How Do I Find a Great Estate Planning Attorney? – Annapolis and Towson Estate Planning

Taking care of these important planning tasks will limit the potential for family fighting and possible legal battles in the event you become incapacitated, as well as after your death. An estate planning attorney can help you avoid mistakes and missteps and assist you in adjusting your plans as your individual situation and the laws change.

Next Avenue’s recent article “How to Find a Good Estate Planner” offers a few tips for finding one:

Go with a Specialist. Not every lawyer specializes in estate planning, so look for one whose primary focus is estate and trust law in your area. After you’ve found a few possibilities, ask him or her for references. Speak to those clients to get a feel for what it will be like to work with this attorney, as well as the quality of his or her work.

Ask About Experience.  Ask about the attorney’s trusts-and-estates experience. Be sure your attorney can handle your situation, whether it is a complex business estate or a small businesses and family situation. If you have an aging parent, work with an elder law attorney.

Be Clear on Prices. The cost of your estate plan will depend on the complexity of your needs, your location and your attorney’s experience level. When interviewing potential candidates, ask them what they’d charge you and how you’d be charged. Some estate planning attorneys charge a flat fee. If you meet with a flat-fee attorney, ask exactly what the cost includes and ask if it’s based on a set number of visits or just a certain time period. You should also see which documents are covered by the fee and whether the fee includes the cost of any future updates. There are some estate-planning attorneys who charge by the hour.

It’s an Ongoing Relationship. See if you’re comfortable with the person you choose because you’ll be sharing personal details of your life and concerns with them.

Reference: Next Avenue (September 10, 2019) “How to Find a Good Estate Planner”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Your Spouse Just Died … Now What? – Annapolis and Towson Estate Planning

There are several steps to take while both spouses are alive and well, to help reduce the chance of the surviving spouse finding themselves in a “financial deadlock” situation, or worse. The preparations require the non-financially dominant partner to be involved as much as possible, says Barron’s in the article “How to Avoid Financial Deadlock—or Worse—After One Spouse Dies”

Step one is to prepare the financial equivalent of a “go-bag,” like the ones people are supposed to have when they must leave their home in a crisis. That means a list of all financial contacts, advisors, estate planning attorney, accountants, insurance professionals and copies of all beneficiary designations. There should also be a list or a spreadsheet of all the couple’s assets and liabilities, including digital assets and passwords to these accounts. The spouse should also note the location of financial records, including insurance policies, wills, trusts and any other critical legal documents.

Each partner must have access to checking and cash independently of the other and the spouses need to review together how assets and accounts are titled.

It is especially important for both spouses to be on the deed to their home with right of survivorship, so that the surviving spouse can easily prove that they are the sole owner of the home after the spouse dies. Otherwise, they may not be able to communicate with the mortgage company. If a surviving spouse must go to court and file probate in order to deal with the home, it can become costly and more stressful.

It’s not emotionally easy to go through all this information but it is critical for the surviving spouse’s financial security.

Any information that will be needed by the surviving spouse should be documented in a way that is easily accessible and understandable for the spouse. Even if someone is very organized and has a well-developed description of their assets and estate plan, it may not be as easily understood for someone whose mind works differently. This is especially true, if the couple has had years where the non-financial spouse was not involved with the family’s assets and is suddenly digesting a lot of new information.

It is wise for the non-financial spouse to meet with key advisors and take on some of the tasks like bill paying, reviewing insurance policies and reconciling accounts well before either spouse experiences any kind of cognitive decline. Ideally, the financially dominant partner takes the time to train the other spouse and then lets them take the lead, until they are both comfortable managing all the details.

Each spouse needs to understand how the death of the other will impact the household income. If one spouse has a pension without survivor benefits and that spouse is the first to die, the surviving spouse may find themselves struggling to replace that income. They also need to consider daily aspects of their lives, like if one spouse is highly dependent upon the other for caregiving.

Spouses are advised not to make any big financial or life decisions within a year or so of a spouse’s death. The surviving spouse is often not in a good emotional state to make smart decisions and this is the time that they are most at risk for senior financial abuse.

Both spouses should sit down with their estate planning attorney and discuss what will happen when they are widowed. It is a difficult topic but planning ahead will make the transition less traumatic from a financial and legal perspective.

Reference: Barron’s (Sep. 15, 2019) “How to Avoid Financial Deadlock—or Worse—After One Spouse Dies”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What Happens When There’s No Will or the Will Is Invalid? – Annapolis and Towson Estate Planning

The Queen of Soul’s lack of a properly executed estate plan isn’t the first time a celebrity died without a will, and it surely will not be the last, says The Bulletin in the article “Aretha Franklin and other celebrities died without an estate plan. Will you?”

