Health and Education Exclusion Trust

A health and education exclusion trust (HEET) is an irrevocable trust tailored to help you avoid paying gift and generation-skipping transfer (GST) taxes on tuition and medical care expenses for individuals two or more generations younger than you (grandchildren, great-grandchildren, etc.). Tuition payments made from a HEET directly to an educational institution on behalf of one of these beneficiaries are not subject to gift tax. These payments, if made on behalf of a “skip person” from a non–GST tax-exempt trust are not subject to the GST tax. However, in order to qualify for these benefits, at least one trust beneficiary must be a charitable organization with a significant interest. This can be a great option if you are charitably inclined and want to provide education assistance for multiple generations.

Irrevocable Gifting Trust

Using either the annual gift tax exclusion or lifetime gift tax exemption, an irrevocable gifting trust holds and invests property for your chosen beneficiaries for a variety of purposes, not just education. If you want to use the annual gift tax exclusion to shelter gifts to the trust for gift tax purposes, you will need to include a Crummey power. A Crummey power is a technique that allows your beneficiary to receive a gift that would not usually be eligible for gift tax exclusion but makes the gift eligible. To accomplish this, after each annual gift is made, your beneficiary must be given an opportunity to withdraw the amount that was gifted. However, the beneficiary will often leave the money in the trust to ensure that you will keep making the annual gifts according to the original plan. You can stop making gifts at any time.

Provision in a Revocable Living Trust

If you already have an existing revocable living trust, including a provision for the payment of your child’s or grandchild’s education expenses can be an easy way to help even if you pass away before the education is completed. Upon your passing, the money will be available to be used as you have directed. One benefit is that during your lifetime, you can change the trust provisions as often as you like. Additionally, you can determine how the money should be used. Your definition of education expenses can be as broad or as narrow as you want, and not all of the money in the trust has to be used for education expenses.

Revocable Education Trust

A revocable education trust provides substantial flexibility, as it allows you to set up a trust, act as a trustee, and make distributions for your chosen beneficiary’s education, but it can be revoked or revised if the funds are needed for other purposes or if the beneficiary does not attend college. It will not provide the tax benefits of other trusts or education plans, but it may be a better option if flexibility is a priority.

529 Plans

A 529 plan is a savings plan that provides tax advantages designed to encourage people to save for their child’s or grandchild’s future education costs. There are two types of 529 plans: prepaid tuition plans and education savings plans.

Prepaid Tuition Plan

A prepaid tuition plan allows you to purchase units or credits for your beneficiary’s future tuition and mandatory fees in advance at the current prices, helping to avoid paying the higher costs that likely will be charged in the future. These plans are usually available only for public and in-state colleges, cannot be used for room and board, and cannot be used to prepay tuition for elementary and secondary schools. If the beneficiary later decides to attend a private college or university, prepaid funds can be applied to tuition at most private postsecondary institutions.

Education Savings Plan

An education savings plan enables you to open investment accounts to save for any qualified higher education expenses. The funds can be used not only for tuition and fees, but also for college expenses such as room and board, computers, and software. This account can also be used to pay for education expenses at some international institutions. In addition, up to $10,000 can be used for elementary and secondary school tuition.

Coverdell Education Savings Account

A Coverdell education savings account (ESA) is a savings account used to fund qualified education expenses. Although the contributions are not deductible, the distributions and growth are tax-free as long as the funds are used for qualified education expenses. Unlike some other options, the Coverdell ESA can be used toward qualified education expenses for elementary and secondary education without a monetary cap. In contrast to a 529 plan, this program has an income limit (adjusted gross income must be less than $110,000, or $220,000 for those filing a joint return), as well as a contribution maximum ($2,000 per year per beneficiary).

Uniform Transfers to Minors Act and Uniform Gifts to Minors Act Accounts

The Uniform Transfers to Minors Act (UTMA) and Uniform Gifts to Minors Act (UGMA) accounts are types of trusts whereby a custodian manages money and property on behalf of the minor owner. However, unlike other types of trusts, UTMA and UGMA accounts do not require that any trust documents be prepared or that a court appoint a trustee. All of the required trust instructions are spelled out in the state’s statute. Until the minor reaches the age of majority (eighteen or twenty-one depending on the statute), the custodian must manage and use the funds for the benefit of the minor, which can include the payment of education expenses. However, once the owner reaches the age of majority, the money is turned over to the owner, who can choose how it is managed and spent.

