John Lane Law

What are the Biggest Estate Planning Mistakes?

“Taking a few simple steps now can potentially help save your beneficiaries thousands in legal fees and taxes.”

One of the largest wealth transfers our nation has ever seen is about to occur, since in the next 25 years, roughly $68 trillion of wealth will be passed to succeeding generations. This event has unique planning opportunities for those who are prepared, and also big challenges due to the ever-changing legal and tax world of estate planning.

Fox Business’ article “5 estate planning disasters you'll want to avoid,” discusses the biggest estate planning errors to avoid.

Failing to properly name beneficiaries. This common estate planning mistake is easily overlooked, when setting up a retirement plan for the first time or when switching investment companies. A big advantage of adding a beneficiary to your account, is that the account will avoid probate and pass directly to your beneficiaries.

Any account with a properly listed beneficiary designation will override what is written in your will or revocable living trust. Therefore, you should review your investment and bank accounts to make certain that your beneficiaries are accurate and match your intentions.

Naming a minor as a beneficiary. This can be a problem, if they are still minors when you die. A minor won’t have the legal authority to take control of inheritance or investment accounts until they reach the age of 18 or 21 (depending on state law). When a minor receives an asset as a beneficiary, a court-appointed guardianship will be created to supervise and manage the assets on behalf of the minor. To avoid this mistake, you can name a guardian for the minor child in your will.

Forgetting to fund a trust. Creating a trust is the first step, but many people don’t properly fund their trust after it’s established.

Making a tax mess for your heirs. A significant advantages of passing on real estate or other highly appreciated investments or property, is that your beneficiaries receive what is known as a “step-up” in basis, so that they aren’t responsible for any income taxes on the appreciated assets when they are received. The exception is when inheriting retirement accounts, such as 401k’s and traditional IRAs. Except for a surviving spouse, inheriting a traditional IRA or 401k means that you are now responsible for the taxes owed. With the recent passage of the SECURE Act, most non-spouse beneficiaries must totally withdraw a 401k or IRA within 10 years. It is deemed to be ordinary income for beneficiaries, which could result in a huge tax bill for your heirs. To avoid this, you can convert some or all of your retirement account assets to a Roth IRA during your lifetime, which lets you to pay the conversion taxes at your current income tax rate—a rate that may be much lower than your children or grandchildren’s tax rate. When you pass away, any money that is passed inside a Roth IRA goes tax-free to your heirs.

Failing to create a comprehensive estate plan. Properly establishing your estate plan now, will care for your loved ones financially, and can also save them a lot of emotional stress after you’re gone.

Talk to an experienced estate planning attorney about planning now. It can really affect your family for generations. It is one of the best gifts that you can leave your family.

Reference: Fox Business (Nov. 12, 2020) “5 estate planning disasters you'll want to avoid”

Get the Basic Estate Planning Docs Signed - John M. Lane Law, PLLC

“Legal Documents Everyone Should Have”

Harrisburg Magazine’s recent article, “Protect Yourself,” recalls the case 25 years ago of a young woman named Terri Schiavo, who had a heart attack in Florida. She was resuscitated but suffered massive brain damage and was left in a persistent vegetative state. This created a lengthy legal battle with her husband—who wanted her feeding tube removed—against the wishes of Terri’s parents—who wanted her kept alive. After seven years and 14 appeals, Schiavo's feeding tube was disconnected, and she died in 2005.

A big issue in this fight was that those closest to her testified she never would’ve wanted to be kept alive in a vegetative state, but Schiavo hadn’t signed a living will. Therefore, if you fail to have the legal documents necessary to express those intentions, no one will know what they are. Without leaving your written wishes, you take important decisions out of the hands of your family. It is very important to have these documents for your own peace of mind, as well as that of your family.

End-of-life directives are just one of the legal documents that are needed to protect us. Wills and powers of attorney (financial and medical) are crucial for sound estate planning. A financial power of attorney, allows another individual, like a spouse or trusted friend, to take care of your financial affairs in the event that you become incapacitated, which is particularly useful as you get older.

A medical power of attorney is like a living will, but it details more than deathbed concerns. It also allows your trusted agent to be given your private medical information and to decide health care issues for you if you’re incapacitated.

Wills are extremely important, especially for those with children. They let you name a guardian for your children, if you and your partner pass away. This step will prevent the courts from deciding who should care for your children or a dispute by relatives over guardianship. In some states, a will is not required, but another legal document specified by state law will suffice.

