Blog – Needham Estate Planning

New Baby? Time to Create Your Estate Plan

Estate planning is often one item that gets pushed back on nearly everyone’s to-do list. The reasons you might be delaying vary - lack of time, not thinking you have enough assets, not knowing how to start, or fear of contemplating death.

Whatever the reason for not putting an estate plan together, it is important to understand that if you just had a baby - now is the time to meet with an estate planning attorney to implement a plan.

In general terms, an estate plan is a set of legal documents that outline your wishes on how your assets should be distributed and who is responsible for your dependents, in the event of your death or legal incapacity.

An estate plan should be developed with a qualified estate planning attorney to ensure that it will work as intended and fully protect your family.

Here’s how an estate plan can you protect the newest addition to your family.

Protect Your Children

Perhaps to top reason to put together an estate plan is to dictate who will care for your children in the event you and your spouse die early or become legally incapacitated and therefore unable to care for your kids.

Your estate plan can designate someone you trust and who shares your values as a guardian of your minor children. This is the person who will essentially be a surrogate parent and raise the children through adulthood. When selecting a guardian, it is important to choose people who will be willing participants in your estate plan, who share your values and parenting philosophy, and who you trust to raise your children.

Distribute Your Things

While some assets have purely financial value, others have deep emotional attachments. Not only will a trust-based estate plan speed up - and, possibly, eliminate - the probate process, but it will save your heirs bickering, time, and money.

As you may already know, probate is the court-supervised process of wrapping up a deceased person’s affairs. This consists of multiple steps, including presenting a deceased’s last will and testament (if they had one - otherwise the probate court uses the government’s default plan known as intestacy), gathering assets, paying off debts, and distributing what’s left over to the deceased’s heirs.

Using a trust to provide specific instructions on distribution of assets can help ward off fights among surviving relatives. Additionally, special features in your trust, sometimes called lifetime trusts, also allow you to provide long-term financial stability and support for your children.

These lifetime trusts can prevent a financially immature young child from using up their inheritance.

Provide for Your Loved Ones

Beyond your children, creating an estate plan will inform your loved ones what final health care decisions should be made on your behalf in the event you become incapacitated and are unable to make decisions.

Serving as a healthcare proxy is an enormous responsibility for the person you name, but you can help lessen the burden by communicating your wishes about medical decisions.

One significant advantage of properly planning is that your intentions can be clearly stated so that your surviving family members do not have to guess what your desires are.

Find an Estate Planning Attorney

If you have experienced a recent life-event - such as a new baby, a work promotion, purchasing a home, moving to a new state, or any other milestone - you should discuss your situation with an estate planning lawyer.

If you already have a will or trust in place, it may make sense to update it to ensure it provides for your family and loved ones.

To learn how estate planning can protect you, your newborn, and the rest of your family, contact us today.

Are Your Documents Following the Same Script?

In the event of your untimely death, the manner in which your beneficiaries -- or those people who receive your assets from your estate -- are determined is highly dependent on how your property is titled.

Generally, property with title includes vehicles, boats, airplanes, real estate, bank accounts, savings bonds, life insurance policies, retirement accounts, and stock certificates.

If you die without a will or a trust and haven’t used any beneficiary or transfer on death options, state law will determine who inherits property with a title.

On the other hand, property without a title, such as jewelry, antiques, art, and even your digital assets are usually provided for in your will or trust, and if you don’t have one typically goes to your heirs at law.

As you can see, who you have listed as a beneficiary -- and not having a beneficiary designation at all -- can have serious implications for your family after you have passed away.

Increasingly, a wide range of financial products allows you to name a beneficiary upon your passing.

The benefit of naming a beneficiary is that the assets go directly to the named beneficiary upon the account owner’s passing, often bypassing the long and expensive process of probate.

The danger is, however, that when these designations are not carefully coordinated with your estate plan you can inadvertently disinherit a loved one, cause a disabled family member to lose government benefits, leave your heirs with a massive tax bill, or otherwise fail to achieve your goals.

What is a Beneficiary Designation?

Simply put, a beneficiary designation is a contractual agreement where the bank, insurance company, or financial company agrees to pay a person or entity, that you have selected, the specific assets upon your death.

For example, Bob may list Susan, his sister, as the payable on death (POD) beneficiary for his savings account at ABC Bank. When Bob dies, ABC Bank will pay Susan the balance in Bob’s account, without Susan having to first go to probate court.

