Better Safe than Sorry: Have Your Will Properly Executed

Better-Safe-than-Sorry-Have-Your-Will-Properly-ExecutedThanks to a lot a hard work and a little luck, you’ve done well financially. Maybe you’ve been able to travel and see the world, and you understand you can’t take it all with you.

By crafting a Will, you can outline what you want to happen with your assets (after your taxes and debts are paid) after you pass on. Without a Will, through the action of state law, your next of kin will receive your assets. If that’s not the outcome you want, having a Will professionally prepared provides you options of whom will receive the assets.

You could create your own Will or find a DYI form online. However, your desire for simplicity and low cost may make things very costly and complex for your estate and beneficiaries.

You “could” do many things on your own:

  • Replace the brakes on your car
  • Re-wire you home’s electrical system
  • Design your next home.

However, chances are you won’t because you lack the expertise. Performing these activities on your own could cause irreparable harm. You want your car to be able to stop; you don’t want your home to burn down, or have crumbling walls. So, you hire someone you trust to do these jobs to save yourself a lot of time and energy while giving yourself peace of mind. You understand the long-term financial risk isn’t worth the short-term financial savings.

The same principle applies with a Will, especially if family relationships aren’t good and there are assets at stake. If a Will is not executed properly, you may be laying the groundwork for the destruction of your estate plans. The more mistakes and errors in a Will, the more likely it will be contested in court.

The cost of defending a Will is billed typically to the estate itself. If a Will challenge is successful, the person who originally disputed the Will may gain control over the estate. Not exactly the desired outcome you would want.

Those who could challenge a Will include those named in the Will and those who would inherit if you died intestate (without a will). Commonly cited grounds include:

  1. The Will lacks the formality required by the state’s Statute of Wills: The testator (the one creating the will) must be at least 18 years old and if the Will is typed or printed, two witnesses must sign it. Verbal or oral Wills aren’t usually valid in New Jersey.
  2. The testator lacked sufficient mental capacity to legally execute a Will:The testator is presumed to have sufficient mental capacity to execute a Will (he or she was of sound mind and competent when the Will was executed). The testator understood the property to be disposed of, those who would naturally be seen as benefiting from the estate, the process of creating the Will and the distributions made in it.
  3. The contents of the Will are a product of undue influence upon the testator by another:Undue influence can be considered mental, moral, or physical efforts being exerted on the testator resulting in a loss of his or her free will so the contents of the Will actually reflect the desires of another person.
  4. The Will is the result of deception or fraud: This would take place if a beneficiary made at least one false statement to the testator, which resulted in the Will being written to benefit the beneficiary due to the false statement.

When a Will is created, it should be done so with potential challenges in mind to make it difficult, if not practically impossible, for a challenge to be successful. If you draft your own Will or just fill in the blanks on a form, you may not be creating safe guards for an effective defense, which will make your estate plans susceptible to a successful challenge.

Contact us today to discuss your estate planning needs.


There Can Be a Happier Ending if You Prepare for It

There-Can-Be-a-Happier-Ending-if-You-Prepare-for-ItAttorneys, in general, and those of us in estate planning in particular, often don’t work with people when life is going great. We often see families whose loved one may be very elderly, dealing with a serious disease or accident, or who have passed away. They are in a situation they hoped they would never be in, dealing with issues they hoped they could avoid. Things didn’t go as planned, but how often does life go according to plan?

As stressful as this situation may be, it provides an attorney an opportunity to do what we really want to do, help people. Regardless of what stage of life you’re in, we can help you either take actions to avoid or reduce future problems or, when needed, help you address your current problems.

The reality is your family will experience challenges at one time or another. The only questions are what those challenges will be, how serious they will be, when they will occur, and mostly importantly, will you be prepared when they happen? For example, if you or your spouse were to suddenly pass away, what may happen to your family, financially?

  1. Do you have life insurance?
  • This is a way to cushion the financial blow that will come with the passing of a spouse.
  • Most families have a primary wage earner and the other spouse may not work outside the home, work part time or work just as much but make less than the other.
  • How much money is needed to replace the decedent’s income or to pay someone for all the services that person does for the family? If you need full time daycare, cooking, cleaning, lawn care, and to replace their lost income for years to come, how much would that add up to?
  • If you have a child, how would a college education be paid? If you have a special needs child, you know how costly it can be to provide the help and services he or she needs. How would these expenses be paid?
  1. What if the two parents pass unexpectedly?

What would happen if both you and your spouse were to pass on or about the same time? This is another reason to have life insurance, covering both parents. If the proceeds are substantial and your children are not old enough or, though older, not mature enough, to handle the money as a contingent beneficiary, you could name their guardian or the trustee of a trust that benefits your children.