Even unmarried people without any kids should have a will. If not, state intestacy laws will dictate how your property will pass to your heirs. If you die without a will, the state will distribute your assets to your next of kin. This could be someone you don’t really like or whom you’ve never met.

Everyone has heirs. Even if you think you don’t have anyone, there’s likely a cousin out there somewhere, and the intestacy statute will try to find the next of kin. If you have a properly prepared will, you can leave funds to charity, and make sure that the funds go where you want them to go—instead of to some distant relative with whom you have absolutely no relationship.

This issue isn’t pleasant, but preparing for disability and death with legal documents provides undeniable protection, as well as peace of mind for you and your family.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Harrisburg Magazine (December 2016) “Protect Yourself”

Don’t Go Without a Will - John M. Lane Law, PLLC

“Draft a will now.”

Did you know you need a will? You really do. Creating a will can make certain that your assets are transferred the way that you wanted. If you decide to go—sans will—there’ll be a few dangers that your family may encounter.

Nerd Wallet’s recent article, “5 Hidden Dangers of Not Having a Will,” lists some of the most challenging issues, reminding you why it’s so important to have an up-to-date, signed will.

1. Spendthrift heirs. It’s pretty rare that a child can handle a large sum of money all at once. Some heirs are just bad at handling money, and others may have addiction issues—like gambling or abusing illegal substances. Either way, handing them a windfall can enable bad habits and anger other beneficiaries. Those who didn’t get as much might hire lawyers to fight the proposed distribution.
2. Unexpected or contested heirs. Sometimes there can be confusion and questions about the actual beneficiaries of an estate. Someone might appear unexpectedly during the settlement.
3. Property (and probate) in more than one state. If you have property in several states, dying without a will can result in some of your estate having to go through probate in multiple states. This can be costly and time-consuming—particularly if each beneficiary hires an attorney in each state. Let’s do a quick math problem: there are three beneficiaries with estate property in four states. How many attorneys might be hired? Answer: 12.
4. Fraudulent wills. If there’s no will in place, it gives the opportunity for a treasure seeker to make a fake, particularly if you have a big estate. Remember Howard Hughes? He died with no immediate family and no will. Within a short period of time there were several purported wills claiming to be the legitimate one. His estate spent millions defending against the fake documents. It’s harder to do this these days with more sophisticated analysis tools, but why subject your heirs to potential headaches and unnecessary legal bills?
5. Beneficiaries don’t like the appointed court executor. When there’s no will, there’s no designated executor—so the probate court appoints one. Although it’s typically an experienced attorney, the beneficiaries may not get along with this person. An executor must take time in his or her busy schedule to inventory, appraise and distribute the estate; however, it may not be quick enough for the heirs. Generally, family members will do a faster job as executors—maybe because they’re often also beneficiaries.

These are five big problems you can eliminate for your family. Have a will prepared by an experienced estate attorney, and do it ASAP.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Nerd Wallet (August 3, 2016) “5 Hidden Dangers of Not Having a Will”

Rolling Stone Jagger Needs Estate Planning for Expected Arrival

“Careful financial planning is key to making this work.”

When Rolling Stone Mick Jagger isn't on stage later this year, he'll probably be at home changing diapers at age 72. Mick is awaiting the arrival of his eighth child. Although becoming a parent or having a child in older age is the exception and not the norm, experts in financial planning say it's becoming more common.

CNBC’s recent article, “Jagger’s changing diapers at 72. How to manage that,” notes that when people get remarried, they may—lo and behold—have more children.

Jagger isn’t alone in the senior rocker dad club because bandmate Stone Ronnie Wood, 68, and his wife just had twins in May, and Billy Joel at age 66 became a dad last year for the second time.

Becoming a parent later in life brings its own set of unique issues. Preparation is critical if you're going to juggle both day care and retirement.

The first issue to consider is guardianship, especially how you’d like your child to be raised if you pass away or become incapacitated. In this situation, the child's older sibling may be a good choice as guardian.

Next, as far as assets, you should think about creating a trust with certain provisions concerning how and when the money will be disbursed to the child, which can be important for those with multiple children. Parents should protect the minor child first.

To make a fair distribution of the assets and to keep the estate out of probate, consider a living trust, which can hold the assets to put the child through college. Then the estate can distribute assets to the adult children.

In addition, titling your property correctly is another important part of estate planning. Incorrect titling can mean assets falling outside of the trust, entering probate or being distributed in a manner not in accordance with the parent’s wishes.

