The Top Five Mistakes That Derail The Best Laid Plans

This entry was posted on Sunday, April 20th, 2014 at 8:35 am and is filed under Estate Planning, Financial Planning, Probate, Taxes, Trusts.


One of the most important things you can do to protect your wealth and care for your family is creating a life and estate plan. An estate plan is your key to ensuring that your hard-earned assets are distributed (or saved or invested) as you designate. An estate plan is your family’s safety net. Unfortunately, too many people attempt to take shortcuts with their plan, and find themselves with a safety net that is falling apart just when they need it most.

Here are some of the worst mistakes families make and how you can easily prevent them.

1. Neglecting to fund your trust. A trust can be a wonderful tool for protecting your assets; flexible and customizable, a useful trust can be created for just about every situation. But a trust is like a strongbox—if you don’t fill it up it has nothing to protect. Accounts and assets must be put in the name of your trust for it to work as you’ve designed it to.

2. Not enlisting the help of an estate planning attorney. There are a number of Do-It-Yourself will and estate planning programs out there that promise you a full estate plan for a cheaper price; but estate plans are complicated things, requirements change depending on your state of residence, the size of your estate, the age and situation of your beneficiaries, and much more. If you aren’t able to work with an attorney to create your plan, at the very least we urge you to have an attorney review your plan before you sign it.

3. Neglecting to mention previous estate planning documents, or making unofficial changes in the margins of documents that have already been signed. When creating a will or a trust or any other common estate planning document it is usually necessary to revoke any previous documents so there is no confusion about which document is current and valid. Neglecting to do this can end with your assets tied up in probate court for months or years—or even worse, invalidating both documents completely.

4. Putting your plan somewhere safe—somewhere so “safe”, in fact, that nobody can find or access it! People recognize that estate planning documents are things of value, and as such should be protected in a locked filing cabinet or safe deposit box. Wherever you choose to store your documents, be sure one or two trusted individuals have not only the knowledge of where the documents are, but also the ability to access them. An estate plan does no good if it cannot be accessed when it’s needed.

5. And finally, one of the most common missteps that can sabotage your estate plan is failing to update your plan regularly. Not only do federal and state laws change periodically (as we have recently experienced) but also you will undoubtedly experience changes in your own life and fortune. Failing to update your plan to keep up with the law or with your own life can result in an estate plan that is as useful as a car you neglected to maintain—it may look fine on the outside, but it simply won’t run anymore.

Does Your College Student Have These Three Essential Documents?

This entry was posted on Thursday, April 10th, 2014 at 8:55 am and is filed under Baby Boomers, Estate Planning, Guardian, Guardianship, Health, HIPAA, Life Planning, Planning for Adult Children.

Don’t Let Your College Freshman Leave Home Without These

The year your child turns 18 is the year your child becomes an adult in the eyes of the law. It’s hard for parents to make this transition to thinking of your child as an adult. After all they’re still dependent on you. That’s why many parents are surprised when suddenly school, state, and healthcare officials are no longer able to share information with parents due to privacy protection laws.

Parents of college freshman are often shocked to learn that even though they are paying $50,000 a year or more for college tuition and expenses, they are not entitled to get information about how their college student is doing unless the child shares it voluntarily.

That’s when they come face to face with the reality that when they turn 18 they are adults and have the same privacy rights as any other adult. This means that if you are going to be able to be there for your child in case of a medical emergency, your child needs these three documents.

  1. A Health Care Proxy lets the college allow you to be your child’s voice about medical decisions for example, if  your college student child is unconscious and not able to communicate.
  2. Most important is a HIPAA authorization. The Health Insurance Portability and Accountability Act of 1996 requires health care providers and insurance companies to protect the privacy of patient’s health care information and means they won’t share health information with you without it.
  3. A Durable Power of Attorney will allow your child to authorize you to manage his financial affairs either immediately or in the future should he become mentally or physically unable to do so. This would authorize you to handle tasks such as paying bills, applying for social security or government benefits and opening and closing accounts if necessary.