The Rev. Dr. Martin Luther King Jr., Howard Hughes, and Prince all died without a valid will and estate plan. When actor Heath Ledger died, his will left everything to his parents and three sisters. The will had been written before his daughter was born and left nothing to his daughter or her mother. Ledger’s family later gave all the money from the estate to his daughter.

Getting started on a will is not that challenging if you work with an experienced estate planning attorney. They often start clients out with a simple information gathering form, sometimes in an online process or on paper. They’ll ask a lot of questions, like if you have life insurance, a prenup, who you want to be your executor and who should be guardian of your children.

Don’t overlook your online presence. If you die without a plan for your digital assets, you have a problem known as “cyber intestacy.” Plan for who will be able to access and manage your social media, online properties, etc., as well as your tangible assets, like investment accounts and real property.

Automatic bill payments and electronic bank withdrawals continue after death and heirs may struggle to access photographs and email. When including digital estate plans in your will, provide a name for the person who should have access to your online accounts.

Check with your estate planning attorney to see if they are familiar with digital assets. Do a complete inventory, including frequent flyer miles, PayPal and other accounts.

Remember that if you don’t make out a will, the state where you live will decide for you. Each state has different statutes determining who gets your assets. They may not be the people you wanted, so that’s another reason why you need to have a will.

Life insurance policies, IRAs, and other accounts that have beneficiaries are handled separately from the will. Beneficiaries receive assets directly and that bypasses anything written in a will. This is especially important for unmarried millennials, Gen Xers, divorced people, singles, widows and widowers, who may not have specified a beneficiary.

Don’t forget your pets. Your heirs may not want your furry family members, and they could end up in a shelter and euthanized if there’s no plan for them. You can sign a “pet protection” agreement or set up a pre-funded pet trust. Some states allow them; others do not. Your estate planning attorney will be able to help protect your beloved pets as well as your family.

Reference: The Bulletin (Sep. 14, 2019) “Aretha Franklin and other celebrities died without an estate plan. Will you?”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

How Do I Deed My Home into a Trust? – Annapolis and Towson Estate Planning

Say that a husband used his inheritance to purchase the family home outright. The wife signed a quitclaim deed to him to put the property into his living trust with the condition that if he died before his wife, she could live in the home until her death.

However, a common issue is that the husband or the creator of the trust never signed the living trust. So what would happen to the property if the husband were to die before the wife?

This can be complicated if the couple lives out-of-state and it’s a second marriage for each of the spouses. They both also have adult children from prior marriages.

The Herald Tribune’s recent article, “Home ownership complications need guidance from estate planning attorney,” says that in this situation it’s important to know if the deed was to the husband personally or to his living trust. If the wife quitclaimed the home to her husband personally, he then owns her share of the home, subject to any marital interests she may still have in the home. However, if the wife quitclaimed the home to his living trust, and the trust was never created, the deed may be invalid. The wife may still own the husband’s interest in the home.

It’s common for a couple to own the home as joint tenants with rights of survivorship. This would have meant that if the wife died, her husband would own the entire property automatically. If he died, she’d own the entire home automatically. She then signed a quitclaim deed over to him or his trust.

First, the wife should see if the deed was even filed or recorded. If it wasn’t recorded or filed, she could simply destroy the document and keep the status of the title as it was. However, if the document was recorded and she transferred ownership to her husband, he would be the sole owner of the home, subject to her marital rights under state law.

If the trust doesn’t exist, her quitclaim deed transfer to an entity that doesn’t exist would create a situation, where she could claim that she still owned her interest in the home. However, the home may now be owned by the spouses as tenants in common, rather than joint tenants with rights of survivorship.

To complicate things further, if the husband now owns the home and the wife has marital rights in the home, upon his death, she may still be entitled to a share of the home under her husband’s will, if he has one, or by the laws of intestacy. However, the husband’s children would also own a share of his share of the home. At that point, the wife would co-own the home with his children.

You can see how crazy this can get. It’s best to seek the advice of a qualified estate planning attorney to guide you through the process and make sure that the proper documents get signed and filed or recorded.

Reference: The (Sarasota, FL) Herald Tribune (September 8, 2019) “Home ownership complications need guidance from estate planning attorney”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

How Can I Plan for Medical Expenses in Retirement? – Annapolis and Towson Estate Planning

Healthcare can be one of the biggest expenses in retirement.

Fidelity Investments found that a 65-year-old newly retired couple will need $285,000 for medical expenses in retirement. That doesn’t include the annual cost of long-term care. In 2018, that expense ran from $18,720 for adult day care services to $100,375 for a private room in a nursing home, according to Investopedia’s recent article, “How to Plan for Medical Expenses in Retirement.”

Despite saving and preparing for retirement their entire lives, many retirees aren’t mentally or financially prepared for these types of expenses. A survey by HSA Bank found that 67% of adults 65 and older thought that they’d need less than $100,000 for healthcare. However, Fidelity calculated that males 65 and older will need $133,000—and females, $147,000—to pay for healthcare in retirement.

