutual Funds and other financial instruments that have designated beneficiaries.
• Advanced Medical Directive
– Allows the person(s) you appoint to authorize or not authorize a variety of medical treatments if you are unable to speak for yourself. – Not the same as a Living Will.
• Power of Attorney
– A legal document giving an agent the power to manage your finances. – The authorized person(s) steps into your shoes and makes decisions only on those matters that you authorize that person to act on your behalf.
3
With Planning
While living, if you should become incapacitated: At death:
• How should your affairs be managed? • Who makes the decisions on managing your affairs? • Designate who should make financial decisions if you are unable to make them for yourself. • Designate who should make healthcare decisions if you are unable to make them for yourself.
• To provide instructions concerning the physical and financial care of loved ones. • Distribute assets according to your desires. • Reduce costs of settling your estate, if possible. • Potentially minimize estate tax and income tax liability. • Leave a legacy.
4
Without Planning
• Probate estate is distributed pursuant to intestate rules.
– Intestate distribution is based on familial relationships to the decedent.
• Intestate priority rules treat everyone equally. • Distant relatives may receive assets that you would prefer to go to someone else or to charity. • Intestate estates that enter probate administration generally have additional and potentially unnecessary expenses. • If minor children receive assets, the court must appoint a conservator to manage the assets and will turn those assets over to the child when they turn 18 or 21 years of age. • If you have become incapacitated and lack planning:
– No one will be able to manage your financial affairs. – Someone will need to go to court to institute a guardianship or conservatorship proceeding to be authorized to manage your affairs or make healthcare decisions for you.
5
Advanced Medical Directive (AMD)
• Legal document that allows you to do the following:
– state what level of medical care you want if you are unable to make decisions for yourself. – direct that a specific procedure or treatment be provided, such as artificially administered hydration (fluids) or nutrition (feeding); – direct that a specific procedure or treatment be withheld; and – appoint a person to act as your agent in making health care decisions for you, if it is determined that you are unable to make health care decisions for yourself.
• Your agent should:
– understands what level of care you would want; and – be a person that can be trusted and you have spoken to about end-of-life decisions.
• A Living Will is different than an AMD.
6
Power of Attorney (POA)
• The principal, creates a legal document giving another person, called the agent or attorney-in-fact, power(s) to act in the principal's place. • The Agent:
– is in a fiduciary relationship with the principal; – the law requires the agent to act in the best interests of the principal, even over the agent’s interests; – must also be completely honest with the principal; and – must be loyal to the principal in their dealings with each other.
• Powers can be very diverse, broad or restrictive, and can include, but not limited, to:
– – – – – – – – Buy, manage, or sell real estate, Enter into contracts, File tax returns, Handle banking transactions, Handle matters related to government benefits, Make gifts, Make transfers to revocable trusts, or Settle claims.
7
Power of Attorney (POA)
• Durable v. Non-Durable
– In a non-durable power of attorney, the powers vested in the agent by the principal are revoked if the principal becomes incapacitated, incompetent or dies. – A durable POA is effective from the moment of execution of the document and will last until the durable power is revoked by principal or the principal dies.
• Durable POA will also remain in effect for the time the principal remains incapacitated.
• “Springing” Power of Attorney
– Is a special kind of Durable POA. It becomes effective when the principal becomes incapacitated. The Durable POA must expressly state that requirement and what constitutes incapacity.
• All Powers of Attorney become obsolete on death of the principal. • Banks and financial institutions take a hard look at POAs.
8
Guardianship/Conservatorship/Custodianship
• Guardianship is a legal mechanism by which one individual or entity (a guardian) is appointed by a court to exercise certain decision making functions on behalf of, and in the place of, an individual that is legally “incapacitated.”
– Several types of guardianship:
• Guardian of the person – usually only concerned with the nonfinancial issues like healthcare, support, etc. • Guardian of the estate – usually only concerned with financial issues. • Guardian of the estate and person - both • Limited v. full guardianship; joint; temporary; etc.
• Conservatorship is alternative to guardianship and concerned with the financial affairs of the ward/subject.
– a conservatorship is limited to the management of the property and financial affairs of a protected person. As with guardianship, a conservatorship may be full, limited, temporary, or joint.
• Custodian deals with a person overseeing funds that are owned by a minor (someone under 18 years of age).
9
Will Only Controls Probate Assets
Probate Assets
• Individual assets:
– all property titled in the decedent's sole name, without any other owners or a payable on death or similar type of beneficiary designation. – Cars, stocks, boats, real estate, etc.
Non-Probate Assets
• Direct transfer with specific beneficiary, including:
– Payable-on-death accounts. – 401(k) and other retirement plans. – IRAs and Roth IRAs. – Tax-deferred annuities. – Life insurance proceeds
• Tenant in common assets:
– all property titled in the decedent's individual name as a tenant in common with others. – Cars, stocks, boats, real estate, etc.
• Beneficiary assets with predeceased beneficiaries, no designated beneficiary, estate is named beneficiary, or joint ownership property is no longer owned jointly.
• Joint Ownership:
– Joint tenancy with right of survivorship property. – Tenants by entireties property.
• Trusts
Trusts
• Trusts are legal documents that often are used to control the management and transfer of specific assets.
– Trusts divide the legal ownership of an asset from beneficial ownership of an asset which is why trusts help avoid probate.
• Grantor/Settlor – is the person that creates the trust and transfers ownership of assets to trust. • Trustee – is the legal owner of the assets, manages the trust pursuant to grantor’s instructions in the trust document and manages the assets for the benefit of the beneficiaries.
– Has a fiduciary relationship to trust and beneficiaries including remainderman beneficiaries.
• Beneficiaries – receive the income or proceeds under the terms of the trust document. • There are several types of beneficiaries – income, vested, remainderman, etc. • One person can play all three roles – Trustor/Trustee/Beneficiary at the same time.
11
Trust v. Only a Will
Reasons for a Trust
• • • • Avoids probate and its expenses. Avoids court involvement. Easier to control assets. Real estate owned in two or more states
– – Ancillary probate needed. If intestate estate, potential for different results.
Reasons for only using a will
• • • • • Age of testator. Time to fund a trust. Testator’s financial situation. Relatively simple assets. Complexity in ownership of assets. • Low or little chance for contentious issues arising in probate. • Only own real estate in 1 state. • The desire for public review of proceedings.
•
• • • • • •
Contentious family relationships and second marriages. Desire for privacy. Difficult to contest/challenge. Complexity and size of estate. Health of grantor. Belief that beneficiaries are unable to make good decisions. Trust funds more readily available to beneficiaries than to will beneficiaries.
12
What are Fiduciaries?
• Fiduciaries are those people that take act for you when you can no longer act. Fiduciaries have different names depending on document naming fiduciary, including:
– POA/AMD – the agent – Last Will and Testament – personal representative, executor, administrator – Trust – Trustee – Guardianship – guardian/conservator
• Depending on the type of fiduciary, the fiduciary has a variety of duties/responsibilities. These duties could include:
– loyalty, care, act within document’s terms, impartiality, segregate property, confidentiality, preserve property/assets, keep records, account, delegate, enforce/defend claims, furnish information and communicate.
13
Other Considerations for Naming Fiduciaries
• Basic Characteristics of a Fiduciary – integrity, responsible, good judgment, organized, age • Question: Can the person appointed as a fiduciary fulfill the duties and responsibilities in their appointment?
– Do you want to appoint your 67 year old parents as guardians of the person to your minor children. – Do you want to name someone across the country to a fiduciary role the requires daily decisions on a continued basis? – Do you want to name more than one person in that role?
• Does the fiduciary even know the have this role?
– Have you spoken with potential fiduciary? – For AMDs have you discussed end of life decisions?
• Does the fiduciary want to fulfill that role?
– Think about successor fiduciaries.
14
Estate Planning Documents and Organization
• Generally, three types of people with respect to estate planning documents: the planners, the messy Marvin’s and those in between. • Each has pro’s and con’s with respect to organization. Even the planners can create problems.
– The Planners
• Pros: all the documents are kept together, organized, usually easily locatable. • Cons: documents are kept in safe deposit box, safe or other secure location. Gaining access is a concern. Purging too many documents could be concern.
– Messy Marvin’s
• Pros: generally keep everything. • Cons: generally keep everything, hard to find, hoarding; generally throw estate planning documents in drawer, under a bed, in the ceiling, almost anywhere.
– Everyone Else
• Pros: largest group, are somewhat organized. • Cons: are somewhat organized and don’t know what aspect of their life is organized.
• Depending on type of document and the need to access those documents determines where document should be kept.
15
Accessibility and Organization of Documents
• Make sure your fiduciaries are told where documents are and ensure fiduciaries have access. • Where to keep documents:
– Some type of binder with other important documents. – At home: put it in a safe location, like
• A home safe.
– – – Make sure safe is fire-rated for at least 1 hour. No real preference for wall, moveable, floor, etc. type of safe, client choice Issue is opening safe. Fiduciary has to be able to open it. Ease of access: if fiduciary knows location and can open safe - yes
•
Drawer, library, etc.
– – obvious security and destruction risks but if that is only option. Ease of access: easy if fiduciary knows location.
– Safe Deposit Box
• Gaining access. SD boxes are not the most easy to access for non-owners. Fiduciary needs rights to access.
– – – Keeping funeral instructions in safe deposit box with will is a bad idea. Problem with updating documents kept in safe deposit box Ease of access: very difficult and maybe impossible with out court order.
– Lawyer’s office
• Gaining access could be an issue. Lawyer could have retired. You could have moved.
• Communication is key.
16
Digital Estate Planning Issues
• What are digital assets?
– Blog, Facebook™, ITunes™, Twitter™, Flicker™, online bill paying, email account. – Digital assets have financial value as well as an emotional value.
• Accessing accounts for the non-account holder is usually the biggest hurdle:
– Do you have the User Id and Password? – How can you get that information to see account? – If you are a fiduciary, you need access to the account to determine what bills to pay, name of bank account, etc. – Services Providers make it difficult to access account due to privacy rules. See Justin Ellsworth/Yahoo email story.
• Some states have stepped but not many or no precedential case has determined validity of digital estate planning codes.
17
Organizational Steps For Digital Assets
• Digital assets, cloud computing, etc. is where most of this information is going. • How to store documents to meet the push-and-pull between security and access • Options
– Do nothing? – Low-tech solutions:
• Piece of paper • Safe Deposit Box
– Hi-tech solutions
• Computer file • Zip Drive • Commercial service
– Cloud Based Systems: » Drop Box™, ICloud™ – Password security system » LegacyLocker™, Securesafe™
18
Questions?
19
Christopher M. Guest Law Office of Christopher M. Guest, PLLC
888 16th St., NW, Suite 800 Washington, DC 20007 202.349.3969 Email: [email protected] Twitter: @vaestateplanner Northern Virginia Office Arlington, VA 22207 703. 237.3161 Website: www.guestlawllc.com Blog: vaestateplanner.wordpress.com
20
