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You Have a Will, Now What?

Once you have a will, you should do the following to make the executor’s eventual task easier:

1.  Inform your executor where the will is located.
2.  Place a list of your financial assets, including life insurance policies, with the will.
3.  Place a list of on-line passwords with the the will.
4.  Place a list of instructions about various items of personal property with the will.

Do not place the will in a safe deposit box – it will be inaccessible.

Living Wills – Making Them More Effective

Living wills are great conceptually, but can be vague when actually needed.  Some advisors propose making them more detailed and walking people through a lengthy series of questions about specific situations.  Because this topic makes clients squeamish on a good day, and because clients’ wishes about death change as it becomes more imminent, people either would not complete a living will or it would not reflect their current wishes.  The proposed solution is no solution.

Instead, I recommend executing a health care power of attorney in addition to the living will.  The health care power of attorney allows  a family member to make decisions for the incapacitated client.  After executing the health care power of attorney, it is imperative to discuss wishes with the designee. Of course, with Obamacare’s “death panels,” perhaps this will all be moot.

Avoiding Rogue Trustees

Choosing a trustee to manage funds for your children is second in  importance only to choosing a guardian for them.  I advise separating the trustee and guardian duties.   Unlike the author, if there is no perfect candidate, I recommend a bank or trust company rather than two “B” candidates.   After all two Bs, still average a B.  If there is not a suitable family member, go for the “A” of professional investments and management provided by a trust department.

Telling Your Children About Your Estate Planning

What should you tell your children about your estate plan?

1.  Which child is in charge of the estate.
2.  Which child is in charge of the medical decisions and what your wishes are.
3.  Where the documents are located.

Do not tell them which child you love the most/least.

No Contest Clauses

A quick primer on “no contest” clauses which are permitted in Ohio.  They work best when the beneficiary has something to lose by challenging the will.  Leaving someone the proverbial $1 is ineffective.  It is best to leave $50,000 or so which is the amount that could be spent in defending a lawsuit from a disgruntled heir.

Social Security and Posthumous In Vitro Babies

The Supreme Court unanimously ruled that in vitro babies conceived after the death of the father are not automatically entitled to Social Security Benefits. State law has to permit them to qualify as heirs at law for intestacy purposes. I can only hope that the forthcoming decision on Obamacare will also be unanimous.

Planning for Second Marriages

Couples in a second marriage face issues different than couples in their first marriage.

1.  How to balance the  financial needs of the new spouse with the expectations of children from the first marriage.
2.  When the second spouse is close in age to the children, how to provide for the spouse without making the children wait their entire lives for an inheritance.
3.  Who/what to designate as the beneficiary of retirement assets and insurance policies.

Of course, like many topics on this blog, these issues can be addressed through the use of a trust in an estate plan. A prenuptial agreement is also important when there are children from a prior marriage.

Expecting Couples

Advice for new parents:

1.  Increase life insurance to at least 10x salary, or 15x if affordable.
2.  Prepare a will which designates a guardian for your child.
3.  Consider a trust to avoid child receiving inheritance at 18..
4.  Jay is a good name for boys.

Minimizing Estate Taxes

Simple strategies to minimize estate taxes:

1. Do not procrastinate. It is tough to plan to avoid taxes when you never get to it before death.

2. Transfer large insurance policies to an irrevocable trust so they pass estate tax free to spouse and children.

3. Give assets away during life rather than waiting until death. Due to the difference in the calculation of gift tax and estate tax, paying gift tax is better than the estate tax.

The article mentions 2 more strategies of limited applicability to most people so I will not summarize them in the interest of brevity.

Facebook IPO Gift and Estate Tax

Everyone else seems to be writing about the Facebook IPO so I will reluctantly follow the herd, but from an estate tax perspective.

Zuckerberg and other FB founders have the ability to avoid future gift and estate taxes on their FB stock by creating a GRAT.  That trust allows them to annually receive income generated by the stock, but ultimately transfer it to their heirs at the current  value discounted for the time value of money.  This strategy also works for people who are not only founders of social media behemoths.

Long Term Care Insurance?