There are two important numbers for healthcare expenses in retirement: how much money is coming in and how much is going out. A typical person in their 60s has an estimated median savings of $172,000. On average, those 65 and older spend $3,800 per month, but Social Security only replaces about 40% of their working-life income.

Medicare can pay for some healthcare spending in retirement. However, there are some limitations. If a senior doesn’t have a Part D prescription drug policy, Medicare won’t cover medications. Medicare Parts A and B won’t cover dental and vision care, but Medicare Advantage plans typically do. Medicare also doesn’t offer coverage for long-term care. Medicare Advantage plans are offered through private insurers.

There are two ways pre-retirees can create a safety net for healthcare spending when they retire. One way is with a Health Savings Account (HSA). HSAs are available with high-deductible health plans and offer three tax advantages: (i) deductible contributions; (ii) tax-deferred growth; and (iii) tax-free withdrawals for qualified medical expenses. HSA funds can be used to pay for certain medical premiums, like Medicare premiums and long-term care insurance premiums. If you’re in your 50s, you can still maximize these plans by taking advantage of catch-up contributions and employer contributions. However, those already enrolled in Medicare can’t make new contributions to an HSA.

You can also buy long-term care insurance to fill the gap left by Medicare. This policy can pay a monthly benefit toward long-term care for a two-to three-year period.

Healthcare spending can easily take a big bite out of a retirement budget. Estimate your costs and design a strategy for spending to help preserve more retirement assets for other expenses.

Reference: Investopedia (June 25, 2019) “How to Plan for Medical Expenses in Retirement”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Do You Have to Relocate For Retirement? – Annapolis and Towson Estate Planning

Whether to relocate for retirement is a difficult question for some people and a snap to answer for others. Relocating in retirement, says The Motley Fool in the article “4 Reasons to Relocate in Retirement,” can make for a far more relaxed, financially easier lifestyle.

Take a look at these four reasons and see how they line up with your current and future living situation.

It’s Expensive to Live Where You Are. If you live in a city like New York, San Francisco, Chicago or Los Angeles, you know about the high cost of living. Food, gas, and housing are just more expensive. While living in an expensive city usually means your paycheck is also high, once you stop working, that higher cost may no longer be affordable. If you can’t live without the amenities of a big city, consider a neighborhood nearby where you can easily access the world-class museums, theater, medical care, etc., but costs are a little lower.

Local and state taxes are high. People who live in high tax states know who they are. Taxes take an even bigger bite out of your budget at retirement. You will have income from Social Security and retirement savings or maybe a part-time job or a business. However, the less taxes you have to pay, the more money you’ll keep.

Property taxes can be a problem, even if you enter retirement with a paid-off mortgage. When you are on a fixed income, high property taxes are a problem. Moving somewhere with lower property taxes could help your fixed income stretch further.

You live in a state that taxes your Social Security benefits. Most states do not tax Social Security benefits, but there are 13 that do. The good news is that some of them offer exemptions for low-income to middle-income households, so you may be able to avoid these taxes. Some also offer a far lower cost of living than others, so that should be only one factor in your decision. Here are the states:

Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia.

You live in a place where you must have a car. The annual cost of car ownership is estimated at $8,849 on average, according to AAA. If you live in a walkable city, or one with good public transportation, you could save a fair amount of money. Living somewhere walkable will also keep you moving as you age, which is a good thing. At some point, there comes a time when it is necessary to hand over the keys. Losing your independence because there is no public transportation, is a difficult transition.

The idea of packing up and moving from a community where you have friends and family is not an easy one. However, the idea of having more money to enjoy your retirement years may make it worthwhile. Take your time considering how you’ll manage where you are and what you could do in a less expensive location.

Reference: The Motley Fool (Sep. 1, 2019) “4 Reasons to Relocate in Retirement”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Ignoring Beneficiary Designations Is a Risky Business – Annapolis and Towson Estate Planning

Ignore beneficiary forms at your and your heirs’ own peril, especially when there are minor children, is the message from TAPintoChatham.com’s recent article “Are You Read to Deal with Your Beneficiary Forms?” The knee-jerk reaction is to name the spouse as a primary beneficiary and then name the minor children as contingent beneficiaries.

However, this is not always the best way to deal with retirement assets.

Remember that retirement assets are different from taxable accounts. When distributions are made from retirement accounts, they are treated as Ordinary Income (OI) and are subject to the OI tax rate. Retirement plans have beneficiary forms, which overrule whatever your will documents may state. Because they have beneficiary forms, these accounts pass outside of your estate and are governed by their own rules and regulations.

