All too often, estate planning is viewed as a transaction: a will, a living trust, powers of attorney, etc. But the best planning happens when the professional can get to know the client on a deeper level, to uncover hopes, dreams and aspirations. It becomes more about family and values, and it becomes a process instead of a transaction.

This process begins with having a plan for our lives. There is a certain power in planning. When plans are carefully thought through and written out, they tend to come true. A plan can also serve as a guide, helping to align our deepest values, beliefs and goals with our financial resources so we can realize our dreams. Having a plan allows us to live richer, fuller lives–personally, professionally, financially and spiritually.

How to Formulate A Life Plan
1. Think broadly and deeply about what matters most to you. If you had all the money you needed, what would you do with it? If you had only five or ten years to live, how would you live them? If you learned you have 24 hours left to live, what did you miss?

2. Take this vision, sweep away any doubts, and craft your ideal life in as much detail as possible. This can energize you to achieve your vision in the shortest time possible. Goals are no longer something to be hoped for ‘some day,’ but can become immediate and vibrant.

3. A thoughtful professional can help you identify obstacles and roadblocks that may be keeping you from achieving your vision. These are sometimes financial, but more often they are internal beliefs.

4. An experienced professional can then recommend the best ways to achieve your goals. Quite often, this professional will put together a team of professionals from different disciplines to make sure all of the needs are being met. The team may include an estate planning attorney, a financial advisor, an insurance advisor, a CPA, a retirement plan advisor, even a planned giving expert.

The right professional for this approach in planning will ask open-ended questions and listen carefully to the answers. The client, on the other hand, will need to be open, honest and willing to make an emotional connection, with both the professional and with him/herself. The two will be building a mutual trust and relationship, one that can last for many years, possibly even into the next generation.

The result of this type of planning is far more rewarding than any transaction.

Estate planning is creating a set of instructions that specify how property is handled after death, and how property and health care decisions are handled during a period of incapacity. Proper estate planning is important for everyone. But for unmarried partners–opposite sex or same sex–it is critical. Part One of this two-part article will address some issues for unmarried partners to consider for after-death estate planning.

Avoid the State Default Plan
In a way, everyone has an estate plan. For those who haven’t created one, the state has a default plan. Assets will probably go through a court process called intestate (no Will) probate. And a state’s default plan is probably not what most people want. State laws vary, but generally, they direct assets to the closest family members. How a state determines who are the ‘closest’ family members often is complicated for non-nuclear families. But one thing is certain: A nonfamily member, like an unmarried partner, will not receive any of your assets.

A Will Does Not Avoid Probate
A Will is a legal instrument that lists the person’s property (assets) and who should receive them after his/her death (heirs). The assets a Will controls will have to go through probate before they can be fully distributed to the heirs. During probate, a Will becomes a searchable public record. Probate proceedings vary from state to state, but many people view the time, cost, loss of privacy, and loss of control that come with probate as unnecessary evils that should be avoided. The process also invites family members to contest the Will. A nonfamily member, like an unmarried partner, may not receive the assets you leave to him or her in your Will.

How Joint Ownership and Beneficiary Designations Work
Even with a Will in place, all of the assets may not go through probate. Assets with a valid beneficiary designation pass outside probate to the named beneficiaries, and property owned jointly with right of survivorship will automatically transfer to the survivor. But if a beneficiary or joint owner is incapacitated when the owner dies, the court will get involved to protect the beneficiary’s interests. If a beneficiary or joint owner has died before or simultaneously with the owner, or the designation or title is otherwise invalid, those assets will have to go through probate and will be distributed according to the Will or, absent one, under the default state law.

Often, unmarried partners will put both names on a title (especially a home) to ensure the asset will pass to the surviving partner upon the death of the first. But this can create problems.
o jointly owned assets are exposed to the joint owner’s possible misuse of them.
o jointly owned assets are exposed to the joint owner’s creditors.
o jointly owned assets can trigger gift tax issues and income tax issues.
o removing a joint owner can be difficult.
o leaving a jointly owned asset to anyone other than the joint owner can be complicated.
o joint ownership does not provide any asset protection to your joint owner after you die.

Joint ownership and beneficiary designations can avoid probate, but often cause unintended consequences–both for you and for your unmarried partner.

How a Revocable Living Trust Works
A far better way to avoid probate is to establish and fully fund a Revocable Living Trust. This document lets you specify how you want your assets handled during your lifetime and after your death. You can be your own trustee and keep full control while you are living. You name a successor trustee, someone you know and trust, to uphold your instructions at your death or incapacity. The beneficiaries you name will receive distributions from the trust. Trusts are carefully structured to minimize tax exposure. Assets that remain in the trust are protected from creditors and predators–yours and your beneficiaries.’

With a Revocable Living Trust, you can avoid the pitfalls of Wills, joint ownership and beneficiary designations:
o avoid the time, cost, loss of privacy, and loss of control of probate;
o avoid uncertainty and unintended consequences; and
o if you and your partner separate, you can simply change your trust without retitling or dividing assets.

