Avoiding Lost Documents

documents-2I frequently hear from clients who inquire about probating their family member’s estate that they cannot locate important documents of the deceased family member even though they know the documents existed.  So, what can you do to avoid this situation when you die?

My first recommendation is that you discuss your desires with your family.  If you want specific items to go to particular individuals at least communicate that to all the pertinent family members.  Better yet, write it down in a list with detailed descriptions of each item.

Next, compile folders or a binder of information for your executor, trustee or other family members and tell them where this information is kept.  Those folders or binder should include at least the following:

  • Will or trust documents, including any amendments you have executed.  If this is not the original, include a note explaining in detail where the originals are located.
  • Copies of all “Impaired Judgment Documents” you executed.  These might include a general power of attorney, a medical power of attorney, and a Directive to Physicians (sometimes referred to as a living will).
  • Login information (usernames, passwords, PINs, answer to security questions, etc.) for your digital assets.  Digital assets can be virtually anything you can access through the Internet or an electronic device like financial accounts, cloud storage services, social media services, etc.)
  • Contact information for professionals you have used like your attorney, CPA, insurance agent, financial advisor, etc.
  • Contact information for your close family and friends.
  • Remains-handling instructions including any documentation of funeral or memorial planning you have done, and contacts involved such as cremation or burial contracts, funeral home and location, preferred clergy, organ donor documents, etc.
  • Obituary or background information about you, pictures and preferences you have for where those who wish to memorialize you might make donations.
  • Contact information for employers where you might have been receiving benefits or be entitled to post-death benefits such as life insurance, pension, 401(k) or other savings plans.
  • Copies of life insurance, annuity, social security, Medicare, pension or other similar documentation.
  • Information on bank and other financial account locations, account #s, credit lines and credit card information and location of safety deposit box and key.
  • Copies of birth certificate, marriage license, divorce decrees, real property deeds and similar important legal documents.
  • Tax returns.

This may seem like an overwhelming task, but you probably have most of this information somewhere now.  A good start is to either move it all into one file cabinet or at least make a list describing where all these items can be located.  Your family will be very grateful that you made the effort.

Posted in deed, digital assets, Estate administration, life insurance, Safety Deposit Box, Trusts, Wills | Tagged , , , , , , | Comments Off

Where Is My Power of Attorney?

hidden_filesIt is frustrating as an estate planning attorney to receive a call from a client asking if I have the estate planning documents they signed.  Because our society is so mobile, I do not retain original signed estate planning documents for my clients, but send them back to clients with instructions on how to keep them.  But many times clients are so relieved that they have signed the documents, they totally ignore the instructions I send them with their original documents.

So what should you do?  Some people provide the original documents to the person who will need them when they become incapacitated (in the case of a power of attorney or medical power of attorney and related documents) or die (in the case of a Will).  But often people do not want to provide the original document to that person until they actually need to use it.  What do you do in that case?

Instead of providing the original to the person(s) you appointed, you may elect to provide a copy of those documents along with a description of how the agent, in case of need, can obtain the original document.  For example, if you kept the original documents in a file cabinet in your home, you might send your appointee a copy of the pertinent document along with a description something like the following:  “If I ever become unable to handle my own affairs or am incapacitated, you can find the original of this document in a folder labeled “Estate Planning Documents.”  That folder is located in the top drawer of a locked file drawer in my bedroom closet.  The key to the file is located in the kitchen cabinet to the left of my stove.  The key to my house may be obtained from my neighbor, Susan Jones, who lives at 1234 Mulberry Street in Plano.  Her telephone number is 214-555-5555.”  This method allows your appointee to easily locate your documents when the need arises, but withholds from them any temptation of using the documents before they are intended to be used.

Remember, if your agent or executor cannot locate the original document, the presumption in Texas is that the document has been revoked.  And for Powers of Attorney or Medical Powers of Attorney, delay in locating those documents can cause major problems.  Similarly, inability to locate your original Will may result in the bequests you made being unknown and not put into effect.

