How is a Guardianship Determined? – Annapolis and Towson Estate Planning

Because the courts call guardianship “a massive curtailment of liberty,” it is important that guardianship be used only when necessary.

The Pauls Valley Democrat’s recent article asks, “Guardianship – What is sufficient incapacity?” As the article explains, courts must be certain that an individual is truly “incapacitated.”

For example, Oklahoma law defines an incapacitated person as a person 18 years or older, who is impaired by reason of:

  1. Mental illness;
  2. Intellectual or developmental disability;
  3. Physical illness or disability; or
  4. Drug or alcohol dependency.

In addition, an incapacitated person’s ability to receive and evaluate information or to communicate decisions is impaired to such a level that the person (i) lacks capacity to maintain health and safety; or (ii) is unable to manage financial resources.

A person who is requesting to be appointed guardian by the court must show evidence to prove the person’s incapacity. This evidence is typically presented with the professional opinion of medical, psychological, or administrative bodies.

In some instances, a court may initiate its own investigation with known medical experts. In these cases, the type of professional chosen to provide an opinion should match the needs of the person (the “ward”), who will be subject to guardianship.

The court will receive this evidence and if it is acceptable, in many cases, require that the experts provide a plan for the care and administration of the ward and his assets. This plan will become a control measure, as well as guidance for the guardian who is appointed.

These controls will include regular monitoring and reports of performance back to the court.

Reference: Pauls Valley Democrat (Jan. 23, 2020) “Guardianship – What is sufficient incapacity?”

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

If I’m 35, Do I Need a Will? – Annapolis and Towson Estate Planning

Estate planning is a crucial process for everyone, no matter what assets you have now. If you want your family to be able to deal with your affairs, debts included, drafting an estate plan is critical, says Wealth Advisor’s recent article entitled “Estate planning for those 40 and under.”

If you have young children, or other dependents, planning is vitally important. The less you have, the more important your plan is, so it can provide as long as possible and in the best way for those most important to you. You can not afford to make a mistake.

Talk to your family about various “what if” situations. It is important that you have discussed your wishes with your family and that you have considered the many contingencies that can happen, like a serious illness or injury, incapacity, or death. This also gives you the chance to explain your rationale for making a larger gift to someone, rather than another or an equal division. This can be especially significant, if there is a second marriage with children from different relationships and a wide range of ages. An open conversation can help avoid hard feelings later.

You should have the basic estate plan components, which include a will, a living will, advance directive, powers of attorney, and a designation of agent to control disposition of remains. These are all important components of an estate plan that should be created at the beginning of the planning process. A guardian should also be named for any minor children.

In addition, a life insurance policy can give your family the needed funds in the event of an untimely death and loss of income—especially for young parents. The loss of one or both spouses’ income can have a drastic impact.

Remember that your estate plan should not be a “one and done thing.” You need to review your estate plan every few years. This gives you the opportunity to make changes based on significant life events, tax law changes, the addition of more children, or their changing needs. You should also monitor your insurance policies and investments, because they dovetail into your estate plan and can fluctuate based on the economic environment.

When you draft these documents, you should work with a qualified estate planning attorney.

Reference: Wealth Advisor (Jan. 21, 2020) “Estate planning for those 40 and under”

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Why a Will Is the Foundation of an Estate Plan – Annapolis and Towson Estate Planning

An estate planning lawyer has many different tools to achieve clients’ estate planning goals. However, at the heart of any plan is the will, also known as the “last will and testament.” Even people who are young or who have modest levels of assets should have a will—one that is legally valid and up to date. For parents of young children, this is especially important, says the article “Wills: The Cornerstone of Your Estate Plan” from the Sparta Independent. Why? Because in most states, a will is the only way that parents can name guardians for their children.

Having a will means that your estate will avoid being “intestate,” that is, having your assets distributed according to the laws of your state. With a will, you get to determine who is to receive your property. That includes your home, car, bank and investment accounts and any other assets, including those with sentimental value.

Without a will, your property will be distributed to your closest blood relatives, depending upon how closely related they are to you. Few individuals want to have the state making these decisions for their property. Most people would rather make these decisions for themselves.