Impact on Financial Aid

It is important to note that setting aside money for a child’s or grandchild’s education expenses may impact the ability to qualify for need-based financial aid. The identity of the account owner impacts whether the account must be disclosed on the Free Application for Federal Student Aid (FAFSA) and the weight it will be given in the need-based calculation. Additionally, most types of trusts must be reported on the FAFSA as an asset of the beneficiary.

We Are Here to Help

Working together with your financial team, we can craft a plan that accomplishes all of your family’s education goals and sets them up for the best possible future. We are available to meet in person or by video conference—please let us know what is most convenient.

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If you and your spouse have a marital agreement, it is crucial for you to provide a copy of it to your estate planning attorney to avoid conflicts between provisions in your estate planning and the marital agreement. If the documents conflict, a probate court will have to determine which of the documents will take precedence over the other—meaning there will likely be expensive litigation.

What Is a Marital Agreement?

There are two common types of marital agreements:

Prenuptial agreement. A prenuptial agreement is entered into by two people before they get married. Although state law varies, these agreements must typically meet several requirements to be valid and enforceable: (1) the agreement must be in writing and signed by both parties; (2) each prospective spouse must voluntarily agree to the terms of the agreement; (3) both parties must make full and accurate disclosures beforehand; (4) each spouse must have an opportunity to consult their own lawyer; and (5) the agreement must not be unconscionable, i.e., very unfair to either party.

Postnuptial agreement. A postnuptial agreement is entered into after the marriage has occurred. The rules for enforceability are similar to those noted above regarding prenuptial agreements. Although in the past, postnuptial agreements were regarded less favorably than prenuptial agreements because of the perception that there was more potential for unfairness to one of the spouses, they are now frequently upheld in court.

A Marital Agreement Can Alter a Surviving Spouse’s Rights Under State Law

In the absence of a marital agreement, a surviving spouse typically has the right to inherit a certain amount of the deceased spouse’s accounts and property under state law. The way that this occurs typically depends upon whether the state is a common law state or a community property state.

Elective share. Common law states typically have laws providing a surviving spouse with the option to receive an “elective share” of a deceased spouse’s estate, even if there are provisions in his or her will disinheriting or making only an extremely small gift to the spouse. The surviving spouse can elect to take the share provided by statute (often a third or a half of the deceased spouse’s estate—the same amount he or she could have inherited under state law if there had been no will) or to accept the terms of the will. In some states, the surviving spouse is not limited to what he or she would have received if there had been no will and is also permitted to elect against certain money or property not required to go through the probate process, such as money or property held in a revocable living trust. If the surviving spouse takes the elective share, he or she may be inheriting more than the deceased spouse intended—and other beneficiaries may inherit less.

Community property. In a community property state, all the property resulting from the fruits of the labor of either spouse during the marriage is considered to belong to the marital unit and is deemed to be shared equally. Property acquired during the marriage is typically presumed to be community property (1) in the absence of evidence that the property was brought to the marriage by one spouse, (2) if it was a gift or inheritance to one spouse, (3) if it was separate property before a move into a community property state, or (4) if there is an agreement to the contrary.

A marital agreement can change these statutory rights. Although limiting a spouse’s inheritance rights may seem heartless at first glance, it is not uncommon, particularly in a second marriage where one or both spouses have children from a first marriage and each one came into the marriage financially secure. In that situation, the children are often the main beneficiaries of their parent’s will or trust, as parents commonly want their estate to primarily benefit their own family rather than the family of a new spouse. There also are many other factual situations in which spouses may find it beneficial to enter into a marital agreement altering these statutory rights. If the intention is for the surviving spouse not to receive this elective share or unaltered community property rights, a valid marital agreement should be put into place stating how the couple has agreed the property should be treated at death.

A Marital Agreement Can Clarify Whether a Surviving Spouse Will Benefit from a Portability Election

Federal tax law allows a surviving spouse to utilize any unused portion of their deceased spouse’s lifetime gift and estate tax exemption ($11.58 million for individuals for 2020) in addition to his or her own exemption amount. However, for portability to be available to the surviving spouse, a portability election must be made by filing an estate tax return for the deceased spouse even if the estate is not large enough to necessitate it. If the surviving spouse is very wealthy, the deceased spouse’s unused exemption amount, added to the surviving spouse’s exemption amount, could result in substantial tax savings benefiting the surviving spouse’s beneficiaries.

