Revocable Living Trusts

Why are individuals using trusts for guns today? Are they legal, and do they help individuals get around gun laws and exploit loopholes? The New York Times has an interesting article out this today about the use of gun trusts. Check it out here: https://www.nytimes.com/2013/02/26/us/in-gun-trusts-a-legal-loophole-for-restricted-firearms.html?pagewanted=all&_r=1&

Are you concerned that your Last Will & Testament will possibly be challenged or contested by members of your family after you pass? If so, you're not alone. There are many people with conflicts in their family that may bubble up after you pass, resulting in estate litigation.

While we cannot prevent a will from being challenged, we can minimize the risks and discourage such behavior. Here are a few tips:

1. Get all of the family issues out in the open while you’re alive and try to resolve them. This may be easier said than done, but it's important to at least consider the idea. If you don't resolve the problems now, it doesn't mean they go away after you pass on. If you are concerned about your family, you should think about how to find a solution now.
    
2. Communicate what’s in your will and inform loved ones who you chose as beneficiaries of your estate.  Unpleasant surprises always breed resentment and conflict, especially in a sensitive time of one's passing.
    
3. Make sure your will is created professionally by a lawyer, executed properly and stored properly. "Self-help" and online wills may look tempting, but "you don't know what you don't know." Be careful, and have a professional work with you to ensure you're covered.
    
4. Limit giving copies of your will to people. In fact, don’t give copies to anyone at all. Just let the Executor know where to find the will when the time comes.
    
5. Review your will regularly and update it with an attorney when necessary. Make sure there is a "no-contest" clause in your will. 
    
6. Consider how your estate is set up.  Use more payable-on-death accounts, annuities, life insurance, trusts, etc. to facilitate the direct passage of that asset to a beneficiary (a will does NOT affect those assets that transfer directly to individuals through beneficiary forms).

Looking for a great resource on estate and retirement planning? Jeremy Wechsler, your Estate & Elder Law Attorney, recently co-authored a new book with Peter R. Wechsler, his father and Your Retirement Quarterback. The book is an easy read but full of valuable information on estate and retirement planning.

Learn more about the book here: https://solvingtheretirementpuzzle.com

The Only Good Estate Plan is an Updated Estate Plan.

Lately, many of my newest clients have come to me with very old wills and powers of attorney. The plan is nicely done, folded and tucked in a nice envelope. The older the will, the harder it is for me to unfold. Once I dust it off, the will done on the typewriter is readable. 

In any case, it's a relief to me when these clients visit with me and actually become clients. My thought is, at least I can help this family update their plan, because most of the time, the plan no longer reflects their wishes, values, or the realities of their family situation. 

Many times, the kids were young when you first sat down to make your will. The needs were different. The choice of executor or power of attorney may be a sibling that you no longer feel comfortable with having serve in these roles. The estate size and value have changed, as well as the types of accounts and assets you own. Maybe there has been a second, or third marriage. You get the point! 

That's why the only good estate plan is an updated one. An old estate plan may have provisions in it that go against your current wishes today. 

If you have an old estate plan, I applaud you for doing some planning in the first place. Too many people fail to plan. But now, take the next step and make sure to keep that plan updated. I recommend checking your plan every 3 years, and updating it every 5-10 years. Those are rough guidelines. If there are any major changes in your family or circumstances, update the plan immediately.

Although Living Trusts aren’t a necessity for most people in Pennsylvania, they can still make sense for many, depending on your estate planning goals and concerns.

Here are a few reasons that a living trust might make sense:

1. Easier transition: Unlike a Will that controls only after you die, a living trust allows you to create an instrument that controls your assets if you became disabled, and after you pass on. In other words, 2-in-1. Yes, you could (and should) have Powers of Attorney in case you become disabled. But for assets in a living trust, the Powers of Attorney won’t be necessary and will therefore be easier on your loved ones.
    
2. Privacy concerns: A Will, once probated, is public knowledge and can be reviewed by anyone. If you’re concerned about a Will challenge or contest, a living trust might make sense to look into. The living trust and assets held in it never get probated.
    
3. Avoid Probate: By avoiding probate, your family can save on probate fees and some of the annoyances that come along with probate. Pennsylvania probate isn’t too difficult, but avoiding it will make things easier.
    
4. Asset Protection for Heirs: A living trust can provide asset protection for your children and grandchildren by protecting your heirs from themselves and others, including creditors, divorcing spouses, etc.

You should determine with an attorney whether a living trust makes sense for you. There are a number of factors that could weigh in favor or against a living trust. The reasons above are just scratching the surface.

A living trust will likely cost more than a Will up front, but could save time and money later on.