Property can be left to anyone you choose—including a spouse, children, charities, a trust, other relatives, a college or university, or anyone you want. There are some limits imposed by law that you should know about: a spouse has certain rights to your property, and they cannot be reversed based on your will.

For parents of young children, the will is used to name a legal guardian for children. A personal guardian, who takes personal custody of the children, can be named, as well as a property guardian, who is in charge of the children’s assets. This can be the same person, but is often two different people. You may also want to ask your estate planning attorney about using trusts to fund children’s college educations.

The will is also a means of naming an executor. This is the person who acts as your legal representative after your death. This person will be in charge of carrying out all of your estate settlement tasks, so they need to be someone you trust, who is skilled with managing property and the many tasks that go into settling an estate. The executor must be approved by the probate court, before they can start taking action for you.

There are also taxes and expenses that need to be managed. Unless the will provides directions, these are determined by state law. To be sure that gifts you wanted to give to family and loved ones are not consumed by taxes, the will needs to indicate that taxes and expenses are to be paid from the residuary estate.

A will can be used to create a “testamentary trust,” which comes into existence when your will is probated. It has a trustee, beneficiaries and directions on how distributions should be made. The use of trusts is especially important, if you have young children who are not able to manage assets or property.

Note that any assets distributed through a will are subject to probate, the court-supervised process of administering and proving a will. Probate can be costly and time-consuming, and the records are available to the public, which means anyone can see them. Many people chose to distribute their assets through trusts to avoid having large assets pass through probate.

Talk with an experienced estate planning attorney about creating a will and the many different functions that the will plays in settling your estate. You’ll also want to explore planning for incapacity, which includes having a Power of Attorney, Health Care Proxy, and Medical Directives. Estate planning attorneys also work on tax issues to minimize the taxes paid by the estate.

Reference: Sparta Independent (Dec. 19, 2019) “Wills: The Cornerstone of Your Estate Plan”

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

What Do I Need to Do for Estate Planning if I’m a “Solo Ager”? – Annapolis and Towson Estate Planning

A 60-something single person is part of a group that is sometimes known as “Solo Agers.” There’s more to estate planning for these people than they may realize.

According to the American Society on Aging, about 20% of Boomers fall into this category. From a retirement planning viewpoint, this means there are a few specific areas a solo ager should focus on to help make sure he’s set in retirement.

Cincinnati.com’s recent article, “Retirement planning must-dos for ‘solo agers,’” says first, solo agers should review their support system to make sure they have strong, healthy relationships outside of work. Although a solo ager may not have adult children who can provide care when the time comes, they should consider other family, such as younger siblings, nieces or nephews, and if not, perhaps a younger, trusted friend.

This support system coincides with a solo ager’s finances and estate planning needs. Every adult should have a power of attorney for both healthcare and finances. In these legal documents, you name a trusted person to make healthcare and financial decisions on your behalf, respectively, if you are no longer able to do so on your own. It doesn’t have to be the same person, but it can be. As a solo ager, it’s critical that you determine what your legal guardianship looks like in the future.

Solo agers also need to think about their home. While most people would prefer to age-in-place, think about whether this is going to be feasible, especially if you don’t have an adult child to provide care.

One option is to hire an in-home aide, if you can afford it. There are also several kinds of retirement communities from which to choose, such as assisted living and independent living. There are even now some communities that promote “co-housing,” just like the Golden Girls.

As you near retirement, it’s extremely important as a solo ager that you begin to consider who to trust with your personal directives and assets. Speak to an estate planning attorney to draft the proper legal documents.

Reference: Cincinnati.com (December 18, 2019) “Retirement planning must-dos for ‘solo agers’”

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

How Do I Plan for My Incapacity? – Annapolis and Towson Estate Planning

The Post-Searchlight’s recent article, “How to go about planning for incapacity,” advises that planning ahead can make certain that your health-care wishes will be carried out, and that your finances will continue to be competently managed.

Incapacity can strike at any time. Advancing age can bring dementia and Alzheimer’s disease, and a serious illness or accident can happen suddenly. Therefore, it’s a real possibility that you or your spouse could become unable to handle your own medical or financial affairs.