Consequently, particularly in the case of a second marriage, when one or both spouses have children who may act as their executor or trustee, the marital agreement should specifically address this issue. If the spouse who dies first wishes for the surviving spouse to be able to benefit from a portability election, this should be clearly stated in the marital agreement. If not, it should be waived in the marital agreement. For couples who have a marital agreement that was put in place before 2010, the year when the law allowing portability was enacted, it is wise to review it and make any amendments needed to specifically address portability.

The marital agreement may be referenced in the predeceasing spouse’s will or trust, which can explicitly instruct the executor or trustee to follow its terms and can clearly allocate the burden of paying for the preparing and filing the estate tax return. The burden is often placed on the surviving spouse, that is, the party that stands to benefit from the portability election. In addition, the martial agreement could set forth any benefits that will flow to other family members to compensate for the benefit associated with portability. If this issue is addressed in advance, substantial conflict between surviving family members may be avoided.

We Can Help Eliminate Uncertainty

Families can be more complex these days than they often were in the past. A marital agreement can be an important element of a comprehensive estate plan designed for your unique circumstances. If you have a marital agreement, we can help ensure that the rights and goals you and your spouse have established are also reflected in your estate planning documents, eliminating any uncertainty about your wishes. Give us a call today to set up an appointment. We are happy to meet with you online or by phone if you prefer.

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What a Revocable Living Trust Can Do – That a Will Cannot

• Avoid conservatorship and guardianship. A revocable living trust allows you to name your spouse, partner, child, or other trusted person to manage your money and property, that has been properly transferred to the trust, should you become unable to manage your own affairs. A will only become effective when you die, so a will is useless in avoiding conservatorship and guardianship proceedings during your life.
• Bypass probate. Accounts and property in a revocable living trust do not go through probate to be delivered to their intended recipient. Accounts and property that pass using a will guarantees probate. The probate process, designed to wrap up a person’s affairs after satisfying outstanding debts, is public and can be costly and time consuming – sometimes taking years to resolve.
• Maintain privacy after death. A will is a public document; a trust is not. Anyone, including nosey neighbors, predators, and the unscrupulous can discover what you owned and who is receiving the items if you have a will. A trust allows you to maintain your loved ones’ privacy after death.
• Protect you from court challenges. Although court challenges to wills and trusts occur, attacking a trust is generally much harder than attacking a will because trust provisions are not made public.

What a Will Can Do – That a Revocable Living Trust Cannot

• Name guardians for minor child. A will – not a living trust – can be used to name guardians to care for a minor child. Depending on the state law, there may be an additional writing that can be used to name a guardian; however, a revocable trust is not that document.
• Specify an executor or personal representative. A will allows you to name an executor or personal representative – someone who will take responsibility to wrap up your affairs after you die. This typically involves working with the probate court, gathering and protecting your accounts and property not owned by a trust, paying your debts, and giving what remains to your named beneficiaries. But, if there are no accounts or property in your individual name (because you have a fully funded revocable trust), this feature is not necessarily useful.

What Both a Will & Trust Can Do:

• Allow revisions to your document. Both a will and revocable living trust can be revised whenever your intentions or circumstances change so long as you have the mental ability to understand the changes you are making.

WARNING: There is such as a thing as irrevocable trusts, which cannot be changed without legal action. This is outside the scope of this discussion.

• Name beneficiaries. Both a will and trust are vehicles which allow you to name who you want to receive your accounts and property.
  • A will simply describes the accounts and property and states who gets what. Only accounts and property in your individual name will be controlled by a will. If an account or piece of property has a beneficiary, pay-on-death, or transfer-on-death designation, this will trump whatever is listed in your will.
  • While a trust acts similarly, you must go one step further and “transfer” the property into the trust – commonly referred to as “funding.” This is accomplished by changing the ownership of your accounts and property from your name individually to the name of the trust. Only accounts and property in the name of your trust will be controlled by the trust’s instructions.
• Provide asset protection. A trust, and less commonly, a will, is crafted to include protective sub-trusts which can allow your beneficiaries to receive some enjoyment and benefit from the accounts and property in the trust but also keeps the accounts and property from being seized by your beneficiaries’ creditors such as divorcing spouses, car accident litigants, bankruptcy trustees, and business failures.