But properly choosing a beneficiary and making sure it falls in line with your estate plan is often more complex than it seems at first glance.

Completing a beneficiary designation form is not just a routine task that you complete when filling out your bank account, life insurance, or human resources documents. In fact, naming beneficiaries is something that you should take very seriously and should consult your estate planning attorney about.

Coordinating Your Beneficiaries

It’s important to note that beneficiary designations supersede your will or trust.

For example, let’s suppose that Bob’s will stated that his entire estate is to be given to Elizabeth, his daughter. Since Bob used a payable on death beneficiary designation on his ABC Bank account, that asset will instead go to Susan, not Elizabeth.

In other words, if you name one relative to inherit assets in your will or trust, but some of those assets have someone else listed on the beneficiary designation, then your entire plan isn’t going to work as you likely intend.

For this reason, it is vital to ensure that your beneficiary designations are coordinated or aligned with your estate plan in order to fully protect you and your family.

Of note, many beneficiary forms have a designation for contingent beneficiaries.

A contingent beneficiary is basically a “Plan B” to your initial designation. So, in the event, your primary beneficiary passes away before you, the contingent beneficiary steps in their place and gets their share of the asset.

Estate Planning Help

The best strategy for ensuring your wishes are carried out is to first understand how naming beneficiaries has a significant impact on your heirs and then coordinate your wishes with an estate planner.

We are here to help you coordinate all of your assets and beneficiary designations with your estate plan so that everyone gets the protection they deserve.

How Estate Planning Can Help You Dream About Your Future

A dream without a plan is simply a wish.

Estate planning is not just about death and taxes -- it puts you in the driver’s seat of your financial life, allowing you to set achievable goals.

It is a great opportunity to focus on the legacy you want to leave behind for loved ones, help you avoid the expense and delay of probate, as well as help you save on taxes.

Putting Your Dreams on Paper

When putting together your estate plan, think about what legacy you want to leave behind. The best way to do so is to write down your wishes.

Consider the values you want to promote through your plan.

Think about important family traditions you want to encourage or memories you want to preserve.

Rather than a dry discussion of what happens to your assets, including these wishes in your estate planning documents makes your plan relatable and more meaningful for your family.

Because you’ve passed along values and wisdom along with your wealth, a comprehensive estate plan can help you achieve the dreams, hopes, and aspirations you have for your family, even though you are no longer with them.

For your estate plan to effectively pass along your values and wisdom, it should:

clearly, state who you are leaving your assets to;
give an explanation as to why an individual is receiving a particular asset;
provide guidance about how you want a beneficiary to benefit from your assets (e.g. what “education” you intend to help with, whether or how you want to instill a work ethic, what you mean by “support,” etc.);
make sure that those assets are received by your beneficiaries at the right time to maximize their benefit, and
protect your legacy from being taken by estate taxes, creditors, predatory lawsuits, government claims or divorce.

You even have the opportunity to protect your legacy beyond your beneficiaries’ lifetimes into future generations if you want to do so.

Estate Planning Basics & Benefits

There are several benefits of developing an estate plan with your legacy in mind.

You can help the next generation become empowered to achieve competence, character, and confidence.

You can also preserve and reinforce your family’s core values and traditions.

In addition to preserving your legacy after you die, a comprehensive estate plan can provide guidance for managing your affairs if you become incapacitated and unable to make decisions for yourself.

Some basic documents that should be included in your estate plan are:

A will:

A written document that states who you want to inherit your property and names a guardian to care for your minor children or disabled family members. The use of a will as your primary estate planning strategy does require the court process known as probate.

A trust:

A legal structure which holds property for your benefit during your life and for the benefit of your beneficiaries after your death. The use of a “fully funded” trust allows your beneficiaries to avoid the costly and time-consuming process of probate.

A healthcare directive:

A written document that spells out your wishes for healthcare and end-of-life choices when you are unable to make these decisions for yourself.

A financial power of attorney:

A written document giving a trusted person authority to handle your finances and property on your behalf.

Guidance From Estate Planning Attorneys

A skilled estate planning attorney can help you make your dream a reality by communicating them through a well-thought-out estate plan.

Estate Planning For the Newly Married

Now is the perfect time to start working on an estate plan—because, as newlyweds, you may not have a list of your accounts, but you've effectively just done a working inventory of your possessions—as you've figured out how to consolidate two households into one.