Here are a few options for beneficiary designations when there are minors:

Name your spouse as the primary beneficiary and minor children as the contingent beneficiaries. This is the usual response (see above), but there is a problem. If the minor children inherit a retirement asset, they will need a guardian for that asset. The guardian named for their care and well-being in the will does not apply, because this asset passes outside of the estate. Therefore, the court may appoint a Guardian Ad Litem to represent the child’s interest for this asset. That could be a paid stranger appointed by the court, until the child reaches the age of majority, usually 18 in most states.

Elect a guardian in the retirement plan beneficiary form. Some custodians have a section of their beneficiary form to choose a guardian for minor. Most forms, unfortunately, do not provide this option.

Make your estate the contingent beneficiary of the retirement account. While this would solve the problem of not having a guardian for the minor children, because it would kick the retirement plan into the estate, it may lead to adverse tax consequences. An estate does not have a measuring life, so the retirement asset would need to be fully distributed in five years.

Leave the assets to the minor children in a trust. This is the most effective means of leaving retirement assets to minor children without terrible tax consequences or needing to have the court appoint a stranger to oversee the child’s funds. Your attorney would either create a separate trust for the minor child or build a conduit trust under your will or a revocable trust to hold this specific asset. You would then change your beneficiary form to make said trust or sub-trusts for each minor child the contingent beneficiary of your retirement plan. This way you control who the guardian is for this asset for your minor child and are tax efficient.

Whichever way you decide to go, speak with an experienced estate planning attorney to determine which is the best plan for your family.

Reference: TAPintoChatham.com (Sep. 8, 2109) “Are You Read to Deal with Your Beneficiary Forms?”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Does a Beneficiary of an Estate Need to Live in the U.S.? – Annapolis and Towson Estate Planning

When a person dies without a will, the distribution of his or her estate assets is governed by the state’s intestacy statute.

All states have laws that instruct the court on how to disburse the intestate decedent’s property, usually according to how close in relationship they are to the person who passed away.

A recent nj.com article responded to the following question: “My ex’s new wife isn’t a citizen. Does she get an inheritance?” The article explains that under the intestacy laws of New Jersey, for example, if the deceased had children who aren’t the children of the surviving spouse, the surviving spouse is entitled to the first 25% of the estate but not less than $50,000 nor more than $200,000, plus one-half of the balance of the estate.

Also, under New Jersey law, aliens or those who are not citizens of the United States are eligible to inherit assets.

In California, if you die with children but no spouse, the children inherit everything. If you have a spouse but no children, parents, siblings, or nieces or nephews, the spouse inherits everything. If you have parents but no children, spouse, or siblings, your parents inherit everything. If you have siblings but no children, spouse, or parents, those siblings inherit everything.

Also in California, if you’re married and you die without a will, what property your spouse will receive is based in part on how the two of you owned your property. Was it separate property or community property? California is a community property state, so your spouse will inherit your half of the community property.

In that case, an ex-husband’s wife who lives in and is a citizen of the Philippines doesn’t need to be physically present in the state to inherit assets from her husband.

If the deceased owned property in the Philippines, the distribution of those assets would be according to the laws of that country.

Reference: nj.com (August 28, 2019) “My ex’s new wife isn’t a citizen. Does she get an inheritance?”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Don’t Forget to Update Your Estate Plan – Annapolis and Towson Estate Planning

There are some people who sign their will once in their life and never change it. They may have executed their estate plan late in life or after they were diagnosed with a serious disease.

However, even if your family life and finances are pretty basic, there are still changes in the law that you may need to incorporate into your estate plan.  Some of the people that you named in your will could also have died or moved away.

Forbes’ recent article, “Why You Should Change Your Will Now,” warns us that if you’ve taken the “one and done” approach to your estate plan, think again. In addition to the reasons already mentioned, your assets may have changed dramatically since you signed your will. The plan you put in place years ago may not have considered new federal and state estate taxes. Now that you’ve accumulated significant wealth that will be passed on to your children, you might need to review your plans for that wealth for your children.

You may want to include grandchildren to help pay for their college education.

It is also not uncommon for parents to want to protect their children from themselves. This can be because of addiction issues or a lack of financial literacy. If that’s an issue, some parents elect to hold monies in trust for adult children as a way to ensure that the funds will be there throughout the child’s lifetime.

A person’s estate plan should grow with them over time. An estate plan for a twenty-something may be very basic, but a newly-married couple will want to include provisions for their spouse. Parents need to think about providing for and protecting their children. Adult children have another set of concerns and you need prepare for the possibility of divorcing spouses, poor life choices, addiction issues and just poor money management. There are many stages in life when you may need to readjust the provisions for your children in your estate planning documents.

If you haven’t looked at your will in a while, do it now.

Reference: Forbes (August 27, 2019) “Why You Should Change Your Will Now”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys