Estate Planning Considerations for Mothers

How should a mother provide for her children in her will?  A recent article asks this question, pointing out that many women live alone and need to make decisions on their own, and not with a spouse or partner, regarding their estate planning, finances, and inheritance for their children.

“There are 26.7 million women who are aged 65 or older, according to the 2016 profile of older Americans by the U.S. Department of Health and Human Services. Nearly half (46%) of women who are aged 75 or older live alone. These women have homes, financial resources and children, requiring them to make these decisions on their own.”

The author points out that a mother’s desire to treat her children “equally” in her estate planning, may not match the realities faced by her children.  “For many, dividing the inheritance equally among their offspring is a deeply held value. But it isn’t always easy: What if one child is a successful professional with a good pension plan, and the other is a struggling artist who may never have adequate health coverage? Or perhaps one daughter has a special-needs child, and the other has chosen not to have children? What then is the process of balancing their value of equal distribution and the contradictory need to make financially realistically decisions?”

 

Finally Writing a Will

Here’s a journalist’s take on getting (his long put off) estate planning documents in place:

What it was Like to Finally Write My Will, by John Schwartz.

And here’s Mr. Schwartz’s “To Do” list from this piece.  Of course, I recommend always having a lawyer prepare your documents!

“Get a will. Really. Dying without one — “intestate” — is a drag for everyone.

Get a lawyer. Unless your life is wonderfully uncomplicated, you’ll want the help of an adviser. Even if you do it yourself, have an attorney look over your work.

Decide on your beneficiaries, and make sure your insurance policies and other investments are in agreement with what your will says.

Name an executor. It’s a tough and thankless job, so get someone with good judgment; this person can be paid out of your estate.

Got young kids? Name a guardian. If not, the courts will appoint one; why not take care of this essential matter ahead of time?

Secure your paperwork. Once the documents are done, put them in a safe place and make sure your relatives know how to find it.

Revisit it every five years. The world changes; your will should, too.”

This is a great starting list, but I also add:

Get Advanced Directives.  Have decision makers in place in the event of incapacity.

Put a Trust in Place for Minors.  Make sure you protect your children’s inheritance until they are at mature ages.

Do You Have A Will?

If the answer is “no,” a recent survey shows that you are not alone.  Only 4 in 10 American adults have a will or trust in place.  While older Americans are more likely to have a plan in place (81 percent of those age 72 or older and 58 percent of boomers), younger Americans, including those at ages of having minor children, are much less likely to have a plan.  A “a whopping 78 percent of millennials (ages 18-36) and 64 percent of Generation Xers (ages 37-52) do not have a will.”  See this AARP article for more information about the survey results.

 

Health Care Representatives for Minor Children

It’s the stuff of parents’ worst anxieties when headed out of town for business or vacation, leaving their minor children at home in the care of a friend of family — their child is injured or becomes sick in their absence. Imagine, leaving with your spouse on a long-planned vacation, many states away or even out of country, leaving your children safely in the care of beloved grandparents. But, life happens, and one child breaks his arm at baseball practice, while you are thousands of miles away and cannot immediately return home. Grandma takes your son to the hospital, where all but necessary emergency treatment is denied because Grandma does not have legal authority to grant treatment on behalf of your minor child. You call the hospital in attempt to authorize treatment, but unfortunately, the hospital will not accept your verbal authorization, requiring a written authorization, properly executed and witnessed. After many phone calls, a faxed authorization form, and locating witnesses in your hotel lobby, hours after the accident you occurred, you finally get the documentation required by the hospital to proceed with treating your son. Unfortunately, I have heard first-hand stories of a real life occurrences of this very scenario.

This anxiety producing scenario can be avoided with advanced planning. Execute an Appointment of Health Care Representative for Minors, authorizing a trusted family member or care giver to make health care decisions in the event that you can not make these decisions for your minor child. I recommend that parents with minor children consider including preparation of an Appointment of Health Care Representative for Minors as part of their estate planning package.

Estate Planning for Parents of Young Children

This is a topic of much passion for me.  Estate planning is a necessary protection for all parents with minor children.  Yet, national surveys reveal that less than 40 percent of Americans with children under the age of 18 have their estate planning documents in place.  (LexisNexis 2011 EZLaw Survey).

As a parent with young children myself, I understand that it may seem impossible to find the time to meet with a lawyer and get estate planning documents in place.  Life is busy!  Estate planning often seems like something that can wait to another, less hectic time.  Or, some parents, especially those with young children and just beginning their careers, feel that they have not yet accumulated sufficient assets to warrant the need for such a plan.  And, if I’m being honest, although I personally find estate planning to be a topic of great interest, most people do not particularly enjoy the topic or find it unsettling.  Who wants to talk about planning for death?

Estate planning is necessary!  It is as important as the other basic protections we have in place for our children and loved ones.  Here’s why:

1. Avoiding Intestate Distribution.  You likely do not want your Estate distributed according to the “intestate” or default distribution plans put in place by Indiana Probate law.

2.  Naming a Guardian For Minor Children.  You will want to name an individual(s) to care for your children in the event that both parents should pass.  In the absence of a written appointment by the minor’s parents (through a Last Will & Testament or other document), the Court will select a Guardian, most likely choosing among surviving family members who seek the appointment, and without the benefit of instruction from the child’s parents.

3.  Putting in Place a Plan to Manage Your Children’s Inheritance.  If something should happen to you (and your spouse) while your children are minors, you will want to put into place a trust to manage and distribute your children’s inheritance.  Without such a plan, the Court will appoint a custodian to manage the money while your child is a minor and, in most cases, your child will receive her inheritance outright at the age of 18.  Planning with trusts will allow you to put in place the management of your child’s inheritance until ages you determine are appropriate for distributions, holding it in trust beyond the age of 18.  In addition to managing and investing the inheritance funds, the trustee will use the inheritance to provide for your child’s care, support and education until the ages of distribution.

4. Planning with Beneficiary Designations.  An estate planning lawyer will help you set up your beneficiary designations to fully take advantage of trusts you put in place for the protection of your minor children.  Without such properly worded designations, your children will receive assets such as life insurance, 401(k)s, and IRAs, outright at the age of 18, and not protected by trust.

5.  Planning for Incapacity.  In addition to protecting your family in the event of death, an estate plan should also include incapacity planning documents, including a General Durable Power of Attorney, Living Will, and Appointment of Health Care Representative.  If you should become disabled or incapacitated, these documents will be essential to the continued function of your family and eliminate the public and potentially expensive and time-consuming process of a guardianship.

6.  Other Concerns.  A solid estate plan (and counsel of an estate planning attorney) affords other protections.  Additional topics that may be relevant to you and your family include Federal Estate Tax, avoidance of probate, second (or subsequent) marriages, blended families, children with disabilities requiring long-term care, and capital gains/income tax planning.

 

UPDATE: Congress Passes ABLE Act

Update on the ABLE Act:

From the National Academy of Elder Law Lawyers:

Congress passed the ABLE Act on this week, which creates tax-favored accounts for children and adults whose disability occurred before age 26.

The ABLE Act allows these tax-favored accounts to receive up to the annual gift tax exemption (currently $14,000 per year). Beneficiaries are restricted to one account, but anyone could contribute to their account. Modeled after 529 college savings accounts, ABLE account programs will need to be implemented by the states.

According to the Congressional Budget Office, “assets in an ABLE account and distributions from the account for qualified disability expenses would be disregarded when determining the qualified beneficiary’s eligibility for most federal means-tested benefits. For SSI [Supplemental Security Income], only the first $100,000 in each ABLE account would be disregarded.”

The Senate passed the ABLE Act as part of the Tax Increase Prevention Act of 2014, also known as “tax-extenders,” a bill that includes a variety of extensions for temporary tax provisions. The House passed the ABLE Act overwhelmingly 404-17 on December 3, 2014, and engrossed it into the “tax-extender” bill before sending it to the Senate last week.

The President is expected to sign this legislation.

What Can Celebrity Deaths Teach Us?

High profile celebrity deaths are regularly in the headlines. The ongoing legal battle faced by Anna Nicole Smith, and now her Estate, continues.  That case included allegations of interference with inheritance.  Casey Kasem‘s last months raise questions about guardianship, elder abuse, fiduciary roles, and end of life decision making.  Philip Seymour Hoffman‘s estate plan, lacking in planning for the Federal Estate Tax and failing to include a child born after the his Will was executed, was largely seen as incomplete protection for his family.  Similarly, James Gandolfini’s Will was panned.  As one commentator summarized, “the most common tag-line is that his will is a tax disaster.”   In contrast, Robin Williams’ estate plan, is viewed by some as an example of a solid planning.

These estates serve as reminders for all of us to revisit our estate plans.  Key among the lessons are that even if you have a plan in place, you need to revisit that plan every couple of years or after a change in life, such as after the birth of a child or a divorce.  Questions to consider:

Do you have an estate plan?  Do you have a Will?  Could a Trust be a helpful instrument for you?

When is the last time you reviewed your plan?

Are all of your children included in your plan?  Who do you name as their guardians?  Are these still the right people?

Do you have trusts to provide for your children until the are the appropriate ages to handle money?

Do you have incapacity documents in place?  Who have you named to be decisionmakers in the event you are incapacitated?  Are they still the right people?

Could your Estate be subject to Federal Estate Tax?  Do you have a plan in place to minimize potential Federal Estate Tax liability?

Adult Guardianships in Indiana

Good planning for the possibility of future incapacitates, can decrease the likelihood of ever needing a guardianship.  However, if documents are not in place, or even if they are, a guardianship can be needed in certain situations.

What is an adult guardianship?

An adult guardianship is a court proceeding by which a court adjudicates whether a person has the capacity to make financial and medical decisions for herself.  It is a serious proceeding.  A determination of incapacity means the loss of many legal rights, including the ability to enter into contracts.  If the court determines that an individual is incapacitated, the court appoints a guardian to make decisions for the incapacitated person.  The guardian role is similar to that of an attorney-in-fact and health care representative, documents that can be prepared when an individual has capacity, for future incapacity planning.

When is a guardianship needed?

A guardianship may be needed when an individual is no longer able to make financial and health decisions for himself.  This may be due to illness, injury, or other cause.  Guardianship is also available for children due to their age of minority.  Even if Power of Attorney and Appointment of Health Care Representative in place, a guardianship can be necessary, particularly in cases of financial elder abuse or people seeking to take advantage of the incapacitated person.

Who can be appointed as guardian of an adult?

Under Indiana law, the court will first look to the individual named as in a Power of Attorney document as the Attorney-in-Fact to serve as guardian.  If there is no qualified Attorney-in-Fact, the court would next give priority to a spouse followed by an adult child, if that person is suitable and willing to serve.  An independent person or an corporate fiduciary could also serve in this role.

What is guardianship of the person?

A guardian of a person is responsible for the food, health, and shelter needs of an incapacitated person.  The guardian is responsible for the physical and emotional well being of the incapacitated person.  The guardian makes healthcare decisions for the incapacitated person and is responsible for making sure the living arrangements for the incapacitated person are appropriate for their needs.

What is a guardianship of the estate?

A guardian of the estate is responsible for the financial affairs of the incapacitated person.  The guardian will pay the incapacitated person’s bills and manage their finances.  The guardian has a duty to prepare and file an inventory with the court and file regular accounting.

Does a guardianship process require the assistance of an attorney?

In addition to the obtaining the assistance of an attorney in the guardianship filing and procedure with the court, once appointed, a guardian will benefit from the assistance and advise of legal counsel in carrying out their responsibilities and duties.  An attorney will prepare the guardianship petition, represent the potential guardian before the court, and will assist with the preparation of the inventory and accounting to be filed with the court.  The guardian serves in a fiduciary role, and an attorney can advise the guardian as to his responsibilities and duties in that role.

An alleged incapacitated person also has a right to be represented by counsel in the guardianship proceedings, and may wish for counsel to protect his rights.

Dying Without a Will in Indiana – Part II: Indiana’s “Default” Estate Plan for Married Persons

First Marriage and no children:  Your surviving spouse will receive three-fourths (3/4ths) of your estate and your surviving parents will receive one-fourth (1/4) of your estate.  If your parents predecease you, then your surviving spouse will receive all of your estate.

Who does this default “plan” exclude?  In the event your parents survive you, your spouse is not fully provided for by your estate.  This plan also excludes everyone else for whom you may wish to provide, including your stepchildren, siblings, friends, and charities.

Married and children with your spouse:  Your surviving spouse will receive one-half (1/2) of your estate and your surviving children will share one-half (1/2) of your estate.

Who does this default “plan” exclude?  Neither your spouse nor your children are fully provided for by your estate.  This plan also excludes everyone else for whom you may wish to provide, including your parents, stepchildren, siblings, friends, and charities.

Second (or subsequent) Marriage, and no children with current spouse:  Your surviving spouse (who did not have children with you) will receive one-half (1/2) of your estate personal property, but only one-fourth (1/4th) of your net real estate.  Your surviving children (from a prior marriage) will share one-half (1/2) of your estate and three-fourths (3/4ths) of your net real estate.

Who does this default “plan” exclude?  Neither your spouse nor your children are fully provided for by your estate.  This plan also excludes everyone else for whom you may wish to provide, including your parents, stepchildren, siblings, friends, and charities.

Dying Without a Will: Indiana’s Default Estate Plan

Indiana law provides a “default” estate plan for you, if you do not have a Will at your death.   This is called an “intestate” estate.

Does Indiana’s default plan match your intentions to provide for your loved ones?  Here’s a guide to determine what the law would provide if you died without a Will in Indiana.

First, a look at your estate plan if you are not married:

Not Married and without children:  Indiana law provides for your estate to be distributed, in equal shares, to your surviving parents and siblings.  Each of your surviving parents will receive no less than one-fourth of your estate.

Who does this default “plan” exclude?  Everyone else.  Only your brothers and sisters (or their children, if a sibling dies before you) and your parents will receive your estate.  A significant other, regardless of years together, will be excluded, as will lifelong friends or caregivers.  Each sibling will be treated equally, regardless of whether your relationship with that sibling was a good one.

Not Married, with children:  Your children will receive your estate, in equal shares.

Who does this default “plan” exclude?  Again, everyone else.  Only your children, in equal shares, will receive an interest in your estate.

In either of these situations, dying intestate as an unmarried person means that friends, other relatives, significant others, and charities, are completely excluded from your “default” estate plan.