You've already been working on the new banking and shared the responsibility of bills and taxes and so forth.

Use that all time and energy and work as a leapfrog into planning for your future—so you'll be that much more prepared for the house, the kids, and the next stages of your new life together.

Why Think About Estate Planning At This Point?

Even if you have few assets, as we just talked about, you have more than you think.

Still, putting together a will or a trust probably is very straightforward at this point, since you just did that accounting of your collective assets.

You may have heard of state laws that give your property to a spouse if you don't have a will.

These laws—known as intestacy laws—vary by state and can sometimes have results you wouldn’t expect.

And, intestacy requires your estate going to probate—a court proceeding that can take months, even years, to resolve. So a basic estate plan should give you some peace of mind—knowing loved ones are taken care of if anything should happen.

You can even plan for the property you don't yet own (a house you may buy someday) and provide for children whenever they arrive on the scene.

And once you have that initial plan in place, you can easily update it as your circumstances and needs change.

Furthermore, if you already have a sizable amount of assets then estate planning may lead to tax benefits, now and in the future.

Who Can Make Decisions For Me, If I Can't?

In the U.S., a power of attorney (POA) is a legal document that designates someone else (often a spouse) to make financial and other decisions on your behalf.

In the financial realm, a POA can sign contracts, file lawsuits on your behalf, and more. Depending on the exact language, you can grant the POA broad powers, or something more limited to an issue or situation.

One specific form of POA is in effect only if you are unable to make decisions on your own—such as an emergency or illness.

And you can have that type of POA for both the financial side of things, as well as one relating to your medical care.

What Kind of Care Would I Want?

An advanced directive (also known as a living will) is a document that makes clear the kinds of medical interventions you'd prefer if you're unable to make decisions for yourself. In some ways, think of this as an emotional insurance policy:

You make decisions now, so the people you love won't have to. This can also make it easier for your spouse to make decisions if necessary, as long as you name them as a medical decision maker.

Who Will Look After The Kids?

If you don't yet have kids but want them someday, realize that an estate plan is essential for families with children.

The state statute providing assets for a spouse will probably also include some inheritance for children.

However, when it comes to guardianship, you need a will to designate caregivers for the children, should something happen to both parents.

Without a will, the court decides on the children's caregiver, and the court may select someone you don’t want.

As you start your new life together, one of the best ways to begin is by planning for the future, and whatever it may bring.

We've been helping families of all ages and kinds for decades, and we'd be delighted to help you, so contact our professionals today.

Isn’t There Already A Law That Leaves Everything To My Spouse And Kids?

Many people think that if they die while they are married, everything they own automatically goes to their spouse or children.

They’re actually thinking of state rules that apply if someone dies without leaving a will. In legal jargon, this is referred to as “intestate.”

In that case, the specifics will vary depending on each state's law, so where you live when you die can significantly change the outcome for your family.

However, the general rule is that your spouse will receive a share, and the rest will be divided among your children.

Exactly how much a spouse will inherit depends on the state, though.

Now, it may seem like, "So far, so good." Your spouse is getting an inheritance, so are the kids.

But here are some examples of how the laws can fail many common family situations.

First off, if both parents of minor-aged children die intestate, then the children are left without a legal guardian.

Kids don't automatically go to a godparent, even if that's what everyone knew the parents had intended. Instead, a court will appoint someone to be the children's guardian. In such situations, the judge seeks to act in the children’s best interests and gathers information on the parents, the children, and the family circumstances.

But the decision is up to the court, and the judge may not make the decision that you, as a parent, would have made.

When it comes to asset division, in most cases, state intestacy law presumes that a family consists of a husband, wife, and their natural-born children.

But, that’s not necessarily the way many families are structured, and things can become legally complicated quickly.

According to Wealth Management, one analysis has 50 different types of family structures in American households.

Almost 18% of Americans have been remarried, and–through adoption and stepfamilies–millions of children are living in blended families.

The laws just haven't kept up, and absurd results can occur if you rely on intestacy as your estate plan.

Stepchildren that you helped raise (but didn’t legally adopt) may end up with no inheritance, while a soon-to-be-ex-spouse may inherit from you.

Say, for instance, a father has a will that allocates assets to his spouse and two children, then they adopt a third child.

Then, the father dies in a car accident before he's able to revise his will. In some states, because the adopted child is not mentioned in the will, she may not be entitled to any inheritance.