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Is Your Will Up-To-Date?

old willPreparing a will is one of the best ways to be certain that upon your death your property will be distributed according to your wishes. What many people don’t realize, however, is that keeping your will up to date is as important as having a will. That’s why you should review your will periodically. As long as you have testamentary capacity (i.e. you’re mentally competent), you can make changes to your will.  You can change it a little, change it a lot, or completely revoke it, any time you want.  However, it is imperative that you work with a qualified estate planning attorney so that your changes are legally valid and will be understood by your executor, the courts, and your beneficiaries.

Beyond simply reviewing your will every five or six years, what events might trigger a need to change your will?

Marriage, divorce, and remarriage
Life events can have a major impact on financial planning documents. For example, if a widow or widower remarries, it is important that the will is updated to show how the children from the previous marriage and the new spouse should be provided for in the will.  And a divorce quite often changes a person’s view of who they want to receive their property upon their death.

A new heir
Updating a will is especially important when you have a child, because your will allows you to name a guardian to care for your child in the event that something happens to both you and your spouse. If you don’t name a guardian for your child, the courts will appoint one and it may not be whom you would have selected.  If a family member is diagnosed with a condition that might make them a candidate for government assistance programs, a special needs trust might need to be added to a will to prevent bequests from disqualifying that family member from the benefits they are entitled to.

Death of someone named in the will
The death of a named executor, guardian, beneficiary, or trustee signals a need to make changes to those provisions in your will.

Substantial increase/decrease of net worth
If you win the lottery, get a large personal injury settlement, or receive a large inheritance, additional tax planning might be necessary to minimize the tax bill on your estate. On the other hand, a significant decline in your financial assets might dictate altering your specific bequests or making other modifications.

Life relocation to another state
If you relocate, you should have an attorney in the state of your new residence review your will. This is especially important if you move to or from a community property state. Although all states recognize a will that was properly created in another state, there may be some nuances that need to be addressed.

Tax law changes
Updating your will allows you to take advantage of recent developments and new techniques in estate planning. With recent increases in the federal estate tax exemption, the tax planned wills many people did to minimize estate tax may now create needless and serious problems for their estates.

Changes to your intentions
Changing your mind about something in your will should be handled as soon as you’ve decided. From adding a new beneficiary or charitable donation to second thoughts about your executor or the guardian of your children, be sure to make these changes on a timely basis. If your revised intentions do not make it into print, they will have no legal effect.   And be sure your memory of what is in the will matches what is really in it.  Sometimes our recollection of what is in the will does not match what we actually put in there many years before.

Posted in Community Property, Divorce, Estate Planning, Funeral, Power of Attorney, Wills | Tagged , , , , , | Comments Off

What the Heck Does “Per Stirpes” Mean in My Will?

treeAn estate planning client recently called me to say he wanted the words “per stirpes” removed from his will because he “read on the Internet” that these words were old fashioned, confusing and lead to much litigation. In case you come upon the same thing, let me clarify.

Per stirpes is a Latin phrase, so in that sense it is old. It means “by root” or “by branch.” As used in estate planning it is a term used to denote a method used in dividing the estate of a person.

Here is an example. Mary is a widow who has three children: Paul, Peter and Fred. She wants those three children to divide her estate equally among them when she dies. But before Mary dies Fred dies leaving three children: Rosa, Randy and Roger. How should Mary’s estate be divided now? Should Paul, Peter, Rosa, Randy and Roger split it equally among them, each receiving one-fifth?

Mary wants Paul and Peter to still receive their one-third. She wants Rosa, Randy and Roger to divide their father’s one-third among them, thus each receiving one-sixth of Mary’s estate. To achieve that result, we use the term “per stirpes.”

There are some variations in how per stirpes can apply in different situations, so many attorneys include a definition of per stirpes within the definitions section of the wills they draft to help remove any confusion.

