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”

Coronavirus News Should Make You Think about Estate Planning - John M. Lane Law, PLLC

“Nobody likes to think about their own mortality, and that's why so many people go without basic estate planning documents. Often, an event like the coronavirus can be the kick in the pants you need to get your affairs in order.”

The global Coronavirus (COVID-19) outbreak has many of us thinking about what could happen, if the disease spreads more fully across the general population. We all need to plan for what could possibly happen. To protect yourself and your family, it’s smart to be certain that you have the following these documents prepared and updated, says Motley Fool’s recent article entitled “The Coronavirus Should Have You Thinking About These 4 Things.”

1. A will or revocable trust. Be sure that your assets will pass to those who you want to receive them after your death. This is critical during crisis times. You don't want to make things any harder than they need to be. Create an estate plan to avoid potentially expensive and time-consuming processes like probate, which will have greater importance, if your family is confined to their homes in a quarantine situation. A simple will can cover what happens to your assets at death. This typically works well, especially for modest estates. State laws differ on how complicated a probate process would be with a basic will. Some people opt to use a fully funded revocable trust that doesn't require probate. For either a will or a revocable trust, make sure that it’s up to date and reflects your current preferences and family circumstances.

2. Updated beneficiary designations. If you have an IRA, 401(k) account, or life insurance policy, those you name as beneficiaries of that account will receive the proceeds, despite a totally different arrangement in your will or trust. Many of us also don’t designate any beneficiary for these accounts, which means added complications in the event of death.
3. Healthcare power of attorney. When we’re in the midst of this Coronavirus, it’s even more urgent that you'll be able to get the healthcare you need, if you're hit with this illness. A durable power of attorney for healthcare will give the individuals you choose the ability to make whatever medical decisions you specify on your behalf. An estate planning attorney can help you draft documents that match your specific wishes.
4. Financial power of attorney. You can designate an agent to help take care of your finances, if you become incapacitated or otherwise unable to handle your financial affairs. A general durable power of attorney for financial matters is another document that lets you delegate responsibility and authority to make financial transactions to the person you name.

Estate planning may not be the highlight of your week, but the Coronavirus outbreak has more people thinking about what they need to do. Make sure your family will have what they need even if something happens to you.

Reference: Motley Fool (March 8, 2020) “The Coronavirus Should Have You Thinking About These 4 Things”

What Happens to My Debt When I Die? - John M. Lane Law, PLLC

“When we think about retirement planning, our focus often keys on the question of how to maintain a monthly paycheck after we stop working.”

A retirement plan isn’t set without some thought and planning on how to transfer any unspent assets to people we’d like to benefit after we die, and to whom we can entrust important financial and health care decisions in the event we’re unable to manage those affairs.

fosters.com explores this in a recent article, “What happens to your debt in estate planning?” The article reminds us that this is where estate planning is needed. An estate plan is a set of instructions that lets us designate certain individuals to act on our behalf after we die, or while we’re living but incapacitated, and provides guidance about how our assets should be distributed to beneficiaries at death, or managed for us while we are alive but unable to do so on our own.

Wills, trusts, and beneficiary forms set out our instructions as to who will receive any assets that we leave behind. Wills name an executor who is responsible for an accounting of all of our assets and liabilities at death. The executor also works with the probate court to get our creditors paid, and distribute the remaining funds to our heirs. Trusts are similar, but don’t involve oversight by the probate court. When a trust is set up to own assets during your lifetime, a successor trustee is named at your death or incapacity to manage the trust assets and then distribute them at the specified time to the named beneficiaries.

Wills and trusts don’t have any control over accounts that have a joint owner or beneficiary designation, unless the estate or trust has specifically been named as beneficiary. IRAs, 401(k)s, life insurance, annuity contracts, and brokerage and bank accounts can all be created with beneficiary designations that serve as the instructions to their custodians, regarding who is to receive them after death.