While some of the differences between a will and trust are subtle; others are not. Together, we will take a look at your goals as well as your financial and family situation to design an estate plan personalized to your needs. Call us today to schedule your in-person or virtual consultation and let’s get started.

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When you meet with the estate planning attorney, it is crucial that you bring all necessary documents, including a copy of your divorce decree. This document will be helpful in determining what obligations need to be provided for in your documents, what accounts or property you now own, and how you own those accounts and property.

What Is in a Divorce Decree?

Support obligations

Spousal or child support obligations may necessitate purchasing life insurance should you pass away before fulfilling the entire obligation. If there is a child support obligation, it may be wise to have the life insurance policy owned by a trust allowing distributions to the minor children by a trustee instead of a lump sum payout to your former spouse, who may or may not use the funds as intended. (If this is not incorporated into your decree, make sure your former spouse agrees to this strategy!)

Property Division

The divorce decree will also contain a section on the division of your marital property. This is helpful information to provide to the estate planning attorney to present an accurate picture of your current property and financial accounts.

In addition to identifying the accounts or property you now own, how you own them is incredibly important. Ownership of accounts or property previously owned by you and your former spouse as joint tenants or tenants by the entirety has more than likely changed to ownership as tenants in common under state law. This is important because before your divorce, if you had passed away, your now former spouse would have likely received your interest in the account or property automatically. However, now that the ownership has changed to tenants in common, when you pass away, your interest will go to your heirs. If you don’t do any planning, the interest will be transferred according to state law, which may not coincide with your wishes. As part of your estate planning, you can choose who will receive your interest and how they will receive it.

What Effect Does the Divorce Decree Have on an Existing Estate Plan?

Last Will and Testament

Depending upon the state in which you live, divorce can have a varying impact on your will. In some states, a divorce revokes all provisions in your will that benefit your former spouse. Additionally, some state laws also revoke the appointment of your former spouse as the personal representative. However, in the District of Columbia, a divorce revokes the entire will. Should you die before executing a new will, the law will determine who receives your money and property. Even if the gifts to your former spouse are revoked, the law may or may not revoke gifts you made to your former spouse’s family, making it very important to revise this document as soon as possible to incorporate any changes you wish to make.

Revocable Living Trust

Similar to wills, the laws regarding what happens to a provision in a revocable living trust vary. Some state laws revoke all provisions relating to the former spouse, while others leave the trust intact. If you and your former spouse previously had joint planning, it is important to review it and make any desired changes, as like wills, gifts to your former spouse’s family as beneficiaries of a trust may or may not be revoked as a result of the divorce.

Financial Power of Attorney

In some states, filing for divorce revokes the former spouse’s appointment as agent (the person who would act on your behalf) under a financial power of attorney. However, in other states, and the District of Columbia, a divorce does not revoke your spouse’s ability to act as your agent. Regardless, if there are any outstanding powers of attorney with third parties, it is important for you to inform them of your divorce and provide them with a revocation so they are on notice that your former spouse is no longer authorized to act on your behalf.

Medical Power of Attorney

Like other estate planning documents, state laws vary as to whether or not your former spouse will still be able to make medical decisions for you if you are unable to make or communicate them yourself. Some states will revoke the designation of your former spouse as your agent for medical matters as a result of the divorce, while others do not. Regardless, it is incredibly important to keep this document up to date and to provide it to the necessary healthcare professionals.

Life Insurance

Because a life insurance policy is a contract with a third party, a divorce can sometimes complicate things. If you named your former spouse as a beneficiary of the policy prior to your divorce, state law varies as to whether that designation is automatically revoked. Even if the designation is revoked under state law, it is important to change the beneficiary designation so the company is on notice of your wishes. In some cases, although the former spouse is no longer entitled to the life insurance proceeds, if they were not informed, the benefit will be paid out to the named beneficiary (former spouse), and it will be the responsibility of the rightful beneficiary to sue and collect the proceeds from the former spouse. This may not be an issue in some instances, but in others, it could create a lot of avoidable drama.

