The Estate Planning Challenge of Blended Families

The Estate Planning Challenge of Blended Families

According to statistics from the Pew Research Center, a staggering 42 percent of Americans are in a “step” relationship. Which means that you or someone you know is probably one of the 95.5 million people who are part of a blended family.

Estate planning that is needed to secure a financial future for the millions of Americans who are divorced, remarried and widowed is available, but it can be tricky. There are numerous ways in which your plan can go wrong. The stakes get even higher if you want your estate left to your current spouse and family versus your former spouse.
The problem? Spouses and families, current and former, aren’t always able to come to an amicable agreement on vital issues.

Let’s take a look at some of the vital questions that may loom in a blended family estate plan:

  • How would you like your assets handled when you die?
  • Who do you want to make decisions for you if you were unable to make them for yourself?
  • How will you balance the needs of children from the first spouse with the needs of the second spouse?
  • Would you like your surviving family to have a significant amount of decision-making power over your estate?

You might want to establish a trust to lay everything out in detail.

With a better idea of what you want to happen in the case of your untimely demise, you should discuss your plans with a qualified estate planning attorney, who can formalize them and add legal structure. Leaving open-ended questions may provoke “slighted” family members to sue causing delays, dissention, and legal fees.

“An ounce of prevention is worth a pound of cure.” Ben Franklin

Using legal documents (Living Will, Trusts, and Power of Attorneys), we can ensure that everyone receives the inheritance that you want.

Contact estate planning attorney Chuck Bendig to get started.

When should I begin my estate planning?

When should I begin my estate planning?

There’s an easy answer to this. It’s never too early. You’ve heard tomorrow isn’t promised. It’s true. At worst, you could die before getting around to executing a plan, and that could leave your heirs with a costly, divisive mess.

What happens if you suffer a debilitating health crisis that prevents you from seeing that your wishes are carried out, or even prevents you from signing essential documents?

Did you know that applicable laws that are favorable to you now may be changed to be less so later? The more years that slip by, the more vulnerable you become to being taken advantage of because of your advanced age.

If your needs change in the future, you can modify your plan; although prospective change isn’t a valid excuse for delay. Do your best to look out for yourself and for your family now, and be sure to keep your plan current. Make sure that you have the right documents and that they are in keeping with estate laws now and in the future. An estate & probate attorney can help you with this.

Here is a quick summary of the estate-planning process

Getting started on estate planning can be a lot simpler than you think. To start with, you will want to go through these basic steps:

Take inventory of your assets, including investments, retirement accounts, insurance policies, real estate holdings and valuable items including your digital assets.
Determine your goals and your inheritors. If you have minor children or elderly loved one, who will care for them when you are gone?
Designate a person that you trust to manage your business affairs; Power of Attorney.
Designate a person to direct your medical care should you become incapacitated; Power of Attorney Healthcare
Designate an Executor to implement the directives outlined in your Will.

After deciding what kinds of bequests you wish to make, it’s important to discuss your plans with your heirs. You don’t want to leave any unpleasant surprises. Think about how best to leave your assets. A simple Will may not be the best option. An attorney can help you with a variety of trusts, which have many advantages in creating an estate plan.

I can’t stress enough that the earlier and the greater the degree of clarity you use when you outline your plans to family and friends, the less chance there will be for disagreements when you are gone.

Who Should Be Your Inheritors?

Who Should Be Your Inheritors?

If you’ve thought about estate planning and have contemplated when and how to distribute your assets to your heirs, read on. You probably imagine that this process will entail a series of trade-offs to prevent emotion-laden family problems. However, when you focus on numbers, you’re dealing with objective and straightforward facts.

But, you are in murkier waters when considering who should inherit your wealth, and you understand that emotions will most likely factor into those decisions. The truth is, there is no correct answer to how to distribute your estate. But here are some questions that will help frame your thinking:

  • How much would you like to leave to charity and how much to your family?
  • Will you divide your assets equally among your heirs, or on some other basis, like need or good behavior?
  • What form does your estate take? Is it cash, securities or some other assets? Do you want to give these outright or leave them in a trust?
  • Can the heirs you chose to handle the responsibility of managing their own finances, or will they need help?
  • If you use a trust, will there be provisions, what will they be and whom will you designate as the trustee?

Maybe we should take a step back and clarify what exactly an heir is. An heir is a relation who potentially is entitled to money or property after you die, such as a spouse or child. Laws in each state outline the exact order in which heirs inherit property, but the list stops at a certain point. Not every heir automatically inherits.