Special Challenges for Blended Families

This entry was posted on Monday, March 31st, 2014 at 7:00 am and is filed under Baby Boomers, Estate Planning.

Blended families face challenges and complexities in finding a way to leave assets to their spouses, stepchildren, children from  previous  marriages,  ex-spouses,  and  other  various people who become “family” when two existing families are combined.

A particularly painful, often overlooked, problem for blended families is:  if you remarry, where are you buried after  you  pass  away?   Will  your  children  reunite  you with your first spouse?  Or will your second spouse bury you in a new  plot  where  he  or  she  will  join  you  in  the  future? Whichever  the answer,  there  is a high probability  there will be a fight about it!

Even the Kennedys Have This Problem.

Jacqueline  Kennedy  Onassis  is  buried  next  to  John  F. Kennedy,  not  Aristotle  Onassis.  Writer  Jack  Kerouac remains buried by his third wife, but only after his daughter from his second marriage lost her fight to disinherit him. Seem a little extreme?  Some funeral directors claim fights such as this occur at least once a week. Over 40% of marriages  today have  a  spouse who has been previously married.

In a recent situation, a son was fighting with his  father’s new  spouse  about whether  to bury his dad next  to  his  deceased  mother,  or  in  a  plot  where  his  new stepmother  would  one  day  rest  beside  him.  In Michigan, where  this  case  occurred,  the  law  lets  the  current  spouse make the burial decisions, so the stepmother won.  However, the funeral director informed  the son that once his step mom passes  away,  he  becomes  his  father’s  next  of  kin  and  can legally disinter him  and move  the body.

The  son promptly told his stepmother that she could bury his dad wherever she likes,  but  he  will  move  the  body  as  soon  as  she dies. Realizing her  loss of control,  the  stepmom agreed  to  let her husband be buried next to his first wife, and refused to attend the  funeral.   This  example  shows how  complicated blended family issues can become.

The Law Preempts?

Even  people  who  write  down  burial  instructions  can  get foiled by  the  law. The  surviving  spouse  is  allowed  to make the burial decision in 60% of states.  Some states have passed laws  to  allow written  burial  instructions  by  the  decedent  to prevail.  Illinois  and  Kansas  let  you  designate  someone  to make your funeral arrangements for you.  This was partially in  response  to  situations where gay  lifetime partners had no legal ability to influence funeral arrangements.

To complicate matters, religious beliefs can also direct burial arrangements.  For example, the  Jewish  custom  is  that  if  a  deceased person does not leave any instructions, they should be buried with the person with whom they had children.

To some, being buried in a military cemetery carries great prestige  and honor. The  family of  a veteran  is  allowed  to be  buried  in  the  cemetery;  however,  if  the  veteran remarries, the first spouse may lose that right even if his or her children are buried there.

A Growing Issue

As the number of blended families continues to grow, this issue  will  become  more  and  more  common  and  will continue  to  tear  families  apart.  Some  current  suggestions from  funeral  directors  are:

Cremation, which  enables  the deceased’s  remains  to  be  divided  between  spouses  and children;

Have the new spouse purchase a burial plot in the same vicinity as the deceased and his/her previous spouse;

Leave  written  instructions  (though  not  always  legally binding,  the  families will often  adhere  to  them).

Dealing with these  often  overlooked  issues  in  a  thoughtful  and  caring way  will  enable  blended  families  to  think  them  through before  they  result  in  hurtful  confrontations.

The Perils Of Joint Ownership

This entry was posted on Thursday, March 20th, 2014 at 7:06 am and is filed under Elder Law, Estate Planning, Life Planning.

Today’s blog post examines one of the most common estate planning mistakes that people make. It's using  joint ownership as a quick and "simple" fix in place of a well thought out comprehensive life and estate plan or seemingly simple solution.

Today I’m not talking about the common practice of using  joint accounts between spouses. This has its own potential problems if it is seen as the ultimate "estate planning" solutions. And for couples in second-marriage situations or who may be subject to estate tax, including Massachusetts estate tax, there are important reasons not to hold all assets as joint owners.