Retirement Accounts

For accounts governed by the Employee Retirement Income Security Act of 1974 (ERISA), the designation is not automatically revoked. In order to ensure that your former spouse does not receive the benefits, you must affirmatively change the designation, provided that your divorce decree does not state otherwise.

You Need An Estate Plan Now More Than Ever

As a newly single person, you are now in full control of your money and property. Without an estate plan in place, the state laws will determine what happens to your hard earned money and property. If you already have estate planning documents in place, you need to review them when circumstances change, such as in the event of divorce. Even if gifts to your former spouse are revoked under state law, you need to make sure that the alternate plan built into your documents is still what you want. Give us a call today so we can schedule an appointment to protect your new future and those you love, and don’t forget to bring the divorce decree.

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What To Do After the Honeymoon

As you start living happily ever after, make sure to attend to these post-honeymoon to-dos during the first few days (or even weeks) after your wedding. This will help you enjoy the memories of your wedding and honeymoon for years to come. The following checklist can serve as a reminder of some, but not all, of the tasks to which you should give your immediate attention:

• Meet with a knowledgeable estate planning attorney to discuss the creation of a will or trust, or to update one from before you got married;
• Review and update your medical proxy documents and provide copies to your necessary doctors’ offices;
• Check and update beneficiary designations on any life insurance policies, 401(k)s, IRAs, annuities, and other investment accounts;
• Seek advice from your tax preparer about whether or not you should adjust your withholdings to reflect your new marital status;
• Obtain life insurance, if you do not already have coverage, and designate a beneficiary and a contingent beneficiary;
• If you have or are planning to move, notify your auto insurer, banks, employer, and anyone else of your new address;
• Add your spouse to your group health and/or dental insurance policy, if necessary; and
• Change ownership of real property, if you choose to, to reflect your marital status;

In addition to the above, if you decide to legally change your name make sure to notify the following institutions:

• Schools;
• Employer(s);
• Department of Motor Vehicles;
• Creditors and debtors;
• Social Security Administration;
• Passport office;
• Insurance agencies;
• State taxing authorities;
• Telephone and utility companies;
• Banks and financial institutions;
• Government benefit office.

Contact an Experienced Estate Planning Attorney

We are here to help guide you through the estate planning process and to make sure that the financial and legal aspects of your life correctly match your new marital status. Contact us today to learn about how we can help you enjoy your wedded bliss with financial and legal security.

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For starters, you’ll want to execute a financial power of attorney. It’s perhaps the most important estate planning decision to make while you’re healthy. Assigning the duty to a trusted relative, loved one, friend, or professional can help ensure your financial matters are taken care of and your wishes are respected. Financial powers of attorney give the designated agent the power to manage your money should you become incapacitated or pass away. Understanding the different types of financial powers of attorney can help you make an educated choice for yourself as to when and what type of assistance you may need.

Failing to properly designate someone to make your financial decisions prior to your incapacity could lead your loved ones to court to have someone appointed. As an adult, no one is automatically able to act for you, you must legally appoint them through the use of a financial power of attorney.

How Much Authority to Give?

A limited power of attorney allows someone else to act in your place for a very limited purpose. For example, you might opt to pursue this option if you need to sign a deed on a day you’re out of town. Arranging for someone to represent you and sign on your behalf is possible through a limited power of attorney. Other financial matters not outlined in the limited power of attorney documents cannot be handled by the person you choose.

A general power of attorney, on the other hand, is a good option for a comprehensive approach. The person you select, also known as your attorney-in-fact, can sign any and all documents on your behalf, whether or not you are incapacitated. They can also pay your bills, conduct financial transactions, and generally manage your property and money. Anyone who could use an extra set of eyes on their finances may find this option useful.

When Should My Attorney-In-Fact Act?

Just as there are different scopes of authority you can give your attorney-in-fact, you can also choose when you want the power of attorney to become effective. A durable power of attorney can be as general or as limited in scope as you’d like. This instrument goes into effect the moment you sign it and remains in effect until you pass away, unless you rescind it while you are of sound mind.