Durable power of attorney documents for both financial matters and health care are also important components of a retiree’s estate plan. Because IRAs, 401(k)s and other retirement accounts can’t be owned by a revocable trust, trustees can’t manage them for you. An agent designated in a durable power of attorney can take any actions you authorize on these sources of retirement cash flow. A durable power for health care will specify the individual you authorize to make care decisions for you and what your wishes are regarding life-sustaining treatments.

It is not unusual for those approaching retirement to either delay creating wills, trusts and power of attorney documents or not to have reviewed them for many years. Because laws and relationships change over time, it is important to review estate planning documents regularly and consult with an estate planning attorney when updates are needed.

What happens to the debt? With good planning, there hopefully is no debt. But if there is, beneficiaries generally do not have to pay the obligation, unless the debt was owned jointly with a spouse or a co-signer. Unsecured debts, like credit cards, however, do become liabilities of the estate and payment of these debts will be overseen by the probate court. The executor will need to pay them from any assets passing via the decedent’s will. An experienced estate planning attorney should work through these items with you and your heirs to take care of your affairs while you are living.

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: fosters.com (November 22, 2017) “What happens to your debt in estate planning?”

Should I Use a Trust? - John M. Lane Law, PLLC

“A proper estate plan is critical to ensuring that the success you’ve worked so hard to build over your lifetime, is passed on in a way that benefits your family and supports the values you want to leave behind when you’re gone.”

Planning for the transfer of wealth to younger generations is a challenging process for successful families. Many want to leave their children enough so they can do anything, but not so much that they can do nothing. What’s “enough” or “too much” is unique to each family.

BizWest ‘s recent article, “To Trustee or not to Trustee,” says that many families of wealth choose to leave some, or all, of their wealth to future generations in trusts. Trusts can be created in many ways and can specify exactly how and when the assets are to be passed to the beneficiaries. If you go with a trust, you’ll need to select a trustee. A trustee is a person, board, or corporation that you designate with the task of overseeing the administration of your trust after you pass away. They’re tasked with making decisions about distributions to your beneficiaries and ensuring they meet the directions defined in your trust. It can be a challenging job, so it is crucial to select the right trustee to carry out your wishes.

Opting for a family member or friend to serve as your trustee is common, because the relationship is personal, and they may be well-suited to understanding the needs of the beneficiaries. However, most individual trustees don’t have the experience, time, or financial or business background to manage the tax and administrative duties associated with a modern trust. It can also change the personal relationship between the individual trustee and the beneficiary.

If you go with a corporate trustee, like a bank, it can help you sidestep pitfalls often associated with an individual trustee. That’s because corporate trustees have expertise that individual trustees often don’t possess. A corporate trustee must also comply with internal audits and is scrutinized by both federal and state regulatory agencies. That ensures protection of the trust beneficiaries.

For some, using an individual trustee and a corporate trustee may be a good solution. Acting in concert, the individual trustee can bring the knowledge of the personal relationships, and the corporate trustee can apply the safeguards needed for making sound investment and administrative decisions.

Regardless of the direction you take, here are three thoughts which you should consider when evaluating which trustee is right for you and your family:

1. Trustees must be diplomatic. A trustee must work with beneficiaries of vastly different character and levels of sophistication including: children, grandchildren, friends, and other beneficiaries who all have different backgrounds, expectations and goals. An individual trustee must weigh the needs of the individual trust beneficiaries versus the terms of the trust. Itis critical for the trustee to recognize the differences between beneficiaries and administer the trust in a way that both supports their needs and satisfies the intent of the trust.
2. Siblings will always fight. One sibling may have a lifelong belief that “Mom always liked you best.” It’s important to explain to your trustee and your beneficiaries what will occur when you’re gone, before you’re actually gone. This can make a huge difference in preserving family harmony. It may seem uncomfortable, but it’s a gift to your family that’s far more valuable than money.
3. What you can expect. Working with a beneficiary who depends substantially on trust distributions for support can be a challenge for any trustee. A trustee has to be prepared to be the “bad guy”, when beneficiary behavior runs up against prudent trust administration. Someone has to be the one to say no.