If you become incapacitated without the proper plans and documentation in place, a relative or friend will have to petition the court to appoint a guardian for you. This is a public procedure that can be stressful, time consuming and costly. In addition, without your directions, a guardian might not make the decisions you would have made.

Advance medical directives. Without any legal documents that state your wishes, healthcare providers are obligated to prolong your life using artificial means, if necessary, even if you really don’t want this. To avoid this happening to you, sign an advance medical directive. There are three types of advance medical directives: a living will, a durable power of attorney for health care (or health-care proxy) and a Do Not Resuscitate order (DNR). Each of these documents has its own purpose, benefits and drawbacks, and may not be effective in some states. Employ an experienced estate planning attorney to prepare your medical directives to make certain that you have the ones you’ll need and that all documents are consistent.

Living will. This document lets you stipulate the types of medical care you want to receive, despite the fact that you will die as a result of the choice. Check with an estate planning attorney about how living wills are used in your state.

Durable power of attorney for health care. Also called a “health-care proxy,” this document lets you designate a representative to make medical decisions on your behalf.

Do Not Resuscitate order (DNR). This is a physician’s order that tells all other medical staff not to perform CPR, if you go into cardiac arrest. There are two types of DNRs: (i) a DNR that’s only effective while you are hospitalized; and (ii) and DNR that’s used while you’re outside the hospital.

Durable power of attorney (DPOA). This document lets you to name an individual to act on your behalf. There are two types of DPOA: (i) an immediate DPOA. This document is effective immediately; and (ii) a springing DPOA, which isn’t effective until you’ve become incapacitated. Both types end at your death. Note that a springing DPOA isn’t legal in some states, so check with an estate planning attorney.

Incapacity can be determined by (i) physician certification where you can include a provision in a durable power of attorney naming one or more doctors to make the determination, or you can state that your incapacity will be determined by your attending physician at the relevant time; and (ii) judicial finding where a judge is petitioned to determine incapacity where a hearing is held where medical and other testimony will be heard.

Reference: The Post-Searchlight (December 13, 2019) “How to go about planning for incapacity”

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What Does an Estate Planning Attorney Really Do? – Annapolis and Towson Estate Planning

Vents Magazine’s recent article, “Understanding What an Estate Planning Attorney Does,” explains that estate planning is a legal set of instructions for your family about how to distribute your wealth and property after you die. Estate planning attorneys make sure the distribution of property happens according to the decedent’s will.

An estate planning attorney can provide legal advice on how to prepare your will after you pass away or in the event that you experience mental incapacity. She will have all the information and education on all the legal processes, beginning with your will and moving on to other important estate planning documents. She will also help you to understand estate taxes.

An estate planning attorney will also help to make certain that all of your savings and property are safe and distributed through the proper legal processes.

Estate planning attorneys can also assist with the power of attorney and health care directives. These documents allow you to designate an individual to decide issues on your behalf, in the event that you become mentally incapable of making decisions for yourself. They can also help you with a guardian who will look after your estate.

It’s important that you select the right estate planning attorney to execute the legal process, as you’ve instructed in your estate plan. You should only retain an attorney with experience in this field of law because other legal counsel won’t be able to help you with these issues—or at least, they may say they can, only to find out later that they’re not experienced in this area.

You also want to feel comfortable with your estate planning attorney because you must disclose all your life details, plans and estate issues, so she can create an estate plan that’s customized to your circumstances.

If you choose the right attorney, it will save you money in the long run. She will help you save from all the estate taxes and make all the processes smooth and easy for you and your loved ones.

Reference: Vents Magazine (December 12, 2019) “Understanding What an Estate Planning Attorney Does”

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Tips for Choosing a Fiduciary – Annapolis and Towson Estate Planning

One of the important tasks in creating a complete estate plan is selecting people (or financial institutions) to represent you, in case of incapacity or death. Most people think of naming an executor, but there are many more roles, advises the article “What to consider when appointing a fiduciary?” from The Ledger.