Insurance raises some important considerations. With a child later in life and no work-based medical coverage, most retiree healthcare plans don’t cover minor children—and neither will Medicare. You’ll need to buy private coverage for your child. If you’re able to buy life insurance in your 60s or 70s, get a 20-year term policy that will protect your child through the age of majority in the event you pass away. If you are already claiming Social Security, your minor child may be able to get a payment of up to 50% of your benefit. The child must be single and under age 18, under 19 if he or she is still in high school, or 18 and over but disabled by a condition that started prior to age 22.

Parents can’t directly deposit their child's Social Security benefits into a 529 college savings plan, but it's common for them to spend the benefits on the child and invest a similar amount of money from their personal funds into a 529.

One piece of good news is that if you’re no longer working and are living off retirement savings, you’ll have a low employment income. If the majority of your savings is in exempted retirement accounts, you may be able to maximize financial aid.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: CNBC (July 21, 2016) “Jagger’s changing diapers at 72. How to manage that”

Laws for Guardianships Slow to Change - John M. Lane Law, PLLC

"Judges are really worried about people getting hurt; they think guardianship protects them. They do get hurt...when they get stuck in nursing homes."

Abusive guardianship cases have made headlines for decades. Tales of relatives fighting over Mom to access her savings, professional guardians draining an estate through high fees, or nursing homes filing for guardianship to keep their beds filled have been regular occurrences.

When a judge imposes legal guardianship or conservatorship, the ward or "incapacitated person" may no longer be allowed to decide where to live or whom he or she will see. If a guardian is appointed, that individual gets to decide whether the ward is allowed spending money. He or she won't be able to enter into contracts, including marriage, or demand a different guardian—even if the guardian is abusing the ward or stealing his or her money.

According to a recent nextavenue.com post, "Guardianship Laws: Improving, But Problems Persist," there were 33 changes in adult guardianship laws in 18 states in 2014. A report by the Commission on Law and Aging of the American Bar Association stated that the changes were on issues like background checks on guardians, access of the ward to visitors and phone calls, health care decision-making by guardians, fees, and rights of people under guardianship.

There are no reliable statistics on exactly how many guardianships there are nationwide. Today, experts believe that there are 1 million to 2 million. Some of the changes in recent years include these requirements:

• The would-be "incapacitated person" is notified of the guardianship hearing and the right to be present if desired;
• He or she has the right to an attorney;
• There must be "clear and convincing" evidence that the person is incapacitated and, in some states, that guardianship is necessary to avoid harm; and
• A medical expert must assess the proposed ward.

But many states are resistant to change. One major push in new legislation in the U.S. has been to require judges to grant limited guardianship orders whenever possible, instead of a complete and total termination of the ward's rights. A preference for limited orders is the statutory mandate in almost every state, but there are an excessive number of removals of rights in too many cases. There's a strong push for judicial efficiency against them.

Many advocates think that it's way too simple to get a judge to sign off on a guardianship or conservatorship. The evidence stating that the older adult can't handle his or her own affairs is supposed to be "clear and convincing," but it really may only be one of the following:

• a brief letter from a general practitioner who's taking the word of an adult child;
• a statement from a doctor who doesn't know the difference between delirium (temporary) and dementia (permanent);
• a court petition from a proposed guardian or conservator with a conflict of interest;
• a petition from a nursing home that wants a regular, paying client; or
• a statement from an adult child who wants to take over the decision-making from a parent instead of determining necessary care.

Another issue with efforts to reform guardianship and conservatorship is the difficulty of monitoring. Most states require guardians and conservators to keep records of their activities and file regular reports with the judge, but compliance can be a mystery. Many courts simply don't have enough resources to hire staff to track the reports and investigate potential problems.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: nextavenue.com (May 24, 2016) "Guardianship Laws: Improving, But Problems Persist"

Financial Planning Help for Single Parents - John M. Lane Law, PLLC

"Single parents face a more challenging task of managing their finances with only a one-income household."

The Parent Herald gives us five financial planning tips for single parents that will protect them and their families in its recent article, "5 Financial Planning Tips For Single Parents For Your Family's Protection."