These two roles could be fulfilled by one person, two people or you could have a single guardian and more than one trustee (though the more people involved, the more problems may arise). Your estate, through your Will, could also fund this trust.

  1. What if the entire family passes unexpectedly?

It’s very unlikely you and your spouse will pass at the same time and far less likely your entire family will pass simultaneously. If this happens, it will probably be due to an accident and accidents literally do happen. These accidents (such as vehicle accidents or house fires) often occur due to the negligence of one party or another, and negligence can be the basis of a lawsuit. If you’re engaged in estate planning, think about this possibility.

In addition to the assets in your estate and the life insurance proceeds, the executor, the person responsible for your estate, could have money from a settlement or judgement from a legal action against those responsible for the accident. The compensation from these legal actions may be far greater than the value of your estate and your life insurance combined. Where should the money go? Extended family? Friends? A favorite charity? All the above? It’s a very long shot, but because these terrible events happen, you should plan for it.

To schedule a consultation to discuss estate planning and how life insurance may be a part of it, contact us today.

The Power Behind the Power of Attorney

The-Power-behind-the-Power-of-AttorneyThere are many legal documents that could be created by a trust and estate attorney. They’re all meant to help individuals and families get the results they seek. A power of attorney is potentially a very powerful document. It can do a lot of good, but it could also be misused and do a lot of harm if care isn’t taken.

A power of attorney is created by a person (the grantor) who is mentally competent, that allows another person or persons (the agent(s)) to do certain things for him or her or make certain decisions. They normally cover medical or financial issues.

A financial power of attorney allows a grantor to name an agent to make financial decisions and take actions concerning the person’s assets, debts, income and bills. This document can be as narrow or broad as the grantor wants. Financial decisions need to be made by one who is mentally competent. If due to age or disease that competence may be waning, it may be a good idea to have this document executed. If an individual loses competence and does not have a power of attorney in place, a guardian may need to be appointed to oversee their finances, which can take time and be expensive.

It’s critical someone trustworthy and competent in finances be chosen as the agent. You want to select someone comfortable paying bills, who is organized and available (the closer the better, generally). This person must also be trustworthy, especially if it’s a broad power of attorney enabling the person with wide access to assets and funds (a power of attorney could also be very narrow with access to one or two bank accounts to pay certain expenses if you wish). You need to make sure the power you give will be in the right hands.

For example:

  • Bob is retired, widowed with four children and six grandchildren.
  • Incapacitated by a stroke he’s unable to communicate and take care of his affairs.
  • Through a power of attorney Bob designated his oldest daughter to take care of his financial affairs if he was unable to do so. She lives nearby and is good with money. She can sign checks to pay his bills and have access to her father’s financial accounts. This access will allow her to make informed decisions on his behalf. She’s able and willing to communicate Bob’s assets and liabilities with her siblings.
  • Without a power of attorney, if Bob’s children would need to petition the court to have a guardian or conservator named if he lost competence. That person would make all decisions regarding Bob’s finances assets. This will cost the family significant time and money. Bob will have no say in the court’s decisions about who manages his affairs. Potentially family members and others could also dispute who should be the one controlling his finances.

A power of attorney can head off problems when done properly. They can also create problems if done incorrectly or not at all. We can help you make sure the right one is created for you and your family.

If you would like to schedule a consultation, please feel free to contact us at your earliest convenience.

Retirement accounts: Tips for taxpayers turning 70 1/2

Retirement-accounts-Tips-for-taxpayers-turning-70.5It’s a big year for the first set of baby boomers: They’re turning 70 1/2. And that means getting prepared for their first mandatory distributions from tax-sheltered retirement accounts.

The first thing to keep in mind is that the amount of your required annual withdrawal is based on the assets in the account as of the prior December 31. For a taxpayer with multiple 401(k) plans, he or she must take a proportional distribution from each of the accounts. If a taxpayer has multiple IRAs, the payouts can be uneven. That is, the entire amount can be taken out of one IRA, if the taxpayer chooses.

As far as timing, a taxpayer can choose to get periodic payments or take a lump sum, typically later in the year, to defer paying taxes on the withdrawal.

IRA withdrawals are usually in cash, but you can also take them as shares of stock or a piece of real estate. If an IRA owner doesn’t intend to spend the money that’s withdrawn, such in-kind withdrawal options avoid commissions on selling investments and buying them again outside of the IRA. However, this type of withdrawal takes more time and necessitates finding out whether any other fees will be charged.

Keep in mind that federal law allows IRA owners to donate up to $100,000 of IRA assets per year, counting toward the required minimum distribution. The donation must be made to a qualified charity.