Even several weeks after his death, people are still talking about Steve Jobs and his contributions to the technological advances we've made in the last 30 years. Just last week, there was a memorial for Apple employees, shutting down every Apple store for a couple of hours, to celebrate the life of Steve Jobs. I remember using the Mac Classic, a black and white Apple computer from the 1980’s, and being fascinated by what was then advanced technology (no WiFi, no Facebook, no internet but still great!). People are going to be talking about Steve Jobs for a long time.

As your estate planning attorney, I was intensely curious about what type of estate plan Jobs created. We have plenty of wealthy individuals who have not engaged in estate planning, and their affairs are simply a mess.  People like Elvis Presley, Sammy Davis Jr. and others lost a huge amount of their estate to unnecessary taxes because they didn’t plan properly. We can learn a lot from their mistakes. But we can also learn from those who actually did take the time to plan, like Steve Jobs. To be honest, the less we can learn about their estate plan, the better their estate plan probably was!

To read more about what Steve Jobs did and didn’t do, check out the Forbes article on his estate plan here.

Every estate plan is different. Most people don’t have the wealth that Steve Jobs had. Nonetheless, everyone needs a plan that works for them and avoids disputes, excessive taxes, and unhappy heirs. If Steve Jobs didn’t put the proper plan in place, we will surely find out sooner or later.

Have a great week!

Top 7 Estate Planning Questions That Clients Ask

1. What if I don’t have a Power of Attorney, what happens?

You need to make sure you have a Power of Attorney, no matter what age you are. If something happens to you and you can’t make decisions for yourself, you need to make sure someone is appointed to handle your affairs. If you don’t, a guardian may need to be appointed for you. That means going through the courts, something that no one wants to be bothered with.

2. Is probate a big deal in Pennsylvania? Do I need a living trust?

Probate is not the scary process that it used to be, at least in Pennsylvania. Most people in Pennsylvania opt to have a will over a living trust because probate is rather straightforward. Sometimes, an attorney may need to be retained to help with probate affairs, but many times, a family can do it themselves.

3. Why do I need a will if most of my assets are joint or have beneficiaries?

Regardless of if your assets are jointly titled and have beneficiary designations, it still makes a lot of sense to have a will.

First, you may acquire new assets or move assets around during the course of your life. You may forget to re-title beneficiaries, or you may not title the asset jointly.

Second, there are bound to be assets that WILL pass through the will! It always happens. Plus, even if that doesn’t happen, a will is important for other reasons, such as making sure you have an Executor appointed.

Finally, if you are married, a will may not be as important upon the first-to-die, but upon the second-to-die, a will becomes essential because it’s likely that many of those joint assets are no longer jointly held, and will pass through the will.

4. Where do I store my documents, and should an attorney keep a copy?

We generally recommend you purchase a fire-proof records safe for your home and store your original estate planning documents there. They will be safe, but more accessible than a bank safe deposit box. As your estate planning law firm, we keep a copy of your documents on our secure LegalVault service, which also provides you and your health care providers access to your documents.

5. Can I write my plan myself or with a LegalZoom type of service?

Of course you can, but it’s probably not a good idea. Would you skip the doctor’s office and diagnose yourself if you’re feeling sick? Estate planning is best done with an attorney who understands how all of the pieces of the puzzle fit together. Estate planning includes wills, powers of attorneys, and trusts, but it also includes strategies while you’re alive, and strategies for the next generation. Even a “simple” plan is best done with an attorney, because as of our experiences show, even the simple plans require customizations.

6. How often should I update my plan?

Check your documents at least every three years to make sure they still seem current. We recommend that you update the plan when you see a need for a change, and update your powers of attorney every five years.

7. What are the taxes at death and how do I avoid them?

There are both federal estate and state inheritance taxes. Most people today don’t worry about federal estate taxes today, because only folks with more than $5 Million of assets are affected. 

Pennsylvania has a state inheritance tax, and any asset transferred upon death in Pennsylvania is possibly subject to inheritance tax, with very few exceptions. The tax rates are relatively small (4.5% to kids and grandkids), so most of the time, planning to avoid PA inheritance taxes is not worth it. However, every case is different and we can discuss estate and inheritance tax planning strategies with you that may make sense.

This week, I reached into my grab bag for a few best practices in estate planning. Everyone must have an estate plan because without one, you risk leaving your affairs a mess for others. Here are a few tips and ideas:

1. KEEP IT CURRENT:
   Keep your Powers of Attorney up-to-date. In the event of a disability, you want to ensure financial institutions and medical providers will accept these documents without reservation. Update them every 3-5 years.
    
2. DON’T LET PROBATE SCARE YOU:
   In Pennsylvania, don’t let the probate process scare you into writing big expensive estate plans to avoid probate. Probate is a relatively easy process in Pennsylvania compared to other states.
    