Here is a quick look at these tips:

1. Create a safety net. Most important is to have sufficient emergency funds that can be your financial safety net. Single parents should save at least six months' worth of expenses in an account that's untouched until an emergency occurs.
2. Make insurance a priority. Medical insurance is another high priority. Unforeseen medical emergencies can be a big drain on a family's cash flow. There are many health insurance plans that include regular check-ups for parents and their dependents—use this to your family's advantage. In addition, life insurance can secure a child's future. The right amount is usually enough to cover the children's living expenses and education.
3. Adhere to a cash flow plan. This will help a family stay on a budget, especially when there's less money coming in. Treat yourself once in a while, but avoid giving in to impulse purchases. A family budget also educates children about money and may help them understand why parents may not be able to afford some things.
4. Do your estate planning. If the parent passes away or becomes incapacitated, you want to ensure your children's care. This is where you need to do estate planning. Single parents need to prepare a will and choose an executor so their children can receive the money left to them.
5. Plan for retirement. Don't neglect your own future stability upon retirement by trying to meet your child's immediate needs.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Parent Herald (April 6, 2016) "5 Financial Planning Tips for Single Parents for Your Family's Protection"

How to Plan to Help an Incapacitated Loved One

"What should or shall we do about the circumstances of an elderly relative or seemingly incapacitated relative?"

The article, "Legal Issues for Concerned Family and Friends of a Possibly Incapacitated Individual," advises that functional capacity is contextual. The challenges an individual faces in daily living and how well they are being addressed is sometimes hard to pin down. The legal terminology is frequently vague and inconsistent. Terms such as "incompetent," "unsound mind," and "incapacity" are used interchangeably.

State statutes typically define an "incapacitated person" as someone who, because of a physical or mental condition, is substantially unable to provide food, clothing, or shelter for himself or herself, to care for the individual's own physical health or to manage the individual's own financial affairs.

The courts will often require expert testimony and reports as to the individual's physical or mental state before rendering a judgment. Many states use a required standardized "Certificate of Medical Examination" form to be submitted to a court, which has the specific statutory definition of incapacity. It will often have boxes for the physician to check and a space for his or her comments.

A progressive and gradual onset of dementia may be hard for both the individual and family members to recognize and appropriately address. As such, there are a variety of tasks that have significant personal and legal implications. Consider if the person can consistently and appropriately undertake the following tasks, although this isn't a complete list and they aren't listed in any particular order:

• Administer her or his own medications;
• Engage in daily activities like personal hygiene, bathing and dressing;
• Attend to shopping, food preparation, self-feeding and housekeeping;
• Safely drive a motor vehicle;
• Manage their finances and pay household expenses;
• Make appropriate decisions concerning marriage or intimate relationships;
• Keep his or her home clean;
• Collect and respond to mail or other communications;
• Recognize and avoid common scams and frauds; and
• Understand the need for and consent to medical and dental treatment.

There may be assistive devices, accommodations and part-time caregivers that might be less restrictive alternatives than legal guardianship and institutional living. Legally, an individual is presumed to be sane and have legal capacity. As a result, the family may have a hard time stepping in when an individual is stubbornly insistent on keeping the status quo in spite of signs that some changes are needed.

Make sure, well in advance, that you and your loved ones have created durable powers of attorney so that a trusted person may act when one becomes incapacitated. Similarly, a medical power of attorney and healthcare directives to physicians and medical staffs are extremely helpful. Finally, create an up-to-date will and talk to your estate planning and elder law attorney about appropriate estate planning.

These very basic steps can eliminate many burdens from your family and friends.  Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Huffington Post (December 22, 2015) "Legal Issues for Concerned Family and Friends of a Possibly Incapacitated Individual"

No Time Like NOW to get Papers in order for Dementia Patient

"Get the documents in place before tragedy hits and emotions are sky high."

Money's recent article, "5 Essential Documents for Protecting a Loved One with Dementia," says that a person with dementia needs someone—either a relative or a trusted friend—who can make important financial and medical decisions in his or her stead. It's critical to assign this job while the person with dementia is still mentally able to make sound decisions and have the legal capacity to be involved in making the choice.

If you delay with the paperwork, your family member's dementia may progress to the point where he or she cannot legally turn over power. At that point, your only option is to petition for guardianship and ask a judge to declare the person incapacitated. That can take about two months and may be expensive. It can get even worse if your loved one—or another family member—contests the application.

Laws vary by state, and mistakes can be costly. You should draft these documents with the help of an experienced elder care attorney. Here are the key documents that are recommended:

Durable Power of Attorney. This gives you the authority to make financial decisions for your loved one, like writing checks to pay his or her bills, handling tax returns, and selling a home. A "durable" power remains in place if the person for whom you are making decisions becomes incapacitated and can't make decisions for himself or herself, as opposed to a regular power of attorney, which terminates if the person who issued it becomes incapacitated. Avoid some headaches and visit the institution with the family member granting you power of attorney to complete any proprietary forms in advance. If your loved one spends a significant amount of time in another state, you should also have a power of attorney drafted by your estate planning attorney according to that state's laws.