The term “heir” is often used when someone dies without a will. When that happens, the estate administrator tries to find who rightfully inherits the property.

A “beneficiary” is a person or an organization who receives money or property by being specifically named in your will or trust. Beneficiaries can include charities, descendants or close friends, even places of worship.

If you leave a will, beneficiaries often have more rights to whatever assets remain after probate. If you don’t leave a will, the assets go to the first heir in line, and the process continues until a living blood relative is found. Keep in mind that rules may vary depending on the jurisdiction.

Trusts can help ensure the people you want to get your assets, in the form you want. Ensuring the transfer of your hard-earned assets to your heirs is a crucial part of a well-thought-out estate plan. Although it may be uncomfortable to have a conversation like this with your spouse, your children, and other possible heirs, it will enable them to ask questions and to clarify what your exact wishes are. While the estate planning talk deals with sensitive issues, it will mean a smoother transition for your heirs after your death.

Get started with your estate plan.

5 Common Misconceptions about a Power of Attorney

5 Common Misconceptions about a Power of Attorney

MISCONCEPTION #1. A power of attorney can be authorized at any time.

– I received a phone call asking me to draft a power of attorney. The caller said that she had just received certification from her father’s doctor stating that he is no longer competent. “Can you draft a power of attorney and living trust for my dad?” she asked. Unfortunately, I can’t do that. Once someone lacks legal capacity, they can no longer sign any legal document including a power of attorney or living trust, which of course is the purpose of the document. At this point, the only recourse is a guardianship proceeding through the courts, which can be extremely costly and time-consuming.

MISCONCEPTION #2. Power of Attorney documents are all the same. I’ll just download one from the web.

– Everyone’s circumstances are unique. Without guidance from an experienced estate attorney, a generic POA document could expose your estate to legal challenges and interjections. Unfortunately, when problems with a POA are discovered it’s usually too late.

MISCONCEPTION #3. A Power of Attorney grants the agent the right to make any decision that they choose.

– Within a POA the agent has an obligation to make decisions that are in the best interests of the principal. While the POA grants authority, the right to act is based on fiduciary circumstances. If the action is not in the best interests of the principal, the agent does not have the right to act. In fact, many people fear signing a POA because they are concerned that their agent will mismanage their estate. Although the fiduciary obligation offers protection, it is important to choose someone that you trust to be your agent.

MISCONCEPTION #4. There is one standard Power of Attorney; it covers everything.

– It is much more flexible than that. The principal determines what powers to grant their agent in the document, which is why it’s important that it be drafted by an experienced attorney.

  • A general power of attorney governs all powers covered by a power of attorney, such as buying or selling property or otherwise managing one’s assets.
  • A limited or special power of attorney can grant very precise authorizations. For example, a power of attorney can be drafted which only grants the power to conduct a real estate sale.

MISCONCEPTION #5. Only a Durable Power of Attorney survives death.

-All powers of attorney terminate upon the principal’s death. The difference between a regular power of attorney and a durable power of attorney revolves primarily around incapacity.

 

  • A standard POA terminates upon death or incapacity. Once either of those events happens, the POA is invalid.
  • A Durable POA survives mental incapacity, but not death. The agent can act on the principal’s behalf even if the principal is declared mentally incompetent.
Estate Planning 101 for LGBTQ Couples

Estate Planning 101 for LGBTQ Couples

It’s true, most couples can benefit from estate planning. It’s a way to ensure your assets end up in the right hands after you die, and that your health care wishes are followed. But LGBT couples in particular often have special situations that require extra planning.

Here are five steps that LGBTQ couples can take to get started with estate plans.

1. Know your marital status

The Supreme Court’s decision in 2015 legalized same-sex marriage in the United States, but the patchwork of prior state laws has had some unintended consequences when it comes to estate planning, because assets typically flow directly to a spouse upon death, it’s important to be sure past relationships really are history.

For example, prior to 2015, some same-sex couples got married in states where it was legal, but then moved to states that didn’t recognize those marriages and later broke up. Thinking their nuptials weren’t valid in the non-legal states, many couples split up but never dissolved their marriages legally speaking. In addition to that, some states automatically converted registered domestic partnerships or civil unions into legal marriages.

Resulting in a lot of people being married and not knowing it.

2. Look beyond a will

A will seems like a no-brainer, especially if you have children from previous relationships or those who had children before legally marrying. Without one, it’s often unclear where assets should go when the last partner dies.