As you think about what type of trustee to use, you still need to work with an experienced estate planning attorney, who will ensure that your trust is set up properly.

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: BizWest (November 27, 2017) “To Trustee or not to Trustee”

What about a Trust? Do I Need This? - John M. Lane Law, PLLC

“Do we need a trust? This is one of the most common questions people have when they start to discuss their estate planning needs.”

A trust is a legal vehicle for managing financial assets for the benefit of you and/or someone else. The property owner (the grantor or settler) transfers legal ownership to the trust, and a person or institution (the trustee) manages that property for the benefit of the beneficiary. It sounds pretty clear cut, but it can get complicated.

There are some misconceptions about trusts, which can lead to them being unused or misused. WMUR’s recent article, entitled “Money Matters: Five misconceptions about trusts,” provides several of these common misconceptions.

Trusts are used primarily to save on estate taxes. This depends on the type of trust and the size of the estate. A trust may impact estate taxes, but that’s determined by the tax law in effect at the time the grantor dies. The same is true of income taxes.

My estate is too small for a trust. Regardless of the estate size, trusts can be used to manage assets and control their distributions in a private way. This is because they aren’t public like probate court. A trust can contain provisions to manage your assets, if you become incapacitated and are no longer capable of doing so yourself.

Trusts limit your flexibility. This is not necessarily true. It is because a revocable trust can remain under your control as trust creator and be modified as you want in your lifetime.

You must designate a friend or relative as trustee. Perhaps. The trustee must manage and distribute trust assets according to the terms of the trust.  However, not everyone is up to the task of being a trustee. Designate a successor trustee, in case the primary trustee is unable or unwilling to serve.

A trust will protect you from creditors. Some trusts are specifically designed to protect a grantor from creditors, but not all of them do this. Asset protection can be very complicated and expensive.  Therefore, if you need to have these protections, work with an experienced estate planning attorney.

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: WMUR (September 14, 2017) “Money Matters: Five misconceptions about trusts”

Simple Estate Planning Tools - John M. Lane Law, PLLC

“The longevity of successful retirement cannot be overstated, thus the importance of building, preserving and protecting one’s assets during retirement.”

When we look at the steps taken in our investing lives, the basics are simple. As working investors in the initial stages, the priority is accumulation and growth. Therefore, we participate in retirement plans such as IRA’s, 401-k plans, etc.

As Marco Eagle’s article, “Money Talks: Estate planning tools” explains, the next phase is the retirement stage, when the focus shifts from accumulation to preservation and maintenance of the nest egg.

Growth is a component of any retirement plan, but protecting your purchasing power during retirement is critical. You also want to generate a predictable stream of income during retirement, in order to avoid compromising your lifestyle.

The final stage of successful retirement planning is often overlooked: that’s the estate planning phase or the strategy of a succession plan to pass assets to your family. There are many estate planning tools that can be used to execute an estate plan. You can create a personal trust. Under this arrangement, your assets are transferred into a trust during your lifetime and then transferred by the trust at death. It’s important from both a tax standpoint and an allocation standpoint, regarding who receives what and how much. This is what your estate plan does for you and your family.

Work with an experienced estate and trusts attorney to establish your estate plan, so you can achieve your final objectives when passing assets to the next generation. Some individuals like the ability to exercise control with an effective plan to pass assets to their beneficiaries, without the need of trusts or probate.

There are many types of insured annuity strategies that will pass assets immediately to the beneficiaries, without the need of probate. Avoiding probate is frequently part of a strategy to make the assets available, immediately after the death certificate is issued.

Some see the foundation of their estate planning as the incorporation of life insurance. This lets the beneficiaries inherit assets, generally tax free. Avoiding a taxable event upon death is also appealing, based on both taxes as well as overall portfolio values. Talk to a professional about your situation.

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: Marco Eagle (June 11, 2017) “Money Talks: Estate planning tools”

If it is So Important, Why Doesn't Everyone Make a Will? - John M. Lane Law, PLLC

“Understanding what happens to you when you die may help you understand the intricacies of your estate and make planning both simpler and more effective.”