A professor of health and economics debates a nursing home reform advocate about the pros and cons of buying long term care insurance.  My conclusion is that the people with minimal savings do not need it nor do those without children.  If people can afford it, they should buy it.  Annual premiums cost $3,500 which is less than a month in a nursing home.  I am inclined to spend $3,500 to save $80,000 – $100,00 per year.  However, I do understand the hesitation to write a $3,500 check.

Pet Planning

Once again, with federal estate taxes not being much of a concern to most people, the smaller estate planning issues have become more prominent.  Planning for pets has taken on greater importance in recent years with the advent of pet trusts and other arrangements after the death of the owner.

My favorite anecdote in the article is the couple who has designated a guardian for their children, but would not trust them with their pet.  I think that they might wish to revisit the guardian selection.

Controversial Wills

Many people have criticized the wills of Chief Justice Burger and Howard Hughes as being poor examples of estate planning.  A recent article defends the Burger will as being adequate and raises the point that Hughes’ hand written “Mormon  will” might have been legitimate after all and actually accomplished his estate planning goals.  Of course, if Hughes had hired an attorney to prepare the will, the questions about its authenticity would have dissipated.

Aging Parent(s)?

When and how do children offer to assist their parents with the management of  their financial affairs?  A few signs that assistance is needed are:

1.  a large volume of phone and mail solicitations for money,
2.  checkbook errors,
3.  unpaid bills, and
4.  disorder where there used to be order.

Children should offer to assist with bill paying and financial management.  Additionally, the parent should make sure that he has a will, financial power of attorney, health care power of attorney and perhaps a trust in place to enable the child to assist the parent.

Unified Credit Per Obama Proposed Budget

For those looking for some clarity on the future of estate taxes, the Obama Administration has proposed a unified credit of $3.5 million and an estate tax rate of 45%.  Though this has the same likelihood of passing as the Paycheck Fairness Act and the Buffett Rule (re: nil) and would require the Senate to pass a budget for the first time in 1,000 days, it is illuminating for two reasons.

First, it indicates that unified credit will not revert to $1 million as currently slated.

Second, it amplifies the exigency of making a large gift this year for those who can afford to give away $5 million.

Facebook Organ Donation Campaign

As if getting members to share the details or their lives and otherwise sell their souls is not enough, Facebook now wants members’ body parts.  Actually,Facebook is encouraging its members to sign up to become organ donors.  However, in keeping with its minimal belief in personal privacy, the status would be shown on the member’s page.

Divorce and Insurance

People getting divorced need to change the beneficiary of their insurance policies. Most states provide that a former spouse will be considered deceased for beneficiary purposes, but bad results can still happen especially if the former spouses own insurance on each other.

Also, for new marriages a trust could serve as a vehicle for receiving insurance proceeds to benefit a new spouse, but have the proceeds pass to the children from a prior marriage.

Faith and Estate Planning

Using estate planning documents to instill religious values in heirs can be difficult.  Although the Illinois Supreme Court has upheld a trust which disinherited grandchildren who did not marry within their faith, the better strategy for ensuring religious adherence is to discuss faith based issues with heirs over time and to live life accordingly.  Related, clients with a strong faith need to be careful when executing living wills and health care powers of attorney top ensure compliance with their beliefs.

Sports Blog Post II

Paul Daugherty of the Cincinnati Enquirer was gracious enough to allow me to guest blog again for him today.  Check out my ruminations on sports, OTR tours, and music, among other topics.

Estate Planning Mistakes

Forbes addresses 7 common estate planning mistakes. To me the highlights are:

1. Not having a plan. This is self explanatory.

2. Using an on-line or DIY service instead of a professional. Estate planning lawyers of years of experience to guide clients and help them make wise choices.

3. Not reviewing beneficiary designations to ensure that they meet current wishes and plans.

4. Leaving assets outright to adult children who might not handle them responsibly or who might not need them.

Contact Me

All Posts By Jay Brinker

I am an attorney located in Cincinnati, Ohio who practices in the areas of estate planning, probate, asset protection, and small business advice. I make a difficult and bewildering process as simple as possible. Most importantly, I provide "more for less" for my clients.