Estate Planning Potholes
Michigan roads are notorious for being rough, unsteady and full of potholes. Sooner or later, your car may hit one that you didn’t see coming, costing you precious time and money. However, potholes are avoidable if you know where they are. The same is true with estate planning.
This article will focus on pointing out some common estate planning “potholes” to avoid while you still can. Many of these suggestions are simply a matter of due diligence - updating your information and making sure your Foster Swift estate planning attorney is aware of changes in your life.
An easy problem to avoid is designating beneficiaries or transfer on death designations that are in conflict with your estate planning objectives or that do not take into consideration income tax consequences. Keeping your beneficiary designations up to date and current is vital to the success of your estate plan. Many of your assets, such as life insurance, annuities, IRAs and tax-deferred benefits, will pass by this method. In addition, the non-probate transfer laws of many states provide for “pay on death” or “transfer on death” designations. Consequently, you may designate beneficiaries for bank accounts, CDs, stocks and other assets.
While all of this is great news, remember to heed the advice of your estate planning attorney when designating a beneficiary. Why? Because an inconsistent designation could possibly conflict with the distribution plan you created in your will or trust. If this happens, any asset protection or tax planning built into your legal documents might also be short-circuited.
Joint Ownership of your Bank Accounts
Adding a child as joint owner on your bank accounts as a “convenience” is a common temptation which should be resisted as it can backfire with unintended consequences. These assets may unintentionally become subject to divorce, lawsuit and bankruptcy proceedings simply by adding someone's name. The more joint tenants you add, the greater your risk is. Also in the event of your passing, the assets held in joint tenancy will pass directly to the surviving joint owner (or owners) and potentially disrupt the plans you had for the distribution of your assets under your will or trust.
Considering Special Needs
Failing to adequately plan for individuals with special needs or disabilities can be a huge oversight. It is a mistake to leave an outright inheritance to a loved one with special needs or a disability. The inheritance itself could negatively impact the current or future eligibility of that loved one from receiving public assistance benefits to which they are entitled. And, if they do receive public assistance, then the inheritance may be required to reimburse the state instead of passing to your other family members. This is not a do-it-yourself project. Your estate planning attorney can help create a special needs trust or supplemental needs trust to “own” the inheritance in a trust rather than being owned by your loved one with special needs. The inheritance will be managed by an independent trustee who provides benefits as specifically described in the trust agreement.
Reviewing your Estate Plan
Failing to review your estate plan on a regular basis can be a major pothole but can easily be side-stepped. Ideally, you should make it a priority to visit with your estate planning attorney roughly every two years or whenever there is a major change in your life, the lives of your loved ones or in your financial situation i.e. retirement.
Don’t be caught off guard and derailed by common misconceptions. Contact a Foster Swift estate planning attorney if you have questions on your current estate plan situation before taking action.
Due to the shock of the death of a spouse or a loved one, the steps of what needs to be done first can be an overwhelming process for the survivor(s). To aid in the breakdown and to act as a tool amidst the emotional days ahead, estate planning Jonathan "Jay" David has assembled a "Survivor's Checklist" of some of the important things that need to be addressed when a spouse or loved one dies.
COVID-19 Checklist & Elder Organizer Tool
For adult children responsible for their elderly parents and other senior caretakers concerned about protecting loved ones as the COVID-19 pandemic continues, below is a free downloadable checklist of steps to follow to prepare for any possible COVID-19-related illnesses among the most-vulnerable.
Foster Swift has created a free ‘Elder Organizer’ digital notebook to provide seniors and their caretakers with a toolkit that helps organize doctors’ appointments, medications, and more that can be shared online. The tools below are also available on the Elder Law Resources page.
*For those trying to access these links by smartphone, it is best practice to copy/open the link in a separate tab and download the free Google Sheets app from Google Play or the Apple Store.
- Dementia & Alzheimer's
- Long-Term Care
- Legislative Updates
- VA Aid & Attendance
- Personal Property Tax
- Digital Assets
- Fraud & Abuse
- Senior Exploitation & Abuse
- Powers of Attorney
- Health Care Reform
- Medicaid Planning
- Elder Law
- Financing Long-term Care
- Estate Planning
- Alerts and Updates
- Did you Know?
E-book Covers Estate Planning Essentials
Engaging in estate planning, while essential, is often emotional and generates many questions. How do I protect my spouse and my children if something happens to me? What happens if I become disabled before I pass on? Who will take care of my pet after I'm gone? How do I pass my business on to my children? These questions and more are addressed in Jonathan David’s recently updated e-book, “Estate Planning: You Have to Start in Order to Finish.”
Need Help Planning?
For more tools, visit our Elder Law Resource page for additional content. Click here to view/download the Foster Swift estate planning brochure to see what our experienced team of attorneys can do for you.