Probate and Estate Administration

Fall Estate Plan Check-Up

As we rapidly enter the Fall season, I thought it would be a good time to check back in and discuss a few estate planning concepts.

With the election season upon us, there is continued talk of what tax laws may change, and how that may affect estate planning. As always, I will keep up on any changes that could affect your plan and keep in touch with you.

Understand Your Estate: One issue I am seeing is that some folks I meet with don’t understand how their estate would work when they die. They think everything will pass based on the instructions written in the Will, but that is not always the case.

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Are the beneficiary designations on your accounts mere afterthoughts? Consider how important these designations are, and the fact that things can go very wrong if these designations aren't correct. Read about five common mistakes in this blog.
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Probate is a scary word, but should you be concerned about it if you're a resident of Pennsylvania?

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Aretha Franklin, the Queen of Soul, died in August 2018 without a will -- until today, when 3 handwritten wills were uncovered. What could possibly go wrong?

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Prince is just the latest in a long line of celebrities who have failed to properly plan their estate. But it's not just celebrities who mess up or brush aside estate planning. Statistics show that at least half of adults in the United States don't have an estate plan.

Lawyers across the country continue to report an increase in estate litigation. There's no perfect solution to solving this problem, but a great place to start is with an estate planning attorney that you trust.
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This week, The New York Times published an article describing, unfortunately, a common occurrence in estate administration and probate. Robin Williams, married to his second wife, had three children from his first marriage. His estate plan attempted to provide for both his second wife and his children from the first marriage. Estate planning for a blended family is almost an art, because you have to balance many sensitive issues.

Six months after his death, the conflict seems to be centered over the personal property left in his home, particularly valuable items linked to his career.

Whether Robin Williams had $30 million or $300,000, it wouldn't matter. We've seen estates for celebrities that have no money, but relatives fight over their namesake and the personal property and collectibles. 

For ordinary folks, we often feel that celebrity estate planning mistakes won't happen to us. However, the same principles apply whether celebrity or not. Family is family, and conflicts are bound to occur if (1) the estate plan is not set up properly and reviewed regularly, (2) you haven't clearly communicated your intentions to your loved ones, and (3) you left some ambiguity in your will or trust. 

You can read the article by clicking here.

If you need assistance with your estate planning, contact The Law Offices of Jeremy A. Wechsler today at (215) 706-0200. The only good estate plan is an updated estate plan.

Is a simple will really so simple? Jeremy Wechsler shares with you his thoughts about what a simple will really means, and why it is a disservice for you and your family. Read more in this blog post.

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Three Reasons Joint Accounts May Be a Poor Estate Plan

By Jeremy A. Wechsler, Esq.
Your Estate Planning & Asset Protection Attorney

Many people see joint ownership of investments, bank accounts and real estate as an inexpensive way to avoid probate since joint property passes automatically to the joint owner upon death. Joint ownership can also be an easy way to plan for incapacity since the joint owner of accounts can pay bills and manage investments if the primary owner falls ill or suffers from dementia. These are all legitimate benefits of joint ownership, but three potential drawbacks exist as well described below. Please note that I am discussing joint ownership with your children or other loved ones, excluding your spouse. Jointly owning property with a spouse is normal and makes complete sense. 

Drawbacks to Joint Accounts:

1. Risk: Joint owners of accounts have complete, unconditional access and the ability to use the funds for their own purposes. I have seen children who are caring for their parents take money without first making sure the amount is accepted by all the children. In addition, joint assets are available in the case of divorce, creditor claims, bankruptcy, lawsuits and more. Joint assets could be considered as belonging to all joint owners if applying for public benefits or financial aid.
   
   
2. Inequity. If you have one or more children on certain accounts, but not all children, at your death some children may end up inheriting more than the others. While you may expect that all of the children will share equally (“they will do the right thing”), it is far from a guarantee. If you have several children, you can maintain accounts with each, but you will have to constantly work to make sure the accounts are all at the same level, and there is little guarantee that this plan will actually work. This type of planning will only create discord and conflict in the family later on.
   
   
3. The Unexpected. A plan based on joint accounts can truly fail if a child passes away before the parent. Then it may be necessary to seek guardianship to manage the funds or they may ultimately pass to the surviving siblings with nothing or only a small portion going to the deceased child's family. For example, a mother put her house in joint ownership with her son to avoid probate and Medicaid’s estate recovery claim. When the son died unexpectedly, the daughter-in-law was left high and dry despite having devoted the prior six years to caring for her husband's mother.

If you are concerned about incapacity, instead of joint accounts, consider using a power of attorney. It is much safer and does not give the appointed agent personal rights over your funds (unlike as a joint owner). The agent has a fiduciary responsibility to you and your beneficiaries.

Regarding probate and ease of administration, joint accounts are convenient but as described above, it presents risks. In Pennsylvania, probate is not a difficult or burdensome process. Also, property passing to children is taxed at a 4.5% inheritance tax rate, which is a relatively low rate compared to historical federal estate tax rates. With a well written will and trust, you can have peace of mind knowing your plan will work just the way you intend it to work, free of conflict and problems. Joint accounts may seem like an easy answer, but often create more headaches. Please review your estate plan to ensure that it will work as you intend for it to work. 

