How an Estate Planning Attorney Can Secure Your Future

Estate planning is a topic many people avoid, but it plays a critical role in protecting your assets and ensuring your family's future. An estate planning attorney can help you navigate the complexities of wills, trusts, and other important documents. But what exactly does an estate planning attorney do, and why is it so important to have one? Let’s dive in to answer these questions and more.

Key Takeaways

• An estate planning attorney helps you create strategies to manage and distribute your assets.

• They provide guidance on creating wills, trusts, and other legal documents.

• They ensure your estate planning aligns with current laws to avoid complications.

• Estate planning attorneys are crucial for minimizing estate taxes and protecting your beneficiaries.

Understanding Estate Planning

Estate planning involves preparing tasks that serve to manage an individual's asset base in the event of their incapacitation or death. This includes the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help of experienced attorneys and financial advisors.

The Role of an Estate Planning Attorney

An estate planning attorney specializes in the laws and regulations related to wills, trusts, estates, and probate. Here are some of the key responsibilities they handle:

1. Creating Wills and Trusts

Creating a will is one of the most basic functions an estate planning attorney performs. They help draft legal documents that define how your assets will be distributed upon your death. Trusts can also be set up to manage your assets during your lifetime and after.

2. Minimizing Estate Taxes

One of the significant advantages of working with an estate planning attorney is minimizing estate taxes. They can create strategies to reduce the tax burden on your beneficiaries.

3. Avoiding Probate

Probate can be a lengthy and costly process. An estate planning attorney can help structure your estate to avoid probate, ensuring your assets are distributed more efficiently.

4. Setting Up Power of Attorney

A power of attorney allows someone to make decisions on your behalf if you become incapacitated. An estate planning attorney can help you designate a trusted individual for this role.

5. Healthcare Directives

An estate planning attorney can also assist in setting up healthcare directives, such as a living will or healthcare power of attorney, to ensure your medical wishes are followed.

Why You Need an Estate Planning Attorney

Legal Expertise

Estate laws can be complicated and vary by state. An estate planning attorney has the expertise to ensure your estate plan complies with current laws and regulations.

Personalized Service

Every individual’s situation is unique. An estate planning attorney can provide personalized advice and create a customized plan that best suits your needs and goals.

Peace of Mind

Knowing that your estate plan is legally sound can provide peace of mind for you and your loved ones. An attorney can help ensure that your wishes are carried out exactly as you intended.

Real-Life Examples

Example 1: Avoiding Family Disputes

Consider the case of the Johnson family. After Mr. Johnson passed away, his children disputed over the distribution of his assets. This led to lengthy court battles and strained relationships. If Mr. Johnson had worked with an estate planning attorney to create a clear and legally binding will, these disputes could have been avoided.

Example 2: Protecting a Special Needs Child

Mrs. Smith has a special needs child who requires ongoing care. By working with an estate planning attorney, she was able to set up a special needs trust. This ensures that her child will receive the necessary care without jeopardizing their eligibility for government benefits.

Steps to Finding the Right Estate Planning Attorney

Finding the right estate planning attorney is crucial. Here are some steps to help you get started:

1. Ask for Referrals

Start by asking friends, family, or financial advisors for referrals.

2. Check Credentials

Verify that the attorney is licensed and has experience in estate planning.

3. Conduct Interviews

Meet with several attorneys to discuss your needs and see if you feel comfortable with them.

4. Ask About Fees

Understand how the attorney charges for their services and ensure it fits within your budget.

What to Expect in Your First Meeting

During your first meeting with an estate planning attorney, you can expect to discuss your financial situation, family dynamics, and your goals for your estate plan. Be prepared to provide information about your assets, liabilities, and any existing estate planning documents.