Springing powers of attorney, on the other hand, allow your attorney-in-fact to act on your behalf if and only if you become incapacitated. Criteria outlining what constitutes incapacitation should be properly addressed in the document when creating this type of power of attorney. It is important to note that this type of power of attorney can be cumbersome for your attorney-in-fact. In many cases, if he or she tries to transact business on your behalf using a springing power of attorney, the financial institution will want proof that you are incapacitated, which is often a tedious and time-consuming process.

Regardless of your priorities, there is a financial power of attorney right for your situation and goals. Determine your specific needs for an attorney-in-fact while you are of sound mind. Of course, nothing tops the advice and recommendations of an attorney experienced in these matters, so if you are wavering between your options, give us a call.

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What Should You Do to Prevent the Theft of a Deceased Loved One’s Identity?

Thieves will not wait for your family to grieve before trying to steal and use your loved one’s identity to open accounts. A spouse, family member, or the executor of the deceased person’s estate should take immediate action to prevent the decedent’s personal information from being stolen.

1. Don’t reveal personal information. Although some criminals obtain the personal information of people who have passed away from funeral homes or hospitals, it is more common for them to look for this information online or in print obituaries. As a result, it is important not to list the deceased person’s birth date, address, or mother’s maiden name, which, along with the person’s full name, could be used to illegally purchase the person’s Social Security number. It is also important to exercise similar caution when posting a notice on social media.
2. Immediately take steps to close credit accounts. Look for the deceased person’s credit cards in wallets or purses and contact those companies to notify them of the death and close the accounts. Neal O’Farrell of the Identity Theft Council, a nonprofit organization that provides assistance to prevent and remediate identity theft, also recommends obtaining a copy of the person’s credit report from annualcreditreport.com to learn about all the accounts currently open in the person’s name. Alternatively, a family member or the executor can mail a request to the credit bureaus providing certain identifying information for themselves and their loved one, as well as a death certificate. At that point, they can contact any other creditors listed to notify them that the account holder has died. This will prevent thieves from using any existing credit card accounts.
3. Contact all banks, investment companies, lenders, or mortgage companies. Even if a surviving spouse is also an account holder, it is important to notify these companies of the death.

Warning: Although there are regulatory protections for credit card accounts and bank deposits limiting losses from unauthorized transactions, there is no similar protection for mutual funds, brokerage investments, and retirement accounts. As a result, it is important to make these notifications as soon as possible.

1. Notify the three major credit bureaus. To ensure that new credit cannot be obtained using the deceased person’s identify, the main credit bureaus must be notified in writing. Although the Social Security Administration will eventually contact the credit bureaus to notify them that a person has died, this often does not occur for months after the death. Send a letter and an original copy of your loved one’s death certificate via certified mail with a return receipt to each of the three credit bureaus–Equifax, Experian, and TransUnion–to request that a deceased alert be placed on the credit report. In addition, you should request that a surviving relative or the executor be notified if an application for credit is made. If you are a family member, you may also have to include proof of your relationship, for example, a marriage license. To expedite the notification process even further, Experian provides family members with the option of uploading the death certificate directly to its system, and Equifax allows family members to email the death certificate to it (but keep in mind that email is not the most secure way to transmit this information).
2. Notify the Social Security Administration (SSA). Funeral directors often report deaths to the SSA as part of the services they offer to the deceased person’s family, but the responsibility for ensuring that the notification is given is ultimately on the survivors, who should contact their local Social Security office or call the SSA’s toll-free number. This notification is especially important if the deceased person was collecting benefits.
3. Notify the Internal Revenue Service (IRS). To prevent thieves from filing a fraudulent tax return to obtain a refund in the deceased person’s name, the IRS should be sent a copy of the death certificate, which should be mailed to the address where the deceased person normally filed a tax return. In addition, a copy of the death certificate should be sent to the IRS with the deceased person’s final tax return.
4. Contact the Department of Motor Vehicles. It is also important to cancel your loved one’s driver’s license so that a criminal cannot fraudulently obtain a new one.
5. Monitor the deceased person’s credit report. Continue to check your loved one’s reports regularly to ensure that there is no credit activity, and if there is, contact the police, the credit bureaus, and the creditor as soon as possible.
6. Notify any other relevant groups. There are a number of entities that could have your loved one’s personal information or may have been providing benefits to him or her, for example, the Veteran’s Administration if the deceased person was a veteran, Medicare, and any relevant professional licensing agencies.

