Grimaldi & Yeung

Protect Yourself and Your Family With an Estate Plan

Documents are at the heart of your estate plan, but they have to be created with your unique situation in mind. Not having them, or not having the right ones, could put you and your children at risk, before and after your demise.

Everyone over the age of 18 should have certain documents that protect both life and property. These are the basics for your estate plan, says U.S. News & World Report in the article, “5 Documents You Need in Retirement.” They are used if you should become incapacitated or die, which can potentially occur any time. Most people don’t think about them until they are ready to retire, but there’s no reason not to have them in place now. Our firm has written a book on this subject, called “5@55: The 5 essential Documents You Need by Age 55”, which is available on Amazon.

A Will. This fundamental legal document provides your directions about how the property you own should be distributed after your death. It also names the person(s) who will manage your estate after you die, until your property is completely distributed. Hire a qualified estate planning attorney to be certain your will complies with federal and state laws. Working with a lawyer is vital, to be sure you will address all contingencies, if you suspect someone might contest your will.

Power of Attorney. You can appoint an agent using a Power of Attorney, (a Power of Attorney is a serious document that must be signed before a notary) to a friend or relative, so they can make financial decisions for you, in the event you can't do it yourself (either on a temporary or permanent basis).

Health Care Directive. This document designates a person who in effect serves as your agent for your health care, and it could be the same person as on your financial power of attorney. The document authorizes your agent to withhold or withdraw medical care or medically supplied nutrition, to admit or discharge you from a medical facility, and to hire or fire anyone who’s taking care of you. It can also provide guidance to your agent, if you have an irreversible medical condition. You can specify what type of care and treatment you want. You can add in information about whether and how to prolong life, provide palliative care only and if you want to donate your organs.

Personal Data Sheet & Digital Diary. While this isn’t an official document, it’s a very valuable record to have around to help your family or anyone else handling your estate. This document should list any significant property you own and what to do with it. List any bank or investment accounts, like IRA and 401(k) accounts. Write down the name of the financial institution(s), the account numbers, and the approximate balances and list any assets which you own digitally, or online assets, with the necessary sign in information and password.

Make sure to share these documents with your family. They will need to know where you have placed them. They’ll also need to know the name and contact information for your estate planning attorney.

Reference: U.S. News & World Report (October 11, 2018) “4 Documents You Need in Retirement”

 

Executing a Durable Power of Attorney Requires Witnesses—How Many?

Make sure that your legal documents are executed properly. This is a critical and last step for completing an estate plan. Don’t neglect this last detail.

First, let’s define what a durable power of attorney is and what it does. The durable POA is a legal document, through which one person (the principal) grants another person (or persons, depending on the document) to perform certain tasks for the principal, in the event they are unable to do so.

nj.com’s recent article, “Don't mess up this estate planning document,” says that whether two witnesses are required for a durable power of attorney in New Jersey or whether a notary signature alone is sufficient, typically depends on whether the POA deals with the principal's property or finances or if it deals with health care.

The document must be signed by the principal and his or her signature should be witnessed by one subscribing adult witness. It also must be acknowledged before a notary or other person authorized to take an acknowledgement, such as a New Jersey attorney.

The subscribing witness may be called upon to "prove" the document. This means he or she must swear that the principal executed the document freely and that to the knowledge of the witness, the principal knew what he or she was signing.

In some states, powers of attorney must be signed by the principal and two witnesses to be valid. Especially when the document is intended to be used in that state, two subscribing witnesses are used, so that the document is more readily recognized.

This acknowledgement is especially important, if the power of attorney is being used in connection with real estate transactions. That’s because it must be recorded, and a document must be acknowledged in order to be recorded.

A similar but different document is the advance directive, also known as a health care power of attorney. This is used to designate a person who can make healthcare decisions on someone’s behalf. In the case of an advance directive, the document must be signed in the presence of two subscribing adult witnesses, or it must be acknowledged before a notary or a person who is legally authorized to take an acknowledgment.

Reference: nj.com (June 21, 2018) “Don't mess up this estate planning document”

What Does an Advance Directive Do?

It’s the worst-case scenario: you become ill or are injured and can’t convey your wishes for end-of-life care. Having an advance directive as part of your estate plan is good.  However, it’s just the start.