Common Documents Prepared by Estate Planning Attorneys

Will : Specifies how assets are distributed after death

Trust : Manages assets during life and after death

Power of Attorney : Designates someone to make decisions if incapacitated

Healthcare Directive : Specifies medical wishes if unable to communicate

Living Will : Provides instructions for end-of-life medical care

Table 2: Benefits of Estate Planning

Avoiding Probate Streamlines : asset distribution

Reducing Estate Taxes : Minimizes tax burden on beneficiaries

Protecting Beneficiaries : Ensures assets are managed according to your wishes

Planning for Incapacity : Designates decision-makers for medical and financial matters

Providing Peace of Mind : Offers assurance that your wishes will be honored

List: Essential Tips for Estate Planning

1. Start Early: The earlier you start planning, the better.

2. Review Regularly: Update your estate plan as life circumstances change.

3. Communicate Your Wishes: Clearly communicate your plans to your beneficiaries.

4. Choose the Right Executor: Select a trustworthy and capable executor for your will.

5. Consider a Professional: Work with an estate planning attorney to ensure everything is legally sound.

Common Mistakes to Avoid

Even with careful planning, mistakes can happen. Here are some common pitfalls to avoid:

1. Not Updating Your Plan

Life changes, such as marriage, divorce, or the birth of a child, may require updates to your estate plan.

2. Failing to Plan for Incapacity

Many people focus solely on what happens after they die, but planning for incapacity is equally important.

3. Overlooking Digital Assets

In today’s digital age, it’s essential to include instructions for managing digital assets, such as online accounts and digital currencies.

The Cost of Hiring an Estate Planning Attorney

The cost of hiring an estate planning attorney can vary widely based on the complexity of your estate and the attorney’s experience. Some attorneys charge a flat fee, while others bill by the hour. It’s essential to discuss fees upfront and understand what services are included.

The Importance of Regular Reviews

Estate planning is not a one-time task. It requires regular reviews and updates to ensure it still aligns with your wishes and current laws. Schedule periodic reviews with your estate planning attorney to keep your plan up to date.

Conclusion

An estate planning attorney is invaluable in creating a comprehensive and legally sound estate plan. They can help you navigate the complexities of wills, trusts, and other essential documents to ensure your assets are protected and your wishes are honored. By taking the time to invest in estate planning, you can provide peace of mind for yourself and your loved ones, knowing that your affairs are in order.

UPDATE: Hacked laptop reveals cryptocurrency was already gone . . .

In a previous post I discussed the importance of accounting for digital assets in the context of the mysterious death of a Canadian cryptocurrency entrepreneur who had suddenly died while visiting India only weeks after implementing an estate plan but failing to account for nearly $150 million in cryptocurrency assets. You can read that here. His company claimed that the assets were frozen on a laptop and that he was the only one who knew the password.

Well, security experts were finally able to hack into his laptop to retrieve the funds. However, what they found was that digital assets had been siphoned out of the laptop nearly 6 months prior to his supposed death. I would say this is even more evidence that Mr. Cotten is still alive somewhere. More on the story here!

The Key Differences Between Wills and Trusts

In speaking with clients, friends and family, I realize that many have a misunderstanding of the differences between wills and trusts.

When discussing estate planning, a will is what most people think of first. Indeed, wills have been the most popular method for passing on assets to heirs for hundreds of years. But wills aren’t your only option. And if you rely on a will alone to pass on what matters, you’re guaranteeing your family has to go to court when you die.

In contrast, other estate planning vehicles, such as trusts, which used to be available only to the uber wealthy, are now being used by those of all income levels and asset values to keep their loved ones out of the court process.

But determining whether a will or a trust is best for you depends entirely on your personal circumstances. And the fact that estate planning has changed so much makes choosing the right tool for the job even more complex.

The best way for you to determine the truly right solution for your family is to meet with us as your Personal Family Lawyer® for a Family Wealth Planning Session. During that process, we’ll take you through an analysis of your personal assets, what’s most important to you, and what will happen for your loved ones when you become incapacitated or die. From there, you can make the right choice for the people you love.

In the meantime, here are some key distinctions between wills and trusts you should be aware of.

When they take effect
A will only goes into effect when you die, while a trust takes effect as soon as it’s signed and your assets are transferred into the name of the trust. To this end, a will directs who will receive your property at your death.

A trust specifies how your property will be distributed before your death, at your death, or at a specified time after death. This is what keeps your family out of court in the event of your incapacity or death.

Because a will only goes into effect when you die, it offers no protection if you become incapacitated and are no longer able to make decisions about your financial and healthcare needs. If you do become incapacitated, your family will have to petition the court to appoint a conservator or guardian to handle your affairs, which can be costly, time consuming, and stressful.

With a trust, however, you can include provisions that appoint someone of your choosing—not the court’s—to handle your medical and financial decisions if you’re unable to. This keeps your family out of court, which can be particularly vital during emergencies, when decisions need to be made quickly.

