Estate Planning

Estate Planning: A Tale of Two Celebrities

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Prince, the iconic American musical artist, died in 2016 and inexplicably left no last will & testament. This is despite having an enormous estate which is reportedly in the neighborhood of $300 million. Suffice it to say an epic legal/probate mess quickly ensued and Prince’s estate will most likely not be wrapped up anytime soon. Click here for an online article from Money for all of the gory probate details.

Another celebrity from my boyhood days in the 1980’s, Luke Perry, died unexpectedly from a stroke on March 4th. Despite his relatively young age of 52, it looks like he actually had a solid estate plan in place. Not only will this make it more likely that his estate (estimated at around $10 million) will be distributed and wound up in an orderly manner, but his advance medical directives presumably made the difficult situation at the hospital go much smoother than it may have otherwise. Click here for an online article from Forbes for the details.

Well, reading about such famous people from my childhood passing away makes me feel old. On the upside, this comparison of how two well-known celebrities planned ahead (or didn’t) provides us with a good illustration of why estate planning is so important, whether you’re famous or not.

3 Reasons to Get a Will if You Have Minor Children

If you have young kids, it’s possible that you don’t have a huge estate yet, so there may be no sense of urgency to sign a last will & testament. Why do any estate planning if there’s no estate to plan for, right?

Well, there are at least three big reasons to get a last will & testament in place.

The first reason, which most parents are at least vaguely aware of, is to appoint guardians. It’s not fun to think about, but if you suddenly disappear and you have a minor child then you will need someone to take over to make personal, medical and educational decisions for your child. Your appointment of guardian is made in your will. If there is no will, then it’s up the court to appoint someone as guardian. In some families, the choice is relatively obvious. But in many families, it’s not. And in some families it’s clear that World War III is going to break out over who will become guardian if there are no legal instructions in place. Don’t leave this potential landmine behind for your child and family. They will be going through enough turmoil as it is.

Secondly, you will probably want someone to manage your child’s inheritance for her if she is over the age of majority but still relatively young when you pass away. For most clients, the age range for this is 18 to 25. In other words, a child over the age of 18 (in Connecticut) is legally competent to manage her own inheritance, but she may not be actually competent to do so if she is under 25. Most folks under 25 don’t have a lot of investment experience and could potentially be easy prey to scam artists. If you’re shrugging this off because you don’t think your estate is very big then think again, particularly if you have life insurance. It seems like nearly all of my clients end up underestimating the size of their estate by a good amount.

Third, and perhaps most importantly, you’ll simply feel like a responsible and diligent parent. I’m certainly not trying to lay a guilt-trip on anyone who hasn’t attended to this yet. As a father of three young boys myself, I know first-hand how crazy the schedule can be with young kids. But yearning for some peace-of-mind seems to be what drives most of my clients with minor kids to come in and get their wills done.

DISCLAIMER: This blog does not offer legal advice, nor does it create an attorney-client relationship.  If you need legal advice, consult with a lawyer instead of a blog.

"Dignity of Life" Seminar on April 3rd

Attorney Keenan will participate in a panel discussion at St. Paul’s Church in Glastonbury, CT on planning for the end of life. Attorney Keenan will discuss essential estate planning steps. The discussion is presented by the Catholic Cemeteries Association of the Archdiocese of Hartford, Inc. Call 203-507-6952 for details and to register.

There will be two presentations at 2pm and 6pm. It should last about one hour. Light refreshments will be served.

"Digital Assets" and Estate Planning

For most of us, both financial and social online accounts have played a rather significant role in our day-to-day lives for many years. However, it’s rare that clients consider them when designing their estate plan. Leaving some detailed information and directions for your Executor regarding your “digital assets” should be an agenda item for your estate planning.

Consider maintaining a list (either paper or a computer spreadsheet) which includes all of your usernames and passwords for your online accounts. This would include email (including any encryption information), bank and brokerage accounts, retirement accounts, photograph/video/data storage sites (e.g. Google Drive, Microsoft OneDrive), social networking sites (e.g. Facebook, Instagram, Twitter), business-oriented social media sites (LikedIn), blogs, your own personal website or business website, streaming services (e.g. Netflix, Amazon Prime, ESPN+), online data backup services (Carbonite), online document & spreadsheet processing accounts (Google Docs), tax preparation accounts (Turbo Tax), credit card accounts and accounts for paying your household utilities.

Some of these accounts will help your Executor figure out where your assets are and what outstanding bills need to be paid. There may also be some automatic payments scheduled from online bank accounts that will need to be shut off. You could also leave instructions about which social media sites to shut down and whether you want one or more of these sites to share information with your online social community about your demise. Some of these sites (a personal blog or an online photography account, in particular) may contain information that you want your Executor to download and pass on to children or grandchildren for sentimental reasons.

You should also put together a list of all your devices, such as your desktop computers, laptop computers, tablets and smart phones. Those devices may hold additional data on their hard drives (information that you do not keep online or in “the cloud”) that could further help your Executor wind up your financial affairs.

Keeping these lists updated is important since some of this information, particularly passwords, change relatively frequently. Perhaps you could make updating these lists part of your annual routine, maybe at the same time that you do your tax reporting each year.

I can tell you from 21+ years of probate experience that an Executor’s job is not easy. That’s probably the understatement of the day. But easy access to comprehensive information about your digital assets will make the probate process, as well as addressing all of the non-probate details, much easier.

DISCLAIMER: This blog does not offer legal advice, nor does it create an attorney-client relationship.  If you need legal advice, consult with a lawyer instead of a blog.

Estate Planning for Problematic Children

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It's unfortunate, but clients who meet with me to do their estate planning will sometimes mention that one or more of their children is "problematic" for one reason or another.  

And although the clients want to leave something to that child, there's a concern that their hard-earned money will be "wasted" once the child receives his inheritance.

The best approach in such a situation is usually to have that child's inheritance go into what is commonly called a "spendthrift" trust.  I prefer the term "protection" trust just because it sounds kinder.  

In any case, using such a trust as a component of your estate planning is generally a wise approach when a child (or any beneficiary who is not a child) is in one or more of the following cicumstances:

  • The child is irresponsible with money management, does not have a history of saving and investing, and there is a concern that your hard-earned estate will be wasted;
  • The child has a history of creditor problems, actually has current creditor problems, or you are reasonably certain that creditor issues will arise in the future based on the child's behavior;
  • The child is in an unstable marriage where a divorce is more than likely, in which case the trust can prevent the estate from becoming part of a divorce settlement process;
  • The child is addicted to drugs, alcohol or gambling;
  • The child has a history of being influenced by an overbearing spouse in regards to money management;
  • The child joins an unorthodox religious group (a.k.a. "cult") or some similar organization and you do not want some/all of your estate to ultimately be donated to such a group;
  • The child would be prone to "financial predators" and scam artists.

Please note that this is not always the best approach, but those of you with unstable children should discuss this issue with your estate planning attorney.  Otherwise, your child's inheritance may tragically disappear...and perhaps make your child's problem worse.

DISCLAIMER: This blog does not offer legal advice, nor does it create an attorney-client relationship.  If you need legal advice, consult with a lawyer instead of a blog.

Save Your Health Care Document on Your Smart Phone

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This is one of the better "document maintenance" tips I've come across: Keep a copy of your health care instructions (a.k.a. advanced medical directives, health care proxy) on your smart phone and have your health care agent do the same.

The health care document (a standard item in the estate planning "package") is what I would call an "emergency document" meaning that there may be a sudden and immediate need to use the document at any given time. However, it's hard to have your original health care instructions on-hand at all times. That's why having a PDF of the document on your smart phone can come in handy!

I can't quote a particular study, but I can state with confidence that a steadily growing number of my clients (of ALL ages, by the way) carry smartphones with them just about everywhere they go. This means that they have the ability to carry a copy of their advanced medical directives with them everywhere they go.

Please note that it's always better to have an original health care document on-hand.  That's because many doctors and hospitals get nervous when relying on something other than an original document. But it's certainly better to have a PDF of the document on your phone than nothing at all. 

Of course, explaining how to get your health care instructions document onto your smart phone is beyond the scope of this post.  Click here for iPhones, and here for Android.    

DISCLAIMER: This blog does not offer legal advice, nor does it create an attorney-client relationship.  If you need legal advice, consult with a lawyer instead of a blog.

The Ever-Evolving Last Will & Testament

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Many of my clients tend to procrastinate when it comes to finalizing their estate planning documents. They struggle over who to appoint as guardians for the kids, or who should be the "back up" executor if the surviving spouse can't act, or who's going to end up with the tool collection.  Sometimes these questions can be tough ones and people "freeze up" and stress out over whether or not they're making the right decision.

As the estate planner I'm always concerned that the infamous bus is going to run my clients over while the drafts of the wills sit on my desk, unsigned.  So I try to gently nudge my clients along towards finalizing everything. 

One factor that I try to impress upon my clients is the fact that their wills are not set in stone; that they should conceptualize their wills as "evolving documents". In other words, as developments occur in the family (if people pass away, someone becomes disabled, someone gets divorced, there's a "falling out", etc.) it is very easy to tweak the documents in order to address the new family situation.

I also emphasize that, thanks to computers, tweaking the documents is very easy and very inexpensive, assuming that the changes are not overly-complicated.  I always keep the documents on my computer, so re-printing the documents with small changes and a new date and re-signing everything is awfully easy. And there is nothing exotic about my law practice; this is the case with just about any law practice out there. 

So, don't stress out about it too much when you set up your will and other documents.  Make the best decision you can given the current circumstances and facts.  Then schedule a signing date with your attorney knowing that you can easily change things later if you need to. 

And remember that once your documents are signed you will experience a wonderful, liberating "peace-of-mind", and that's what estate planning is all about.

DISCLAIMER: This blog does not offer legal advice, nor does it create an attorney-client relationship.  If you need legal advice, consult with a lawyer instead of a blog.

Tips on Where to Keep Your Will

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This is one of those standard questions that nearly every client asks me after their will or living trust is finally executed, and it is a vitally important question.  I have more than enough stories about the angst and chaos that has ensued when families cannot locate the original will after a loved one passes.

First thing's first: I'm not a fan of keeping your will in a safe deposit box at a bank even though most clients assume that is the best place.  Unless you have someone else's name on the list as a signatory, it is very difficult (albeit not impossible) for someone else to gain access to the box.  Also, even if the family knows that you have a safe deposit box, it is sometimes difficult for the family to determine which bank and at which branch the box is located.  Those tiny, little keys don't really tell you anything, other than the fact that it opens a safe deposit box somewhere.

What I usually tell clients is that they should keep their wills wherever they keep their other important documents. That location is different for every client, but if the family knows that all of the important stuff is in your file cabinet, or a strong box, or your bottom dresser drawer, or the freezer (I did have one client who argued that that was the most fireproof place in his house) then it shouldn't be a problem for your loved ones to find your will upon your passing. 

Ideally, having your will in a strong box at home (with your other important documents) is the best arrangement since such boxes are usually fireproof.  But don't panic if you don't have one since the chances of a fire that completely destroys your house and everything in it are quite slim. You should also keep the box unlocked for ease of access. Trust me...a third party will have no interest in stealing your will since it has no value on the open market.

However, if you have one of those families in which good chemistry is somewhat lacking, and there are some family members who may be motivated to destroy your will, then you may have to be a little more secretive.  In fact, the safe deposit box at the bank with a trusted person as a co-owner would probably be the best way to go in that type of situation.

DISCLAIMER: This blog does not offer legal advice, nor does it create an attorney-client relationship.  If you need legal advice, consult with a lawyer instead of a blog.

What Living Trusts CANNOT Do

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Revocable living trusts are often a very useful tool when it comes to estate planning, and most of my clients opt to set one up. This is particularly true if minimizing probate involvement upon your death is a major planning goal. However, I find that many clients grossly overestimate what can be accomplished with their trust documents.

Here are the most common myths I've run across in regards to living trusts:

"I will avoid probate if I have a living trust."

This is the most popular myth about living trusts. If you take the necessary steps and fully fund your living trust then you will certainly minimize the necessary probate court procedure. However, at least in Connecticut, even if you do everything perfectly and keep all of your assets out of probate, there are still at least a few documents that you will need to file with the local probate court, the most prominent of which is the estate tax return.

"A living trust will protect my assets if I end up in a nursing home."

This would be fantastic if it were true, but it's not. Assets in a typical living trust are not protected from the nursing home or any other creditor. There are other types of trusts that could be used, but they are typically income-only, irrevocable, someone other than yourself needs to be the beneficiary, and you still have the 5-year look-back to worry about. That is a level of trust planning that goes well beyond revocable living trusts.

"A living trust will allow me to avoid estate tax."

A living trust definitely can include special estate tax planning provisions. But you can accomplish the same type of tax planning in a last will & testament. Please note that the current estate tax exemption in Connecticut is $2 million. 

"A living trust will allow me to avoid probate court fees."

This makes absolute sense. If you use your living trust and take other measures to keep all of your assets out of probate when you die, then there would be no probate court fees, right? Unfortunately, that's not correct. Even if absolutely no assets go through probate, the court will still charge a fee based on the overall size of your estate, and that calculation includes  all of your non-probate assets. So it's referred to as a "court fee", but it operates more like a tax. This is how the Connecticut probate court system is funded. 

"I don't need a last will & testament if I have a living trust."

It's true that you don't technically need a will if you have a living trust. "Need" is a strong word. But it's highly advisable to have a will to accompany your living trust. The purpose of the will is to take any assets that end up accidentally going through probate (despite your best planning efforts) and transfer them over into your living trust. Unfortunately, those assets will have to go through a probate process before going into your trust, which was what the living trust was designed to avoid in the first place. So make sure that you do the appropriate planning to keep everything in the "non-probate" category at all times. 

DISCLAIMER: This blog does not offer legal advice, nor does it create an attorney-client relationship.  If you need legal advice, consult with a lawyer instead of a blog.