But the area where I have seen significant unintended consequences and problems  is when a parent adds a child's name to an asset, such as a bank account, investment, or real estate.  This is often done to help with bill paying, used as a will-substitute to avoid probate court (often called a "poor-man's will"), or simply to help an elderly loved one who needs assistance managing his or her assets.

Too often, what seems like a well-intentioned simple solution created huge problems, including large legal fees and destroyed family relationships.

One example of how this kind of joint ownership of a bank account can backfire is this common situation that I see quite often. Margaret is 74 years old and depends upon her son, Joe who lives nearby. His brother and sister keep in touch but they both live in other states. Mom adds Joe's name to her checking and savings accounts (and sometimes even the house) "to make things easier" and to avoid probate. Here's just one common example of what can and often does go wrong with this seemingly simple "solution".

After Margaret dies, Joe's brother and sister naturally want to sit down and talk about her estate, but Joe says there is no estate that his name is the only name on everything and there is no need to probate or do anything. He may even claim that Mom intended that result  because he was the one who was around and helping out, etc.

And by law, the surviving owner is presumed to be the 100% owner of the account and gets to keep everything.  Meanwhile Joe’s siblings “know” this account was joint only as a convenience for their Mom. But their only recourse now is to bring a challenge to Joe’s claim in court to enforce their mother's actual intent. This leads to a protracted court battle and  family relationships are destroyed in the process – probably forever.

Planning for a Special Needs Adult

This entry was posted on Monday, March 10th, 2014 at 7:22 am and is filed under Estate Planning, Guardian, Life Planning, Special Needs Planning, Trusts.

disabledParents (and grandparents) of an adult disabled child often wonder what’s the best way to make provisions for that member of the family who will not be able to be self-sufficient. Parents generally try to consider the future non-financial needs of the child after the parents are gone. With whom or where will the child live? What housing options or assistance are available? What activities does the child enjoy? Next, there is a need to estimate the future financial needs of the child, taking into account projected government assistance.

When the parents of disabled children think about a financial and estate plan, they plan for their future, as well as the child’s. How will the parents’ estate be allocated to reach the goals they have for themselves and their child? They may consider leaving a larger share for the disabled child who has greater need than the other children. However, this is generally not a good option if government benefits may be needed, since most government assistance requires the recipient to have very low income, very low assets, or both. An outright bequest to the child or a trust which gives the child too much ownership over the money will disqualify the child from government assistance until the child spends down the trust assets.

Parents with disabled children understand the need to protect their own savings from risks during their lives. Nursing home costs pose a threat to every estate. Luckily, the Medicaid rules offer important special protections for parents of disabled children by allowing gifts to be made to supplemental needs trusts for the benefit of adult children with disabilities. These gifts do not create a disqualification or penalty period for the parents if they will need nursing home care for themselves in the future.

As part of their overall estate planning, parents of special needs children can have a portion (or all) of their estate stay in a trust for the benefit of their disabled child after they die. This can have several benefits. First, if done as part of a revocable living trust, the assets bypass probate.

Second, the assets will be managed by someone the parents choose, not by the guardian the court chooses, or by the child. Third, the parents can control what happens to the money when the child dies. Fourth, the parents can include guidance or legally binding directives about how the money is to be used for the child.

Finally, and sometimes of most importance, the trust can be drafted so as to not disqualify the child from government assistance. This is called a supplemental or special needs trust.

Even small amounts in a special needs trust can make a huge difference in the quality of life of a disabled child. For example, while the child’s basic needs could be met with government assistance, the trust could be used to provide “extras” like a television, a trip to visit relatives in California, (or tickets for relatives to visit the child), a special van, or computer with voice-recognition technology.

This entry was posted on Monday, March 10th, 2014 at 7:22 am and is filed under Estate Planning, Guardian, Life Planning, Special Needs Planning, Trusts. You can follow any responses to this entry through the RSS 2.0 feed.
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