No one likes to plan for his or her death, but it’ll happen to all of us, says The Reading Eagle Business Weekly in the article “Make a will, plan for distribution of assets.”

You can pass your wealth to anyone you want, but state and/or federal taxes may be due on these transfers. The rules are also complex, and if you die without a will, the state laws of intestacy may say who gets your wealth.

Most folks make the mistake of signing their wills and life insurance policies, then putting them in files and forgetting about them. These documents and your intentions will become out-of-date. It’s not uncommon for a decedent to have been divorced for five years when they die, but the ex-spouse still inherits all of his or her assets. Why? Because the ex’s name is still in the will or is listed as the beneficiary of the life insurance policy. This happens more frequently than you might think.

Probate?

Probate versus non-probate assets is one of the most misunderstood concepts in estate planning. Probate is the process that deals with proving a will's validity by filing it in court. The will names an executor who is responsible for fulfilling its terms. The estate assets are identified and valued, then given to the individuals named in the will.

There are also non-probate assets that are transferred by operation of law. They specifically include accounts with beneficiary designations like IRAs, 401(k)s, pensions, retirement accounts, life insurance, annuities and transfer-on-death accounts. These non-probate assets supersede what’s written in the will. The beneficiary designations control them.

Do you have a will? When was the last time you reviewed it?

You should hire an experienced estate planning attorney to help structure an estate plan for both your will and beneficiary designations to allow for the efficient transfer of your assets.

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: Reading (PA) Eagle Business Weekly (January 17, 2017) “Make a will, plan for distribution of assets.”

It’s Not Fair! Will Contests Are Costly and Stressful - John M. Lane Law, PLLC

“In most will contest situations, the issue is whether or not the person who executed the will had the legal capacity to do so.”

Say that after an extended illness, the older of two brothers passes away.

When he died, he was divorced, although he had been married three times. This older brother had two adult children at the time of his death, but had nothing to do with them. He always told his younger brother that when he died, the younger sibling would inherit the entire estate.

However, when the older brother died, his attorney said the majority of his estate would go to his two children and his first wife. The younger brother received 15% of the estate.

But since he was the one who helped his brother through his final illness, shouldn’t he get more?

The hometownlife.com article, “Contesting a will usually a no-win proposition,” says that while it may be unfair how the brother chose to divide his estate, it’s not an issue of fairness, but rather, it’s an issue of law.

Here are some examples of common issues in will contests:

Intimidation: if a beneficiary pressured the individual making his or her will and he or she wasn’t of clear mind when he or she made the will, it could create an issue and the will could be overturned.

Medication: if a person was heavily medicated when writing his or her will.

Capacity: if a person’s state of mind could be challenged, a will could be overturned.

In the earlier example of the two brothers, none of these issues other than questioning the will creator’s mental capacity were present.

Just because someone tells you that you’re going to inherit their estate when they die, doesn’t mean they are legally obligated to do so.

Contesting wills isn’t easy, can be very expensive and take a great toll on a family. However, there still may be circumstances when a will contest is the right thing to do. Before making a final decision, speak with an estate planning attorney who specializes in this area to get their opinion. If you decide to go forward, you’ll want a lawyer who is familiar with litigation procedures.

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: hometownlife.com (January 15, 2017) “Contesting a will usually a no-win proposition”

Here’s How to Get Your Affairs in Order - John M. Lane Law, PLLC

“Organizing your key information and getting your personal and financial affairs in order is a great gift to your loved ones.”

It’s a great idea to get your personal and financial affairs in order, so your children will know where things are, both physically and financially, in the event you or your spouse become ill or pass away suddenly.

The Daily Record’s recent article, “How to organize your affairs if you are a senior citizen,” says the first step is to collect your important personal, financial, and legal information so you can arrange it in a way that will benefit you now and your family in the future.  The next step is to create sets of important information and instructions concerning how you want certain things handled when you pass away or if you become incapacitated.