In my experience, the term “per stirpes” does not lead to lots of litigation. What leads to litigation is generally the decedent’s failure to communicate to all of his family what his wishes are and how he wants his estate divided. If you are planning your estate or have already done so, be sure to let your family know how your will divides your estate. This is particularly important if you are dividing your estate in an unusual manner.

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Seven Reasons Why Everyone Should Have a Will

old willEstate planning is a broad concept that can incorporate tax planning, financial and retirement planning, planning for disability and planning for death.  As this suggests you should not only consult an attorney as part of your estate planning, but you also may want to engage a financial planner, banker, insurance agent, care manager, funeral director, your clergyman and others.  Certainly discussing your plans with your family is something you should seriously consider.  Making sure all family members understand your planning and your wishes can prevent many post-death battles and bad feelings.

Aside from taxes, you need a quality, up-to-date estate plan for a whole host of reasons, regardless of your estate’s value.  Here are six significant issues everyone should address:

  1. Plan for your medical care, including disability.  This requires several documents. Define exactly how your medical needs should be addressed and by whom with a medical power of attorney.  Also, consider a living will (in Texas this is referred to as a directive to physicians and family), which directs whether extraordinary efforts should be used to sustain your life in defined circumstances.  Also cover the financial aspects of your medical care, whether it be through buying long-term care insurance, Medicaid, or income generating investments.  Execute a durable power of attorney to authorize a trusted agent to step in and handle your affairs other than medical decisions.
  2. Avoid family disputes.  Clearly state how you want your estate divided and handled.  Traditionally this is done with a will, but it can also be handled via a living trust.  The professional experts on your estate planning team can advise you which of those are best for you.
  3. Update beneficiary forms.  Many of your benefits will pass direct to your beneficiaries.  But that will only happen if you have signed beneficiary designations.  So for your IRAs, annuities, life insurance policies and some other bank and investment accounts, check that you have signed beneficiary designations.  You should check these every few years to make sure they follow your current wishes.  Don’t forget to update them when you or family members have significant life events such as marriage, divorce, severe illness, etc..
  4. Think of others.  If you anticipate having to help a loved one (e.g., elderly parent or special needs child), develop a plan now.  Make appropriate adjustments to your estate planning documents to accommodate that plan.  Also, who will care for your children if you and your spouse both die while the children are minors?  What if you are living, but unable to care for your minor children?  Designation of a guardian in your will will not help your children if you are still living, but unable to care for them.  You need an additional document!
  5. Consider a money manager.  Develop a plan for asset management if you don’t think the beneficiary(s) of your investment portfolio is capable of management.  This might involve placing assets into a trust, the terms of which can be set up in your will or living trust.
  6. Plan for succession.  If you own a business or other complicated asset, plan the transition of management and ownership.  Will your spouse or children really want to continue the business?  Will all of them want to be involved in management?  Is there a way for one or more of them to sell the business?  Valuable businesses can quickly be virtually worthless or have their operations seriously damaged if this transition process is not realistically and thoroughly planned for.
  7. Reduce cost and hassle of probate.  Having a will doesn’t avoid probate, but it can significantly reduce the cost and complexity of probate.  Designate who is to receive your estate; otherwise state law will determine who is to receive your estate and a court will have to determine who your heirs are.  Designate who will handle your estate as your executor; otherwise the court will determine who will administer your estate.  These processes may require the appointment of additional attorneys, the testimony of additional witnesses and the filing of additional paperwork by your attorney.

Estate planning involves many aspects of your life and can take a long time to think through and implement.  Don’t allow your estate to be ravaged for lack of planning.  Take a first step now.  Call your estate planning attorney today.

Posted in Advance Directives, Beneficiary designation, Divorce, Estate administration, Estate Planning, Financial Planning, HIPAA, Power of Attorney, Uncategorized, Wills | Tagged , , , , , , , , | Comments Off