A Revocable Living Trust gives you maximum control over your assets, and gives your unmarried partner maximum protection after your death.

Ensure Your Wishes Are Met after Your Death
Unmarried partners do not have the same protections and benefits under the law that married partners have. An estate planning attorney who has experience working with unmarried partners can help you navigate the issues and make sure your after-death plan will work the way you want it to work when it is needed.

Next time, we’ll look at special considerations for unmarried partners in planning for incapacity.

Most parents choose to leave their estates equally to their children. But sometimes, parents intentionally choose to not leave anything to a child. There may be what the parents consider to be a legitimate reason: one child has been more financially successful than the others; not wanting a special needs child to lose government benefits; or not wanting to leave an inheritance to an irresponsible or drug-dependent child. Sometimes a parent wants to disinherit a child who is estranged from the family, or to use disinheritance as a way to get even and have the last word.

Regardless of the reason, disinheriting a child is hurtful, permanent, and will affect that child’s relationship with his or her siblings. The courts are full of siblings who sue each other over inheritances but even if they don’t sue, it is highly unlikely they will be having family dinners together. Money aside, there is symbolic meaning to receiving something from a parent’s estate.

Disinheriting a child may be short-sighted and even completely unnecessary. For example:
* A child who appears to be more successful financially may have trouble behind the scenes. The inheritance may be needed now or in the future: finances can change, marriages can collapse, and people can become ill. And unless specific provision is made for them, grandchildren from this child will also be disinherited.
* A spouse, child, sibling, parent or other loved one who is physically, mentally or developmentally disabled–from birth, illness, injury or even substance abuse–may be entitled to government benefits now or in the future. Most of these benefits are available only to those with very minimal assets and income. But you do not have to disinherit this person. A special needs trust can be carefully designed to supplement and not jeopardize benefits provided by local, state, federal or private agencies.
* A child who is irresponsible with money or is under the influence of drugs or alcohol may not be the ideal candidate to receive an inheritance of any size. But this child may need financial help now or in the future, and may even become a responsible adult. Instead of disinheriting the child, establish a trust and give the trustee discretion in providing or withholding financial assistance; you can stipulate any requirements you want the child to meet.

How we choose to include our children in our estate plans says a good deal about our values and faith. Not disinheriting a child who has caused grief and heartache can convey a message of love and forgiveness, while disinheriting a child, even for what seems to be good cause, can convey a lack of love, anger and resentment.

If you have previously disinherited a child and you have since reconciled, update your plan immediately. If your decision to disinherit a child is final, your attorney will know the best way to handle it. Consider telling your child that you are disinheriting him or her so it doesn’t come as a complete surprise. Explaining your reasons will allow for honest discussion, may help deter the child from blaming siblings later and may prevent a costly court battle.

March 31, 2012 marked the seventh anniversary of the death of Terri Schiavo, the 41-year-old who succumbed after her feeding tube was removed as part of a very public legal battle between her husband and parents.

As you may recall, Terri Schiavo was in a coma for nearly 15 years after she suffered cardiac arrest and sustained a brain injury. Her husband, Michael Schiavo, alleged that his wife would not want to live in her incapacitated state; she had no written instructions in place.

Her parents, on the other hand, suspected that Michael had something to do with Terri’s collapse and argued that she valued life and would have chosen to be sustained. As you also recall, the Florida Legislature, then-Gov. Jeb Bush, and then Congress and President George W. Bush all intervened in this legal battle. While no one will ever know Terri’s desires, we can safely assume that she would not have wanted the acrimony that her condition created between her husband and parents.

The Terri Schiavo story highlights the critical need for clear instructions as to health care when the patient is unable to make those decisions for him or herself. A recent New York Times Editorial highlights a 2006 Pew Research Center poll , wherein only ’22 percent [of respondents] said a doctor should always try to save a patient’s life, while 70 percent believed that patients should sometimes be allowed to die. More than half said they would tell their doctor to end treatment if they were in great pain with no hope of improvement.’

Notwithstanding these numbers, surprisingly ‘only 69 percent had discussed end-of-life care with a spouse; just 17 percent, or 40 percent of those over 65, had done so with their children.’ Furthermore, only ‘one-third of Americans had a living will and even fewer have taken the more legally enforceable measure of appointing a health care proxy to act on their behalf if they cannot act for themselves.’

These statistics are particularly disturbing given that in less than 20 years there will be more than 8.5 million Americans over 85 — and roughly half will suffer from Alzheimer’s disease or some other form of dementia. (The full New York Times Editorial is available online at http://www.nytimes.com/2012/03/31/opinion/taking-responsibility-for-death.html#.)

Given that we are all likely to suffer from some form of disability during our lifetimes it is critical that we think through these issues carefully and that we prepare the legal documents necessary to effectuate our desires – so that our desires will be carried out even if we are unable to express them ourselves. This is one area where the help of counsel who focuses on these issues is especially critical.

How to Leave Assets to Minor Children

Every parent wants to make sure their children are provided for in the event something happens to them while the children are still minors. Grandparents, aunts, uncles and other relatives often want to leave some of their assets to young children, too. But good intentions and poor planning often have unintended results.

For example, many parents think if they name a guardian for their minor children in their wills and something happens to them, the named person will automatically be able to use the inheritance to take care of the children. But that’s not what happens. When the will is probated, the court will appoint a guardian to raise the child; usually this is the person named by the parents. But the court, not the guardian, will control the inheritance until the child reaches legal age (18 or 21). At that time, the child will receive the entire inheritance. Most parents would prefer that their children inherit at a later age, but with a simple will, you have no choice; once the child reaches the age of majority, the court must distribute the entire inheritance in one lump sum.

A court guardianship for a minor child is very similar to one for an incompetent adult. Things move slowly and can become very expensive. Every expense must be documented, audited and approved by the court, and an attorney will need to represent the child. All of these expenses are paid from the inheritance, and because the court must do its best to treat everyone equally under the law, it is difficult to make exceptions for each child’s unique needs.

Quite often children inherit money, real estate, stocks, CDs and other investments from grandparents and other relatives. If the child is still a minor when this person dies, the court will usually get involved, especially if the inheritance is significant. That’s because minor children can be on a title, but they cannot conduct business in their own names. So as soon as the owner’s signature is required to sell, refinance or transact other business, the court will have to get involved to protect the child’s interests.

Sometimes a custodial account is established for a minor child under the Uniform Transfer to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). These are usually established through a bank and a custodian is named to manage the funds. But if the amount is significant (say, $10,000 or more), court approval may be required. In any event, the child will still receive the full amount at legal age.

A better option is to set up a children’s trust in a will. This would let you name someone to manage the inheritance instead of the court. You can also decide when the children will inherit. But the trust cannot be funded until the will has been probated, and that can take precious time and could reduce the assets. If you become incapacitated, this trust does not go into effect…because your will cannot go into effect until after you die.

Another option is a revocable living trust, the preferred option for many parents and grandparents. The person(s) you select, not the court, will be able to manage the inheritance for your minor children or grandchildren until they reach the age(s) you want them to inherit—even if you become incapacitated. Each child’s needs and circumstances can be accommodated, just as you would do. And assets that remain in the trust are protected from the courts, irresponsible spending and creditors (even divorce proceedings).

8 Estate Planning Things to Do Before You Travel

Before any trip, most of us create a “to-do list” of things we have put off and want to take care of before we leave. Here is a checklist of estate planning things to do before you take your next trip. Taking care of these will help you travel with peace of mind, knowing that if you don’t return due to serious illness or death, you have made things much easier for those you love.

1. Have your estate planning done. If you have been procrastinating about your estate planning, use your next trip as your deadline to finally get this done. Be sure to allow adequate time to get your estate plan completed in advance of your trip.

2. Review and update your existing estate plan. Revisions should be made any time there are changes in family (birth, death, marriage, divorce, remarriage), finances, tax laws, or if a trustee or executor can no longer serve. Again, be sure to allow enough time to have the changes made.

3. Review titles and beneficiary designations. If you have a living trust and did not finish changing titles and/or beneficiary designations, now is the time to do so. If a beneficiary has died or if you are divorced, change these immediately. If a beneficiary is incapacitated or a minor, set up a trust for this person and name the trust as beneficiary to prevent the court from taking control of the proceeds.

4. Review your plan for minor children. If you haven’t named a guardian who is able and willing to serve and something happens to you, the court will decide who will raise your kids without your input. If you have named a guardian, consider if this person is still the best choice. Name a back-up in case your first choice cannot serve. Select someone responsible to manage the inheritance.

5. Secure or review incapacity documents. Everyone over the age of 18 needs to have these: 1) Durable Power of Attorney for Heath Care, which gives another person legal authority to make health care decisions (including life and death decisions) for you if you are unable to make them for yourself; and 2) HIPPA Authorizations, which give written consent for doctors to discuss your medical situation with others, including family members.

6. Review your insurance. Check the amount of your life insurance coverage and see if it still meets your family’s needs. Consider getting long-term care insurance to help pay for the costs of long-term care (and preserve your assets for your family) in the event you and/or your spouse should need it due to illness or injury.

7. Organize your accounts and documents. It used to be that we could just point to a file cabinet and say everything was “in there.” But now so much is done online that there may not even be a paper trail. Make a list of ALL of your accounts, where they are located, and the user names and passwords, then review and update it before each trip. Print a hard copy in case your computer is stolen or crashes and let someone you trust know where to find it. Clean up your computer desktop and put your financial and other important files where they can be easily found. Make a back-up copy in case your computer is stolen or crashes, and let someone know where to find it. Be sure to include on your master list any passwords that might be needed to access your computer and files.

8. Talk to your children about your plan. You don’t have to show them financial statements, but you can discuss in general terms what you are planning and why, especially when any changes are made. The more they understand your plan, the more likely they are to accept it—and that will help to avoid discord after you are gone.