Here are the most common roles that an estate planning attorney will ask you to select:

  • Executor or personal representative, who is named in your will and appointed by the court to administer your estate.
  • Agent-in-fact (under a durable power of attorney) who manages your financial affairs while you are living, if you are unable to do so.
  • Health care surrogate who makes health care decisions on your behalf while you are living, if you are incapacitated.
  • Trustee of a trust document; administers the trust that you have created.
  • Guardian: a person who makes health care and financial decisions on your behalf, if the court determines that other roles, like health care surrogate or agent-in-fact, are not sufficient.
  • Guardian for minor children: person(s) who make decisions for your children, if you are not able to because of death or a loss of capacity before the children reach adulthood.

The individuals or financial institutions who take on financial roles are considered fiduciaries; that is, they have a legal duty to put your well-being first. Their responsibilities may include applying for government benefits, managing and investing your assets and income, deciding where you will live and working with your attorneys, financial advisors and accountants.

Many people name their spouse or eldest child to take on these roles. However, that’s not the only option. A few questions to consider before making this important decision include:

  • Does this person have the experience, skill and maturity to manage my financial affairs?
  • Does this person have the time to serve as a fiduciary?
  • Would this person make the same health care decisions that I would make?
  • Can this person make a difficult decision for my health care?
  • Does this person live near enough to arrive quickly, if necessary?
  • How old is this person, and will they be living when I may need them?
  • What kind of response will my family have to this person being named?
  • Are my assets substantial enough to require a financial institution or accountant to manage?

These are just a few of the questions to consider when choosing fiduciaries or health care agents in your estate plan. Speak with your estate planning attorney to help determine the best decision for you and your family.

Reference: The Ledger (Oct. 16, 2019) “What to consider when appointing a fiduciary?”

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

What Estate Planning Do I Need with a New Baby? – Annapolis and Towson Estate Planning

Congratulations, you’re a new mom or dad. There’s a lot to think about, but there is a vital task that should be a priority. That is making an estate plan.

People usually don’t worry about estate planning when they’re young, healthy and starting a new family. However, your new baby is depending on you to make decisions that will set him or her up for a secure future.

Motley Fool’s recent article, “If You’re a New Parent, Take These 4 Estate Planning Steps” says there are a few key estate planning steps that every parent should take to make certain they’ve protected their child no matter what the future holds.

  1. Purchase Life Insurance. If a parent dies, life insurance will make sure there are funds available for the other spouse to keep providing for the children. If both parents die, life insurance can be used to raise the child or to fund the cost of college. For most parents, term life insurance is used because the premiums are affordable, and the coverage will be in effect long enough for your child to grow to an adult.
  2. Draft a Will and Name a Guardian for your Children. For parents, the most important reason to make a will is to name a guardian for your children. If you designate a guardian, you will select the person you think shares your values and who will do a good job raising your children. This way, it’s not left to a judge to make that selection. Do this as soon as your children are born.
  3. Update Beneficiaries. Your will should say what happens to most of your assets, but you probably have some accounts with a designated beneficiary, like a 401(k), and IRA, or life insurance. When you have children, you’ll need to update the beneficiaries on these accounts for your children to inherit these assets as secondary beneficiaries, so they will inherit them in the event of your and your spouse’s death.
  4. Look at a Trust. If you die prior to your children turning 18, they can’t directly take control of any inheritance you leave for them. This means that a judge may need to appoint someone to manage assets that you leave to your child. Your child could also wind up inheriting a lot of money and property free and clear at age 18. To have more control, like who will manage assets, how your money and property should be used for your children and when your children should directly receive a transfer of wealth, ask your estate planning attorney about creating a trust. With a trust, you can designate an individual who will manage money on behalf of your children and provide instructions for how the trustee can use the money to help care for your children as they age. You can also create conditions on your children receiving a direct transfer of assets, such as requiring your children to reach age 21 or requiring them to use the money to cover college costs. Trusts are for anyone who wants more control over how their property will help their children after they’ve passed away.

When you have a new baby, working on your estate planning probably isn’t a big priority. However, it’s worth taking the time to talk to an attorney for the security of knowing your bundle of joy can still be provided for in the event that the worst happens to you.

Reference: Motley Fool (September 28, 2019) “If You’re a New Parent, Take These 4 Estate Planning Steps”

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