If you have any additional questions  or would like to schedule a consultation, please feel free to contact us at your earliest convenience.

Advance medical directives aren’t just for the sick and elderly

mother_two_daughtersAn advance medical directive is a document in which you can outline what type of medical care you want, and don’t want, in case you are incapacitated in some way and cannot speak for yourself. You may think this type of document is solely needed by the elderly or the very sick. The reality is every adult should have a health care power of attorney (another name for advanced medical directive), given the unpredictable nature of our lives.

An advance medical directive gives us some control if something unfortunate happens to render you incapable of making health decisions on your own. If you are married, your spouse may make some  medical decisions for you. However, if you have instructions in the directive, it will reduce the stress for family members or others interfering with the care and treatment you desire.

A common misconception associated with advance medical directives, is they are only needed by the frail, chronically or terminally ill. If you’re traveling I-295, hit by a tractor trailor and severely injured, do any of your close family members know what type of treatments you may or may not want? Is there someone in particular you would trust to make these decisions for you? Have you ever discussed this with anyone?

It’s a heavy burden to make medical decisions for a person who can’t speak for themselves. These could be life-changing decisions, possibly involving several people. Do yourself and your family a favor and execute an advance medical directive. Alleviate them of the burden and provide a solution before an unfortunate event occurs.

An advance medical directive is like most planning documents in that it can provide guidance, reduce stress among family members, and prevent litigation. It not only allows you some control over your healthcare, it eases a possibly large burden off your loved ones if the unexpected happens. By thinking ahead and taking action, you can make a very bad situation easier for all those involved.

To schedule a consultation, contact us today.

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Reverse mortgages increasingly available for high-value homes

high value homesSeniors with pricier homes now have an increased ability to get a bigger reverse mortgage in order to raise cash for retirement. As the housing market has improved, so-called jumbo reverse mortgages are becoming more popular even though they carry some risk.

Reverse mortgages allow homeowners who are at least 62 years of age to borrow money on their house. The homeowner receives a sum of money from the lender, based largely on the value of the house, the age of the borrower and current interest rates. The loan does not need to be paid back until the last surviving homeowner dies, sells the house or permanently moves out. Homeowners can use money from a reverse mortgage to pay for improvements to their home, to allow them to delay taking Social Security or to pay for home health care, among other things.

The most widely available reverse mortgage product is the Home Equity Conversion Mortgage (HECM), the only reverse mortgage program insured by the Federal Housing Administration (FHA). However, the FHA sets a ceiling on the amount that can be borrowed against a single-family house, which is determined on a county-by-county basis. The national limit on the amount a homeowner can borrow is $625,000.

High-end borrowers must look to the proprietary reverse mortgage market, which imposes no loan limits. Proprietary or jumbo reverse mortgages allow buyers to borrow millions of dollars. For example, American Advisors Group, a reverse mortgage lender, allows borrowers to obtain a reverse mortgage on properties valued up to $6 million. Qualified borrowers can borrow up to $3 million in loan proceeds. While HECM loans limit the amount a borrower can have access to in the first year, these jumbo mortgages may allow the borrower to access the entire loan right away.

The downside of a jumbo reverse mortgage is that it is not insured, so it doesn’t have to have the protections set by the federal government for HECM reverse mortgages. For example, loan counseling isn’t required and fees are not restricted.

During the housing market collapse most lenders stopped offering jumbo reverse mortgages, although as the market has improved the jumbo is returning. But a reverse mortgage is not the right step for everyone. Talk to one of our attorneys about whether it makes sense for you.

The life estate: a useful tool in the right circumstances

The term “life estate” often comes up in discussions of estate and Medicaid planning. Life estates can be used to avoid probate and to give a house to children without relinquishing the ability to live in it.  They also can play an important role in Medicaid planning.  But what, exactly, does the term mean and how are life estates used?life estate

A life estate is a form of joint ownership that allows one person to remain in a house until his or her death, when it passes to the other owner.  Two or more people each have an ownership interest in a property, but for different periods of time. The person holding the life estate — the life tenant — possesses the property during his or her life. The other owner — the “remainderman” — has a current ownership interest but cannot take possession until the death of the life estate holder. The life tenant has full control of the property during his or her lifetime and has the legal responsibility to maintain the property as well as the right to use it, rent it out and make improvements to it.

When the life tenant dies, the house will not go through probate, since at the life tenant’s ownership passes automatically to the holders of the remainder interest. Because the property is not included in the life tenant’s probate estate, it can avoid Medicaid estate recovery in states that have not expanded the definition of estate recovery to include non-probate assets. Even if the state does place a lien on the property to recoup Medicaid costs, the lien will be for the value of the life estate, not the full value of the property.