If that isn't worrisome enough, consider that, in some states, the law provides that an adopted child still has rights to the biological parents' assets–and the biological parents are entitled to inherit a child's wealth. (Imagine if the adopted-as-an-infant Steve Jobs had died intestate, and his biological parents demanded a share of his estate!)

Of course, with a will or trust, you can control your estate and essentially eliminate the risk of these crazy results.

What if You and Your Spouse Are Separated?

State law decides what happens to your estate if you are separated from your spouse when you die.

Much of the time, the court ignores your separation and just considers you still legally married.

Unless you have a prenuptial or postnuptial agreement, it is extremely difficult to disinherit your spouse.

Again, even if a spouse is omitted from a will, state laws might choose to give a surviving husband or wife a share of the assets.

If you are separated from your spouse, and your divorce is pending, you should definitely talk with your divorce lawyer and an estate planning attorney about your options.

Creditors Win

Intestacy provides no asset protection or preservation benefits. Without any protections in place, an estate's assets are still vulnerable to creditors, lawsuits, and others who may claim entitlement to the property.

These claims would take precedence over the statutory requirements for inheritance. In other words, the family may not receive the lion's share of the estate. They'd get the leftovers.

The best way to safeguard and pass along what you’ve worked so hard to build is to talk to a qualified estate planning attorney.

Protect yourself, your family and your assets by contacting us today.

Gift Giving The Tax-Free Way

Although it’s the season of giving, no one wants to share with the IRS. Luckily, the law provides you with many opportunities to give gifts to family, friends, and charities tax-free. Some are straightforward, while others may require the help of a professional.

Your Yearly Coupons

Each year on January 1st, everyone receives what can be thought of as yearly coupons for tax-free gifts. There are several different ways that you can redeem those coupons:

Annual exclusion gifts

These gifts are transfers of money or property that do not exceed the annual gift tax exclusion. These gifts can be given on one or more than one occasion throughout the year, the key is that you add up the gifts throughout the year. In 2018, you can give up to $15,000 ($30,000 for married couples) per recipient without having to pay any gift tax or file a gift tax return. These gifts can be cash or property but they must be of a “present” interest. Gifts using trusts or certain types of property (like closely held businesses) can be tricky because the “present” interest requirement can be missing. If you plan on using a trust or an LLC to make your gift, it’s best to work with a professional.

Pay medical bills

The IRS also allows you to pay an unlimited amount of someone’s medical bills, without worrying about the gift tax. However, the payment must be made directly to the doctor, hospital, or other medical providers in order to qualify.

Pay tuition

Additionally, you are able to pay an unlimited amount of tuition bills for the benefit of someone else, as long as the tuition is paid directly to a qualified educational institution. One big issue here is that the gift must be only for tuition - books, fees, living expenses, travel, and other costs of education do not qualify.

Give to charity

For those of you who are philanthropically minded, you can give as much money or property to a qualified charity as you want without worrying about the gift tax. As an added benefit, unlike the gifts above, you may also be entitled to an income tax deduction for the charitable gift.

Your Once-In-A-Lifetime Coupon

In addition to our annual coupons, we all have a once-in-a-lifetime coupon for taxable gifts, those that exceed or do not qualify for the annual exclusion, called the unified credit. It’s called a unified credit because it unifies the gift tax with the estate tax into a coordinated tax system. Unlike the annual coupons you read about above, once you spend the value of the unified credit coupon for a taxable gift, it’s gone.

Many people assume that because it says taxable gifts, they’ll have to pay the gift tax. Luckily because of the unified credit coupon, most people will never have to actually pay any gift tax. You only have to pay gift tax if your lifetime gifts exceed the unified credit coupon. Under the current law, the base amount of the unified credit starts at $10 million and increases each year through 2025. However, if you make a taxable gift, you are required to file a gift tax return with your income taxes.

When should I talk to an estate planner?

If you plan on making a gift in excess of annual gift exclusion, then you should talk with us first. Sometimes the best way of making a gift is to just write a check, but other times giving in a trust, through an LLC, or with an undivided interest in property can make more sense and offer your recipient greater benefits (like privacy or asset protection).

While we don’t suggest you give away anything that you might need, if you do have some surplus, gifting programs are a fun way to see your loved ones enjoy your generosity. Give us a call today so we can help make sure you do it without drawing the attention of the IRS.

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