 

Beware of Trust Mills: Trusts mills are companies that sell trusts to senior citizens, without consultation by a lawyer. The motivation behind trust mills are two-fold: First, they charge a significant amount of money for un-customized documents that do a disservice to clients. Second, the companies, while building the trusts, send an affiliated financial advisor to the client to recommend they purchase a high-commission product, such as a variable annuity. In Pennsylvania, Trust Mills would market to seniors by telling them they had to avoid probate in Pennsylvania. However, probate is not a difficult process in Pennsylvania, unlike other states.

It is a serious offense in the legal community for what we call “unauthorized practice of law” — in other words, a non-lawyer purporting to be a lawyer, or a lawyer practicing illegally in a state in which he or she is not licensed.

On July 28, 2014, the Pennsylvania Supreme Court upheld the disbarment of Brett B. Weinstein, a trust mill operator. (Office of Disciplinary Counsel v. Brett B. Weinstein)  In it’s decision, the court stated that the trust mill in question was an “extremely egregious example of the unauthorized practice of law.”  Further, the court held that “there is no other comparable case in Pennsylvania in terms of the gravity of deception, the determined persistence, and the harm to enormous numbers of vulnerable clients.”

Please beware of trust mills and other companies that do not offer legal counsel while preparing estate plans. Always ask if the individual is a licensed attorney, and seek proof of that. You can always lookup an attorney to see if they have a valid license or any disciplinary action at The Disciplinary Board website.  

While we are on the subject, also beware of do-it-yourself estate planning. Similar to working with a non-attorney, you could be making a significant mistake when trying to save some money and doing it yourself. 

At our law firm, we offer unlimited consultation times when we work with our clients on their wills, trusts, powers of attorney and estate plans. We hope that when you decide to complete your estate plan, that you work with a law firm that devotes its practice to estate planning. 

The United States Supreme Court handed down a ruling this week (Clark v. Rameker Trustee) that has major implications for Inherited IRA's (also called Stretch IRA's or Beneficiary IRA's). In essence, the unanimous decision is that Inherited IRA's are NOT protected from bankruptcy proceedings or creditor claims, unlike regular IRA's. The court reasoned that the funds are not considered "retirement funds" and therefore are not afforded the same protections. Important note: A spouse that inherits an IRA is afforded bankruptcy protection.

This case really illustrates a key planning technique, which is the use of a Retirement Asset Protection Trust to protect Inherited IRA's. With the use of a Retirement Asset Protection Trust for your IRA, you can ensure your children or loved ones inherit your IRA and receive the following benefits:

• Ensuring that the IRA becomes a stretch IRA, rather than distributed as a lump sum (with ALL of the income taxes immediately due)
• Provide a level of asset protection from creditors, bankruptcy, divorce, lawsuits, etc.
• Keep the IRA in the bloodlines, perhaps creating a multi-generational IRA for your children, grandchildren and beyond.

In summary, the US Supreme Court ruled that Inherited IRA's received outright by beneficiaries are NOT protected from bankruptcy proceedings. However, by using a well-drafted and sophisticated trust, you can protect your heirs from themselves and others. 

You can read the entire Supreme Court opinion here. 

How can you make sure your funeral and burial wishes will be carried out after you die? It is important to let your family know your desires and to put them in writing.  Just don’t do it in your will. 

To help your loved ones follow your wishes after you are gone, you can write out detailed funeral preferences as well as the requested disposition of your remains. In addition to explaining where you want your funeral to be held, the document can include information about who should be invited, what you want to wear, who should speak, what music should be played, and who should be pallbearers, among other information. Making these decisions ahead of time can not only let everyone know what your wishes are, it can also help your family members during their time of grief.

It may be tempting to include this information in your will, but a will may not be opened until long after the funeral is over. A will is best used for explaining how to distribute your property, not for funeral instructions. You can write your funeral and burial directions in a separate document or you may put your wishes in your health care directive. Whatever you do, make sure your family knows where to find the information.

If you don't make your wishes known, the responsibility for determining your funeral and burial rests with your loved ones. If you are married, your spouse is usually in charge of making the decisions. If you are not married, the responsibility will likely go to your children, parents, or next of kin. Disputes could arise between family members over what you would have wanted.

It is possible to make funeral arrangements in advance with a funeral home. But be wary of pre-paid funeral plans. You can lose money when pre-need funeral funds are misspent or misappropriated. A funeral provider could mishandle, mismanage or embezzle the funds. Some go out of business before the need for the pre-paid funeral arises. Others sell policies that are virtually worthless. For more on the dangers of pre-paid plans, click here.

For help with making your funeral wishes known, you can contact our law firm at (215) 706-0200 for a consultation. The book Death for Beginners might be helpful and includes worksheets that provide a clear road map for loved ones to follow.