Organizing Your Estate for Your Loved Ones

7/30/2019 Organizing Your Estate for Your Loved Ones

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Organizing Your Estate for Your

Incapacity and Beyond:

Making It Easy for your Love Ones to Oversee You

Estate

By

Christopher Guest

February 4, 2012


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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 bearound for it.

Benjamin Franklin,

Founding Father

Margaret Mitchell, Authorin Gone With the Wind

Sue DeRoos,

Professional Organizer

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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 probateassets.

Typically, does not control IRAs, 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 thosematters that you authorize that person to act on your behalf.

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With PlanningWhile living, if you should become

incapacitated: How should your affairs be

managed?

Who makes the decisionson managing your affairs?

Designate who should makefinancial decisions if you areunable to make them foryourself.

Designate who should makehealthcare decisions if youare unable to make themfor yourself.

At death:

To provide instructions

concerning the physical and

financial care of loved ones.

Distribute assets accordingto your desires.

Reduce costs of settling

your estate, if possible.

Potentially minimize estatetax and income tax liability.

Leave a legacy.

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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 tosomeone 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 tothe 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 orconservatorship proceeding to be authorized to manage your affairs ormake healthcare decisions for you.

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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 tomake decisions for yourself.

direct that a specific procedure or treatment be provided, suchas 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 caredecisions for you, if it is determined that you are unable to makehealth 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 aboutend-of-life decisions.

A Living Will is different than an AMD.

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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, evenover the agents 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 notlimited, 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.

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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 thedocument and will last until the durable power is revoked by principalor 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 theprincipal becomes incapacitated. The Durable POA must expresslystate 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.

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Guardianship/Conservatorship/Custodianship

Guardianship is a legal mechanism by which one individualor entity (a guardian) is appointed by a court to exercise

certain decision making functions on behalf of, and in theplace of, an individual that is legally incapacitated. Several types of guardianship:

Guardian of the person usually only concerned with the non-financial 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 andconcerned with the financial affairs of the ward/subject.

a conservatorship is limited to the management of the propertyand 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 areowned by a minor (someone under 18 years of age).

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Will Only Controls Probate Assets

Probate Assets

Individual assets: all property titled in the decedent's

sole name, without any otherowners or a payable on death orsimilar type of beneficiarydesignation.

Cars, stocks, boats, real estate, etc.

Tenant in common assets: all property titled in the decedent's

individual name as a tenant incommon with others.

Cars, stocks, boats, real estate, etc.

Beneficiary assets with

predeceased beneficiaries, nodesignated beneficiary, estate isnamed beneficiary, or jointownership property is no longerowned jointly.

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

Joint Ownership:

Joint tenancy with right ofsurvivorship property.

Tenants by entireties property.

Trusts


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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 beneficialownership of an asset which is why trusts help avoid probate.

Grantor/Settlor is the person that creates the trust and transfersownership of assets to trust.

Trustee is the legal owner of the assets, manages the trust

pursuant to grantors instructions in the trust document andmanages the assets for the benefit of the beneficiaries.

Has a fiduciary relationship to trust and beneficiaries includingremainderman beneficiaries.

Beneficiaries receive the income or proceeds under the terms ofthe 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.

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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 morestates Ancillary probate needed.

If intestate estate, potential for differentresults.

Contentious family relationships andsecond 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 tobeneficiaries than to will beneficiaries.

Reasons for only using a will

Age of testator.

Time to fund a trust.

Testators financial situation.

Relatively simple assets.

Complexity in ownership ofassets.

Low or little chance forcontentious issues arising inprobate.

Only own real estate in 1 state.

The desire for public review ofproceedings.

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What are Fiduciaries?

Fiduciaries are those people that take act for you when youcan 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 avariety of duties/responsibilities. These duties couldinclude: loyalty, care, act within documents terms, impartiality,

segregate property, confidentiality, preserve property/assets,keep records, account, delegate, enforce/defend claims, furnishinformation and communicate.

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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 theduties 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 fiduciaryrole 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.

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Estate Planning Documents and Organization Generally, three types of people with respect to estate planning

documents: the planners, the messy Marvins and those in

between. Each has pros and cons 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 Marvins

Pros: generally keep everything.

Cons: generally keep everything, hard to find, hoarding; generally throw estateplanning documents in drawer, under a bed, in the ceiling, almost anywhere.

Everyone Else

Pros: largest group, are somewhat organized. Cons: are somewhat organized and dont know what aspect of their life is

organized.

Depending on type of document and the need to access thosedocuments determines where document should be kept.

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Accessibility and Organization of Documents

Make sure your fiduciaries are told where documentsare 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.

Lawyers office Gaining access could be an issue. Lawyer could have retired. You could have moved.

Communication is key.

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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 usuallythe 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 todetermine 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.

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Organizational Steps For Digital Assets

Digital assets, cloud computing, etc. is where most of thisinformation is going.

How to store documents to meet the push-and-pull betweensecurity 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

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Questions?

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Christopher M. Guest

Law Office of Christopher M. Guest, PLLC

888 16th St., NW, Suite 800 Northern Virginia Office

Washington, DC 20007 Arlington, VA 22207

202.349.3969 703. 237.3161

Email: [email protected] Website: www.guestlawllc.com

Twitter: @vaestateplanner Blog: vaestateplanner.wordpress.com

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