Once you have an advance directive, which explains your wishes for end-of-life care, you’ve taken step one. Next, you need to have a conversation with your family about it. You want to make sure that they understand what your wishes are, and you need to let them know where the document is located. If your wishes change, you need to update the document.

Kiplinger’s recent article, “Advance Directive: Ensure End-of-Life Wishes Honored,” notes that many people say, “My family knows what I want, so I’m covered.” But too frequently, that’s not the case.

If you haven’t drafted an advance directive or named a health care proxy, or your loved ones can’t locate it in an emergency, chances are good that your wishes won’t be honored.

If you don’t have an advance directive, create one now and share it.

An advance directive, which usually refers to a living will and a health care power of attorney, should state your preferences for medical treatment in an accident or at the end of your life. It should also designate an agent to make decisions on your behalf, if you’re incapacitated.

Make copies and give them to family members and your medical team. Keep your copies where they can be easily located.

Be certain that your loved ones are clear about your wishes and are willing to carry them out. Have a family conversation that includes as many people as possible, including adult grandchildren. Let them know your preferences, such as: Do you want to be kept alive on a ventilator? Are you willing to live in a nursing home?

Next, ask a trusted relative or friend to be your health care agent. Choose a person who can handle the responsibility and discuss it in depth.

Just as you need to update your estate plan when major life changes occur, you should also review your advance directive with an experienced estate planning attorney. Those changes include the death of a spouse or a child, divorce, a serious illness, a marriage or a new baby.

Reference: Kiplinger (February 5, 2018) “Advance Directive: Ensure End-of-Life Wishes Honored”

Why You Need to Review Your Estate Plan This Year

Even if the Trump tax law had not passed, other factors make it wise for estate plans to be reviewed this year. Putting it off, may become costly for you and your heirs.

Unless you are in the minority of people who actually pay the federal estate tax, for most people the new tax law may not have a major impact on your family. However, not all of the reasons to review your estate plan have to do with taxes. A recent article in Forbes, “7 Reasons To Revisit Your Estate Plan, Trump Tax Law Aside,” notes the reasons why a review is a smart idea.

The disposition of your assets. Even with a revocable trust in place, a will often serves as the primary means for communicating your wishes. The provisions of a will can state how assets will be transferred, which can include an outright transfer to beneficiaries; to an existing trust (inter vivos trust) or into a new trust that will be created under the provisions of the will (testamentary trust). A testamentary trust in a will can specify the ages of beneficiaries or other terms that determine when beneficiaries will receive assets. Wills also contain specific bequests of financial and nonfinancial assets, like family heirlooms. In addition, charities are often named as recipients of bequests.

Administration and financial management. When a person passes away, an estate is created. The person or institution managing the affairs of the estate is the executor or personal representative, who is tasked with the taking care of the decedent’s assets and liabilities, working with the probate courts, and disposing of the assets in accordance with the will.

Guardianship for children. If an individual has minor or disabled children, the will must designate your choice of a guardian and a successor guardian.

Trusts. Trusts give the creator some level of control over assets and their use through distributions. This can be especially important when leaving assets to those with financial issues, a person with a disability or an addiction, or a financially unsophisticated spouse. Trusts can also shield assets from divorce and the claims of creditors and predators. There are many types of trusts. An experienced estate planning attorney will be able to help you to select the right kind of trust and make sure they are set up correctly.

Other Estate Planning Documents. In addition to the will, an individual should have a health care proxy, health care directives (living will) and a general durable power of attorney over financial matters. One additional document is a letter of intentions.

Taxes. With “portability,” a vehicle that lets any unused credit from the first spouse to die pass to the surviving spouse to use, your current estate plan should be revisited. Consider state estate tax provisions that do not follow the federal tax, which could result in no federal estate taxes, but still a significant state tax.

Gifting. The ability to make lifetime gifts has also doubled. Gifting has many tax savings opportunities.  However, it can also create complications from the impact of the gifts on the recipient. Work with an attorney for any sizable gifts.

Bear in mind that you may not need a complete overhaul of your estate plan.  However, a review will provide you with a chance to make sure the estate plan still aligns with your life choices and to see if any changes, since the last time you did your will, are available to reduce your tax liabilities.

Reference: Forbes (March 15, 2018) “7 Reasons To Revisit Your Estate Plan, Trump Tax Law Aside”