3. FOLLOW THE THREE C’S:
   In your estate plan, be CLEAR, be CONSISTENT, and be CAREFUL. Make sure you’re working with an attorney who only practices estate planning so you can rest assured knowing your plan meets this criteria. Make sure the language is clear, that nothing in the plan conflicts, and that you think through what you want your plan to say.
    
4. HOPE FOR THE BEST, PLAN FOR THE WORST:
   Estate planning is about as exciting as going to a dentist for many people. No one wants to do it, but it must be done. While you’re planning, make sure you plan for the worst-case scenario. For example, leaving your son a large inheritance and the chance that he could have creditor problems or he gets divorced and his ex-wife wants half of the estate. Yes, there are strategies we can put in place to protect an inheritance from these types of situations.
    
5. GIFT PROPERLY:
   Want to downsize, help your kids while you’re still living, or take care of the grandkids? Writing a check may make them smile, but there are other ways to make gifts, such as setting up life insurance policies inside trusts (great for asset protection) and creating a pension for life for your kids. If you want to gift, make sure you explore your options with qualified professionals. Doing so may provide multiple benefits to you and your heirs.

Is the Revocable Living Trust, sometimes just called a Living Trust, the ultimate estate planning tool? It depends who you ask, and what state you’re in.

In Pennsylvania, Living Trusts aren’t used commonly as an estate planning tool. Instead, practitioners in Pennsylvania, as well as clients, tend to favor Wills as the fundamental estate planning tool.

Here are five myths about Living Trusts in Pennsylvania:

Myth #1: Living Trusts save, reduce or avoid taxes:
A Living Trust is NOT a tax reduction or avoidance strategy. You simply cannot avoid estate or inheritance taxes by using a living trust. It used to be that more people were effected by the federal estate tax, and that married couples could reduce their estate tax by using credit shelter trusts. But you could do the same thing in a Will!

Myth #2: They prevent estate challenges:
A Will is easier to challenge than a Living Trust, because a Will is probated and is public. However, just because a Living Trust isn’t probated, doesn’t mean it can’t be challenged in court. It just takes a little more time, effort and money to do so.

Myth #3: They avoid probate because probate should be avoided:
Pennsylvania probate is pretty simple, and a run-of-the-mill estate can be probated by the Executor him or herself without the help of an attorney. So probate shouldn't necessarily be avoided at all costs and you shouldn't be scared of probate in PA. Yes, living trusts avoid probate, but your living trust must be 100% funded with ALL of your stuff to do that! Even missing ONE small bank account means your loved ones will have to go through probate. Anyway, probate is not a big deal in Pennsylvania, unlike in other states such as California (yes, living trusts are popular there because probate is a COURT supervised process!).

Myth #4: A Living Trust will make things easier at the end of my life:
Not really… It is probably takes just as much work to probate the will, settle the estate, etc., as it does to manage an ongoing trust. Trusts need to comply with many rules, tax returns must be filed annually for trusts, and more. A living trust will usually require the help and services of a professional.

Myth #5: I need a living trust to shelter assets from nursing home costs:
A living trust would NOT be a good tool to use if you want to shelter some of your assets from being spent down by nursing homes. You need to use a Medicaid Asset Protection Trust, which is IRREVOCABLE, and establish and fund this trust when you’re still healthy. A living trust used in a situation like this would be a disservice to you and your family.

LIVING TRUSTS MAKE SENSE IN SOME SITUATIONS, BUT NOT ALL SITUATIONS.  Estate planning is an individual process that's unique for everyone. A qualified attorney can help guide you to what estate planning tools you need.

Want more information on what estate planning tools make sense for you? Call us today at (215) 706-0200 to schedule your complimentary visit.

The question is, when you engage in estate planning, are you thinking carefully enough about protecting the inheritance you'll be leaving to your heirs?

If you leave your assets outright in a will to a beneficiary, the asset is owned by the beneficiary upon death. That means that the beneficiary can spend the asset however he or she would like. It also means that if the beneficiary is in debt, or suddenly becomes mired in debt, the creditor can come after that asset. 

How about if your beneficiary is married? 50% of marriages in the U.S. still end in divorce. You better believe your son or daughter in law will be pushing for equitable division of that inheritance.

No one wants to be involved in a law suit, but accidents happen, and we live in a litigious society. Insurance may cover up to a certain amount, but what happens after that? You can be sure that if there is a large inheritance available, an attorney will find it and come after it.

Bankruptcy, high risk professions, and other risk factors are always present as well.

You can protect against these predators and creditors for your heirs if you plan properly. Using trusts, for both non-IRA assets and IRA assets, we can potentially protect your heirs from themselves and others. 

Have you considered how to ensure your heirs don't squander their inheritance? 

If we can be of assistance, call our firm today at (215) 706-0200.