Here are some of the personal, legal, and financial items to consider:

Personal Information

• Make a list of contact information for close friends, clergy, doctors, and advisers such as your estate planning lawyer, accountant, and insurance agent.
• Make a list of medications that you and your spouse take and any allergies and illnesses.
• Include birth certificates, Social Security cards, marriage licenses, military discharge papers and other important papers.
• List the locations that are locked or password protected, like safe deposit boxes, safe combinations, and security alarms.
• List the companies or people who provide services such as: phone, cable, electricity, etc.
• Write down specific instructions for the care of pets.
• Detail your wishes for organ and tissue donation, along with funeral instructions. If you have a pre-paid contract for the services of a funeral home, include a copy of the agreement.

Legal Documents

• Include all of your estate planning documents, such as your will and any trusts.
• A copy of your financial power of attorney that names a trusted agent to handle money matters, if you’re incapacitated.
• A copy of your advance health care directives, including a living will and medical power of attorney, which detail your wishes for end-of-life medical treatment or when you are unable to communicate health decisions for yourself.

Financial Records

• Create a list of your accounts, brokerage and mutual fund accounts, and other financial assets.
• Make a list of loans, leases, or debts, like a mortgage, car loan, student loan, medical bills or credit card balances. Add to this list, all credit and charge cards with the card numbers and contact information.
• Note any retirement plans, pensions, or health benefits from your current or former employer with the contact information for the benefits administrator or HR Department.
• List insurance policies: life, long-term care, home, auto, Medicare, Medigap and prescription drug insurance policies with policy numbers and pertinent phone numbers.
• List real estate, vehicles, and other properties you own, rent or lease and include the deeds, titles and loan or lease agreements.
• Detail the location of your tax records and your tax preparer’s contact information.

Now that you have all of this, keep it organized in a fireproof box or a home safe, and review this information and keep it up-to-date. And don’t forget to let your family know where to find it.

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: The Norman (OK) Daily Record (January 2, 2017) “How to organize your affairs if you are a senior citizen”

Create an Estate Plan without the Potential for Family Fighting - John M. Lane Law, PLLC

“Family relationships are greatly strained when inheritance passes from one generation to the next.”

It’s not uncommon for parents to be mediators between their children. But after they pass away, siblings can battle more frequently and more aggressively. The challenges of maintaining family relationships are that much greater when money is involved. Added stress is present when blended families can’t trust one another and don’t get along.

Motley Fool’s article, “Avoid family fights over inheritance,” says you might be surprised at the amount of money that can cause arguments. It doesn’t have to be a fortune—deep-seated feelings of rivalry and jealously are, in many instances, at the root of the problem. With that in mind, let’s look at four ideas to consider in an attempt to avoid a battle royal over your assets:

1. Irrevocable Trusts. When the parents are both alive, they can consider a trust. Irrevocable trusts can’t be modified by the children or even the surviving spouse. They will protect the aging parents from themselves. They also can let the children know that other beneficiaries can’t inflict undue influence.
2. Preplanning. Don’t force family members to make financial decisions during a family crisis. Consult with an estate planning attorney to talk about how to best address your specific situation.
3. Hire a Corporate Trustee. This can alleviate the scenario of children being pitted against one another. A trustee can be appointed to be responsible for administration. If you name one family member as a trustee for the other family member, it places the family in a precarious situation if there’s a disagreement about how the trustee is managing the trust. A corporate trustee can manage investment accounts, businesses, farms, and real estate. The costs of a trust company might be a small price to pay for keeping peace in the family.
4. Have a Family Conference. The family should meet, especially if the parents decide that “fair doesn’t mean equal.” It’s hard to explain how and why an estate will be distributed in a will or a trust. A face-to-face discussion is the best way to address any issues. A family meeting to talk about estate planning, with an experienced estate planning attorney to lead the process, can help keep peace in the 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: Motley Fool (November 7, 2016) “Avoid family fights over inheritance”