Same-sex couples shouldn’t stop there though. A power of attorney is also a good idea since it gives a spouse or someone else the power to act on your behalf if you are incapacitated.

Setting up a trust can also help, especially if there are concerns about battles over your assets after you die.

Unfortunately, same-sex couples families are more apt to contest the will than heterosexual couples because more LGBT people tend to be estranged from their birth families.

Couples can put their assets into a trust, and when one of them dies, there’s less of an opportunity to contest it, because trusts usually don’t go through probate.

3. Think about your medical needs

Think about this, if you are injured and in a coma, and the prognosis isn’t good, the harrowing decision to “pull the plug” has to go to someone. Think about who you would want making that choice for you. No matter who it is, you want to be sure it’s documented.

There are several options, but the two most popular ones are:

A health care surrogate sometimes referred to as a health care proxy, is someone you choose to make medical or spiritual decisions for you, typically if you’re incapacitated. It can also authorize doctors to share your medical information with specific people of your choosing.

A living will, a do-not-resuscitate or other kind of health directive, which documents your preferences about medical treatment when you can’t communicate. This is useful in a case where you know you wouldn’t want to “live” on life support for years but you don’t think your partner will give the ok to pull the plug. You can essentially document in your will that you only want to remain on life support for….let’s say 6 months, but after that, you wish to be removed from life support. The decision no longer rests in your partner’s hands.

4. Plan for the children

Typically, when parents die, their assets pass on to their children, but to ensure this happens some same-sex parents might need to make adoption part of their estate planning if they haven’t already. This is because it’s more common for only one of the parents to be biologically related to the child.

The idea is to ensure that your assets flow to the children rather than to aunts, uncles or other family members. If there’s been no legal determination of the child, and your partner doesn’t have an estate plan, the child may not get anything.

If only one spouse or partner is legally recognized as the parent, adding a trust with certain provisions will at least ensure the non-legal parent remains in contact with the child if someone else becomes the guardian.

5. Don’t just wing it

LGBT couples should generally avoid do-it-yourself estate planning services online. Most of the forms there don’t account for the needs of same-sex couples.

If you have questions about estate planning, contact Chuck Bendig to set up a free consultation. With more than 39 years experience, we make it easy for you to understand LGBT Estate Planning so you can make the best decisions for yourself and your family.

Getting Re-married? Consider second spouse planning.

Getting Re-married? Consider second spouse planning.

No one wants to think about their untimely death. Especially after you’ve just been given a second chance at love. However, if you’ve just gotten remarried and you have children from your first marriage, how do you ensure that both your new spouse and your children receive an inheritance if you die? Do your children or your new spouse get the house? How will your new spouse get by financially if you choose to provide an immediate inheritance for your children?

You want to make sure that your children won’t be disinherited if you leave everything to your new spouse, who then can ultimately will the money elsewhere. Your current will could be fraught with risks that could cause your children to be disinherited.

Here are some possible solutions:

  • Pass your assets to a revocable trust agreement that’s funded during your life through your will or through beneficiary designations. The trust is revocable at any time, so you’re able to change your mind. Upon your death, the trust becomes irrevocable and would benefit your spouse and children.
  • Invest assets to make them income-producing and pay all the income to your new spouse for the rest of their lifetime, while still preserving the principal for your children. Upon your spouse’s death, the remaining principal of the trust goes directly to your children outright or in further trust.
  • You can also choose to name an independent trustee who will have the power to pay a portion of the principal to your new spouse if there’s a need. You can even have your second spouse’s interest in the trust end upon remarriage.

 

Through proper planning, you can maintain control over your assets to prevent disinheritance of your children, while at the same time, providing for your spouse. However, if you don’t make specific arrangements, here’s a broad look at what may happen to your assets, although this may vary with state law and other situations:

  • Your second spouse may be able to claim 1/3 to 1/2 of the assets covered by your will, even if your will specifically states something else. Click here to learn more. 
  • Joint bank or brokerage accounts held with a child will go to that child.
  • Your IRA and/or 401K will go to whomever you’ve named as beneficiary. Contrary to what you may have been told, wills do not supersede these beneficiary elections.

If you want a different arrangement, you and your spouse must have a written prenuptial agreement that meets your state’s inheritance laws. You’ll need to change beneficiary forms.

These financial issues merit serious consideration. Competing interests of your adult children and your second spouse may induce additional heartache once you’re gone. In the case of blended families, it’s always wise to have a professional evaluate your existing will to ensure your desires are carried out.