Health Care Proxy. This is really a power of attorney for medical decisions, allowing you to make choices about treatments, doctors, and other health-related matters.

Living Will. This is also called an advance directive for health care. It lets your loved one specify the medical treatment that he or she wants—or doesn't want—near the end of life.

Updated Will. A will gives instructions as to what happens to any of your assets after you pass away. Your will needs to be reviewed periodically to reflect changes in your life.

Living Trust. You might also consider this if your loved one with dementia has substantial assets. A living trust makes it easier for another to manage the assets, e.g., homes and investment accounts. The trustee must adhere to the specific instructions of the person who created the trust. It is also useful in states with onerous probate procedures because a living trust may allow the estate to avoid probate when distributing the property of a person who has died. Again, it's important to talk to a knowledgeable estate planning attorney before setting up any kind of a trust.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Money (December 11, 2015) "5 Essential Documents for Protecting a Loved One with Dementia"

A Friend Indeed May Not Always be the Trustee You Need

"With so many estate plans being built around trusts, selecting the right trustee is a key decision."

Implementing a trust can be an indispensable estate planning tool. There are a number of reasons to incorporate trusts as part of your estate plan, says a recent article in Wilmington Business, "Selecting the Right Trustee." These include privacy, avoidance of probate, full management of personal finances, monitoring of investments and tax planning, and some tax-saving techniques for trusts.

Selecting the right trustee to execute your plans is just about the most critical decisions you can make—maybe even as important as the terms of the trust itself. Think about these qualifications when selecting your trustee:

• Administrative Skills and Knowledge. Your trustee must perform a lot of different tasks, like safeguarding assets, collections, reinvestment and distribution of income, document interpretation, bill paying, and many others.
• Investment Expertise. He or she has to put together an investment program that satisfies the requirements of all the trust beneficiaries. In today's changing and volatile investment environment, this is a big responsibility.
• Tax and Accounting Skills. A trustee is required by law to maintain detailed and accurate records, as well as to submit reports to the trust beneficiaries, the probate court, and the IRS. In addition, he or she has to assist with decisions that will have the most beneficial tax results for the trust and beneficiaries.
• People Skills. A trustee must be able to cultivate a strong relationship with both the creator of the trust and the beneficiaries to serve as a trustworthy financial adviser. Communication among all parties is important so that the stated trust purpose and needs of the beneficiaries are met.
• The most important qualification for a trustee is to abide by his or her fiduciary duty and keep high business standards. A trustee is expected to be loyal and treat each beneficiary fairly and impartially.

People automatically turn to a close friend or relative as their choice of trustee. However, you need to ask yourself, "Will he or she meet all the qualifications I require my trustee to perform?" In many instances, that go-to person may not be in the best position to carry out the duties necessary to be an effective trustee. In that case, talk with your estate planning attorney for suggestions on the right trustee.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Wilmington Business (December 15, 2015) "Selecting the Right Trustee"

Guardianship Abuse Is Rampant

Guardians are supposed to look after and protect the interests of their wards. Unfortunately, it has become all too common for guardians to take advantage of their wealthy elder wards.

The purpose of court appointed guardians is a simple and noble one. When a person is not competent to handle his or her own affairs, then a court can appoint a guardian to act on the person's behalf. The guardian is supposed to act selflessly and in the best interests of the ward.

However, as the Wall Street Journal reports, in "Abuses Plague Guardianship Systems Across the Country," the financial abuse of elderly people by guardians is rampant throughout the United States.

Court appointed guardians with no family relationship to the elderly wards too often act in their own interests and deplete the wealth of the wards.

This problem is mostly avoidable through estate planning. Part of a good estate plan is planning for end of life issues and getting a general durable power of attorney and a health care power of attorney. With those two documents, you can appoint someone you know and trust to look after your financial and medical affairs in case you are ever not competent to do so. Doing that can often make the appointment of a guardian unnecessary.

Even if a guardian is necessary, a court will likely appoint the person you have already designated as trustworthy whenever possible.

Do not fall victim to an abusive guardian.

Schedule an appointment with an estate planning attorney and get the documentation that you need to make your own decisions about who should look after your affairs if you are not able to do so. Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Wall Street Journal (October 30, 2015) "Abuses Plague Guardianship Systems Across the Country"