If you discover that your loved one’s identity has been stolen despite your efforts to prevent it, contact the police and notify any company involved immediately.

Give Us a Call

It’s hard enough to lose a loved one, and the stress induced by identity theft can make the loss even more painful. We can help ensure that you and the executor of your loved one’s estate take all the steps necessary to prevent your deceased loved one’s identity from being stolen. Contact us today for an appointment to discuss this or any of your other estate planning concerns.

The post Identity Theft – Not Just an Issue for the Living appeared first on Donald Hyun Kiolbassa Attorney At Law, LTD.

Actually, there is something, probably not yet on your to-do list, that absolutely can make all the difference. Bring your child to a local estate planning attorney.

You’ve probably focused on the fact that, having graduated from high school, your child is an adult now—meaning that your child is going to spread her wings. But what is essential to remember: At 18, a college student may still want her mom and dad by her side if she gets sick. However, legally, decisions for medical care are hers alone now. If she were to be unconscious from a serious car accident, a parent couldn’t authorize medical care without first going to court. And it would be up to a judge to determine if her parent would be an appropriate guardian to make medical decisions.

We don’t want to worry you, but the unfortunate reality is that every year, a significant number of people between 18 and 25 wind up in the nation’s hospitals, and their parents are often locked out of critical decisions.

Therefore, experts recommend that everyone over the age of 18 have a basic estate plan that includes a will or trust, a financial power of attorney, and medical directives that would allow someone they trust to act on their behalf if they aren’t able to.

Here are some things to take care of before you drop your child off at college:

• A FERPA Release: The Family Educational Rights and Privacy Act is designed to protect college students’ privacy, but it can leave parents locked out in an emergency. A properly worded release allows school officials to talk with you and release your child’s records to you.
• A HIPAA Authorization: The Health Insurance Portability and Accountability Act was designed to protect a patient’s privacy. Consider having your child sign an authorization so that—just in case—any necessary doctors can talk to you about your child’s condition, care, and treatment.
• A Durable Financial Power of Attorney: This is a legal document that allows you to take care of your child’s checking or savings accounts, pay bills, etc., if your child is unable to—whether due to illness or even just location (for example, if the school is on the other side of the country).
• A Durable Power of Attorney for Healthcare: Like the financial version, this allows you to handle medical decisions for your child if your child is unable to do so.
• A Will: At first glance, this may seem a little silly for the average broke college kid. In our digital age, there are some hidden complexities. For example, on average, an email account today is tied to 130 or more online accounts, each with their own username and password. Does your child have thoughts about who should manage their social media and email accounts, receive valuable gaming accounts, and close down other apps and accounts? It’s also a great time in your young adult child’s life to instill responsibility by encouraging them to think about planning in the long term.

We’ve been helping families attain peace of mind for years. Reach out to us today to protect your new college student and your family.

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What happens without an incapacity plan?

Without a comprehensive incapacity plan in place, your family will have to go to court to get a judge to appoint a guardian or conservator to take control of your assets and health care decisions. This guardian or conservator will make all personal and medical decisions on your behalf as part of a court-supervised guardianship or conservatorship. Until you regain capacity or die, you and your loved ones will be faced with an expensive and time-consuming guardianship or conservatorship proceeding. There are two dimensions to decision making that need to be considered: financial decisions and healthcare decisions.

• Finances during incapacityIf you are incapacitated, you are legally unable to make financial, investment, or tax decisions for yourself. Of course, bills still need to be paid, tax returns still need to be filed, and investments still need to be managed.
• Healthcare during incapacityif you become legally incapacitated, you won’t be able to make healthcare decisions for yourself. Because of patient privacy laws, your loved ones may even be denied access to medical information during a crisis and end up in court fighting over what medical treatment you should, or should not, receive (like Terri Schiavo’s husband and parents did, for 15 years). You must have these five essential legal documents in place before becoming incapacitated so that your family is empowered to make decisions for you:

1. Financial power of attorney: This legal document gives your agent the authority to pay bills, make financial decisions, manage investments, file tax returns, mortgage and sell real estate, and address other financial matters that are described in the document. Financial Powers of Attorney come in two forms: “durable” and “springing.” A durable power of attorney goes into effect as soon as it is signed, while a springing power of attorney only goes into effect after you have been declared mentally incapacitated. There are advantages and disadvantages to each type, and we can help you decide which is best for your situation.
2. Revocable living trust: This legal document has three parties to it: the person who creates the trust (you might see this written as “trustmaker,” “grantor,” or “settlor” — they all mean the same thing); the person who legally owns and manages the assets transferred into the trust (the “trustee”); and the person who benefits from the assets transferred into the trust (the “beneficiary”). In the typical situation, you will be the trustmaker, the trustee, and the beneficiary of your own revocable living trust. But if you ever become incapacitated, your designated successor trustee will step in to manage the trust assets for your benefit. Since the trust controls how your property is used, you can specify how your assets are to be used if you become incapacitated (for example, you can authorize the trustee to continue to make gifts or pay tuition for your grandchildren).
3. Medical power of attorney: This legal document, also called a medical or health care proxy, gives your agent the authority to make healthcare decisions if you become incapacitated.
4. Living will: This legal document shares your wishes regarding end of life care if you become incapacitated. Although a living will isn’t necessarily enforceable in all states, it can provide meaningful information about your desires even if it isn’t strictly enforceable.
5. HIPAA authorization: This legal document gives your doctor authority to disclose medical information to an agent selected by you. This is important because health privacy laws may make it very difficult for your agents or family to learn about your condition without this release.

If you discover that your loved one’s identity has been stolen despite your efforts to prevent it, contact the police and notify any company involved immediately.

Is your incapacity plan up to date?

Once you get all of these legal documents for your incapacity plan in place, you cannot simply stick them in a drawer and forget about them. Instead, your incapacity plan must be reviewed and updated periodically and when certain life events occur such as moving to a new state or going through a divorce. If you keep your incapacity plan up to date and make the documents available to your loved ones and trusted helpers, it should work the way you expect it to if needed.

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Once you decide to purchase life insurance you will name a beneficiary of the death benefits. You also name a beneficiary on your retirement accounts. But, if you fail to have a system in place and your children are minors at the time they inherit these assets, the court will appoint a property guardian or a conservator (the title depends on state law, but the role of this person is to “watch over” a minor person’s money). This process will require attorneys’ fees, court proceedings, supervision from the court, and will generally limit investment options — all costs and delays that will not help your children, but rather cost them a significant percentage of their inheritance. Another downside? Whatever’s left when the child becomes an adult (usually at age 18, but may be older, 19 or 21, in some states) will be handed over, without any guidance or boundaries. This can impact college financial aid opportunities as well as open up a ready opportunity for irresponsible spending that most parents would never intend.

How To Leave Assets?

There are several ways in which you can structure your life insurance policies, retirement accounts, and overall estate plan to benefit your minor children in the most streamlined way possible.

First, instead of naming minor children as beneficiaries, use a children’s trust to manage and use the money for the benefit of your children. This lets you designate someone you think will manage the money well, rather than leaving it to the whims of the court.
Second, select and name a guardian to handle the day-to-day care for your children. This person can be different than the person managing in the money, which can sometimes work well depending on the amounts involved and the different skill sets needed to manage money versus raise children.

Third, if you have a living trust, make sure you have properly funded the trust and aligned your retirement assets with the plan. If you do not yet have a trust, consider the benefits of one over will-based planning. Both types of plans will allow you to designate how much and when your children will receive the money, but a trust-based plan will allow you to do so without court involvement.

Benefits of a Trust

Generally, parents list a minor child as the secondary or contingent beneficiary on life insurance and retirement accounts after first naming the surviving spouse as a primary beneficiary. This may work, as long as everyone dies in the “right” order and at the “right” time. But, it’s a gamble, and providing structure through a trust for these inheritances is a vastly better option. Unlike guardianship or custodian accounts, where the proceeds must be handed over once the minor(s) turns a certain age, you can specify at which age your child receives the proceeds. This allows you to specifically designate how the money is to be used, so it will be available for the important life events, while protecting your children from reckless spending. Ultimately you have more control with a trust, and your customized plan will provide the best protection for your family.

If you have any questions about how to leave assets to your minor children — whether it is a life insurance policy, a retirement account, or any other asset — contact us today. A legal professional can explain the options available to your family, determine what tax implications will result, and advise you on the best structure that will protect your family’s needs.

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