However, although the property will not be included in the probate estate, it will be included in the taxable estate. Depending on the size of the estate and the state’s estate tax threshold, the property may be subject to estate taxation.

The life tenant cannot sell or mortgage the property without the agreement of the remainderman. If the property is sold, the proceeds are divided up between the life tenant and the remainderman. The shares are determined based on the life tenant’s age at the time — the older the life tenant, the smaller his or her share.

Be aware that transferring your property and retaining a life estate can trigger a Medicaid ineligibility period if you apply for Medicaid within five years of the transfer.  But purchasing a life estate should not result in a transfer penalty if you buy a life estate in someone else’s home, pay an appropriate amount for the property and live in the house for more than a year.

If you have any additional questions  or would like to schedule a consultation, please feel free to contact us at your earliest convenience.


Life insurance can play role as part of estate plan

Life Insurance
For young families, life insurance can be a great help in replacing lost income.  However,  as people get older it can also serve as part of an estate plan.

Historically, one main reason to buy life insurance as part of an estate plan was to have cash available to pay estate taxes. Now that the estate tax exemption is so big (in 2016, estates could exempt $5.45 million per individual from taxation), most estates don’t pay federal estate taxes, and President Donald Trump and his Republican allies would like to eliminate the estate tax entirely. However, life insurance can still be helpful in a number of other ways:

  1. Providing immediate cash. Life insurance provides cash to use for the payment of debt, burial or estate administration fees. In addition, life insurance can be used to pay state estate taxes, if applicable.
  2. Replacing wealth. Life insurance can replace income or assets lost to pay for long-term care. It can also be used to fund a trust for a minor child or a child with special needs.
  3. Buying out business interests. Life insurance can allow a partner or a family member to buy out the deceased partner’s interest in a closely held business to ensure the business can continue.
  4. Funding a charity. Proceeds from a life insurance policy can be used to fund a charity. The policy can be donated directly to the charity, which also has the benefit of giving the donor a charitable income tax deduction. Alternatively, the charity can be named as the beneficiary of the policy.
  5. Treating family equally. A life insurance policy can be used to make sure children receive an equal inheritance. For example, if one child is inheriting a certificate of deposit, a life insurance policy can ensure that the other child receives the same amount.

To find out if you should include life insurance as part of your estate plan, contact one of our seasoned attorneys.

Are you covered by Medicare while traveling within the U.S.?

couple with out children estate planningThose who have reached age 65, the typical age of Medicare eligibility, often have more time to spend traveling.  Although Medicare coverage is generally not available when beneficiaries are overseas, the news may be better for those exploring destinations closer to home.

If you have the original Medicare, the answer is simple: You can travel anywhere in the U.S. or its territories and receive health services from any doctor or hospital that accepts Medicare.  (“Territories” includes Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa and the Northern Mariana Islands.) The amount you will pay depends on whether the provider “accepts assignment.”  Providers that take assignment agree to accept the approved Medicare amount as payment in full, although in the case of outpatient visits you or your Medigap insurer may be left with a 20 percent coinsurance, as would be the case for care at home.

Providers that don’t accept assignment may charge you up to 15 percent above the Medicare-approved amount, although this percentage may be lower in some states. In the case of providers that don’t accept Medicare at all, you will have to pay the entire cost of care.

If instead of original Medicare you are in a Medicare Advantage plan (a privately run managed care plan), the answer to the question of coverage is more complicated. Depending on your post-retirement plans, this could be a consideration that affects whether you choose original Medicare or an Advantage plan.

For enrollees traveling for less than six months outside their plan’s service area, Medicare Advantage plans must cover emergency and urgent care.  Charges for such care that is out-of-network cannot exceed $65 or whatever you would have paid for an in-network provider. Whether you will be covered for anything more than emergency or urgent care depends on the plan’s geographic service area, its rules about travel outside of that area and what type of plan it is.

If your plan is of the PPO (Preferred Provider Organization) variety, it must cover care delivered by providers who aren’t in the plan’s network or service area, although you will usually pay more for out-of-network care. Plans that follow the HMO (Health Maintenance Organization) model usually do not cover care from out-of-network providers.  If your HMO plan does cover those providers, be sure to follow the plan’s rules or you may find that you’re not covered.

If you are outside your plan’s service area for six months or more, you will likely be automatically dis-enrolled and returned to original Medicare unless you choose another Medicare Advantage plan.  However, some plans will allow you to travel outside the service area for up to a year. If your plan has such a travel benefit, check what geographic areas and types of care are covered.

For more information on traveling while on a Medicare Advantage plan, check out the Medicare Rights Center website.