The property they cover

A will covers any property solely owned in your name. A will does not cover property co-owned by you with others listed as joint tenants, nor does your will cover assets that pass directly to a beneficiary by contract, such as life insurance.

Trusts, on the other hand, cover property that has been transferred, or “funded,” to the trust or where the trust is the named beneficiary of an account or policy. That said, if an asset hasn’t been properly funded to the trust, it won’t be covered, so it’s critical to work an attorney to ensure that your assets are titled properly.

Unfortunately, many lawyers and law firms set up trusts, but don’t then ensure your assets are properly re-titled or beneficiary designated, and the trust doesn’t work when your family needs it. I have systems in place to ensure that transferring assets to your trust and making sure they are properly owned at the time of your incapacity or death happens with ease and convenience.

How they’re administered

In order for assets in a will to be transferred to a beneficiary, the will must pass through the court process called probate. The court oversees the will’s administration in probate, ensuring your property is distributed according to your wishes, with automatic supervision to handle any disputes.

Because probate is a public proceeding, your will becomes part of the public record upon your death, allowing everyone to see the contents of your estate, who your beneficiaries are, and what they’ll receive.

Unlike wills, trusts don’t require your family to go through probate, which can save both time and money. And since the trust doesn’t pass through court, all of its contents remain private.

How much they cost

Wills and trusts do differ in cost—not only when they’re created, but also when they’re used. The average will-based plan can run between $500-$2000, depending on the options selected.  An average trust-based plan can be set up for $3,000-$6,000, again depending on the options chosen. So at least on the front end, wills are far less expensive than trusts.

However, wills must go through probate, where attorney fees and court costs can be quite hefty, especially if the will is contested. Given this, the total cost of executing the will through probate can run as high as $8,000-$10,000 or more.

Even though a trust may cost more upfront to create than a will, the total costs once probate is factored in can actually make a trust the less expensive option in the long run.

During a Family Wealth Planning Session at my firm, I will help you compare the costs of will-based planning and trust-based planning with you, so you know exactly what you want and why, as well as the total costs and benefits over the long-term.

Using proprietary systems, such as our Family Wealth Inventory and Assessment and Family Wealth Planning Session, we’ll carefully analyze your assets—both tangible and intangible—to help you come up with an estate planning solution that offers maximum protection for your family’s particular situation and budget. Contact me today to get started.

Even if Your Life Insurance Policy isn’t as Big as Paul Walker’s ($50 million), You Can Still Protect the Proceeds of Your Policy from Taxation Like an “A” List Celebrity

Hollywood actor Paul Walker was involved in a horrific car accident on November 30, 2013. The actor crashed while a passenger in a Porsche traveling more than 100 mph and died at the scene. Walker was in the middle of filming for FURIOUS 7 at the time of his death and Universal Studios collected $50 million for his untimely passing. Sure it wasn’t a typical life insurance policy - it was movie insurance - and it wasn’t Walker’s policy but in fact Universal’s. But it did insure the studio against his untimely death. Disney is reportedly working on a $50-67 million claim on Carrie Fisher for a three-movie Star Wars contract they had with her when she passed away.

The payout on your life insurance may not be a big as Universal’s or Disney’s, but if you have been responsible enough to purchase a life insurance policy as added protection for your loved ones, you will want to carry that responsible action a little further by protecting that important payout from taxation.

More on how this can be accomplished after these other large celebrity insurance payouts:

Michael Jackson = $3 million and an out of court settlement on a $17.5 million policy)

Heath Ledger = Family settled out of court on a $10 million policy he bought shortly before his death

Dale Earnhardt = Out of court settlement on a 3.7 million claim

Here is the taxation problem with life insurance proceeds. If you are married and have named your spouse as the beneficiary of your life insurance policy, those proceeds will pass free of both income taxes and estate taxes.  However, if your children are named as beneficiaries, the proceeds are free of income tax, but they do become part of your taxable estate.  Estate taxes above the exemption threshold have ranged from 35% up to 55% in recent years, so that’s a big bite.

An Irrevocable Life Insurance Trust (ILIT) is a great asset protection tool that protects your life insurance from estate taxes, and when drafted properly, can also be used to protect proceeds from creditors, bankruptcy and divorce. 

The best way to use an ILIT is to have the Trustee of the life insurance trust purchase the life insurance directly and pay all premiums. If you already own the life insurance, your ILIT Trustee can either buy the policy for you, or you can transfer it in, by following certain rules we can help you with.

So why is this a good idea? The proceeds from the life insurance are not part of your estate if the ILIT owns the life insurance.  Therefore, they are not subject to estate tax upon your death. 

If you have not yet purchased life insurance, you should create your ILIT first.  Have your ILIT purchase the life insurance.  This will circumvent the transfer of life insurance from you to
another party, thus avoiding any difficulties if you do unexpectedly pass away since the proceeds of your life insurance policy would revert to your estate if you died within three years of the transfer.

The ILIT is a phenomenal tool for protecting your life insurance from taxation, leaving behind more for your loved ones.

Contact my firm today to take advantage of this type of planning in your own estate.

Don’t Forget to Include Your Digital Assets in Your Estate Plan - Part Two

In the first part of this series, we discussed the importance of including your digital assets in your estate plan. Here, we’ll talk about the best ways to get started with this process. Click this link to see the first part in the series.

Today, estate planning encompasses not just tangible property like finances and real estate, but also digital assets like cryptocurrency, blogs, and social media. With so much of our lives now lived online, it’s vital you put the proper estate planning provisions in place to ensure your digital assets are effectively protected and passed on in the event of your incapacity or death.

However, because many types of online assets have only been in existence for a handful of years, there are very few laws governing how they should be dealt with through estate planning. And due to their virtual and often anonymous nature, just locating and accessing some of these assets can be extremely difficult for those you leave behind.

 Given these unique challenges, last week we discussed some of the most common types of digital assets and the legal landscape surrounding them. Here, we offer some practical tips to ensure all of your digital property is effectively incorporated into your estate plan. 

Best practices for including digital assets in your estate plan
If you’re like most people, you probably own numerous digital assets, some of which likely have significant monetary and/or sentimental value. Other types of online property may have no value for anyone other than yourself or be something you’d prefer your family and friends not access or inherit.

To ensure all of your digital assets are accounted for, managed, and passed on in exactly the way you want, you should take the following steps:

1. Create an inventory: Start by creating a list of all your digital assets, including the related login information and passwords. Password management apps such as LastPass can help simplify this effort. From there, store the list in a secure location, and provide detailed instructions to your fiduciary about how to access it and get into the accounts. Just like money you’ve hidden in a safe, if no one knows where it is or how to unlock it, these assets will likely be lost forever.

2. Back up assets stored in the cloud: If any of your digital assets are stored in the cloud, back them up to a computer and/or other physical storage device on a regular basis, so fiduciaries and family members can access them with fewer obstacles. That said, don’t forget to also include the location and login info of these cloud-based assets in case you don’t have a chance—or forget—to back them all up.

3. Add your digital assets to your estate plan: Include specific instructions in your will, trust, and/or other estate planning documents about the heir(s) you want to inherit each asset, along with how you’d like the accounts managed in the future, if that’s an option. Some assets might be of no value to your family or be something you don’t want them to access, so you should specify that those accounts and files be closed and/or deleted by your fiduciary.

Do NOT provide the specific account info, logins, or passwords in your estate planning documents, which can be easily read by others. This is especially true for wills, which become public record upon your death. Keep this information stored in a secure place, and let your fiduciary know how to find and use it. Consider a service such as Directive Communication Systems to support you here.

It’s also a good idea to include terms in your estate plan allowing your fiduciary to hire an IT consultant if necessary. This will help him or her manage and troubleshoot any technical challenges that come up, particularly with highly complex and/or encrypted assets.

4. Limit access: In your plan, you should also include instructions for your fiduciary about what level of access you want him or her to have. For example, do you want your executor to be able to read all of your emails and social media posts before deleting them or passing them on to your heirs? If there are any assets you want to limit access to, we can help you include the necessary terms in your plan to ensure your privacy is honored.

5. Include relevant hardware: Don’t forget that your estate plan should also include provisions for any physical devices—smartphones, computers, tablets, flash drives—on which the digital assets are stored. Having quick access to this equipment will make it much easier for your fiduciary to access, manage, and transfer the online assets. Since the data can be wiped clean, you can even leave these devices to someone other than the person who inherits the digital property stored on it.

6. Check service providers’ access-authorization tools: Carefully review the terms and conditions for your online accounts. Some service providers like Google, Facebook, and Instagram have tools in place that allow you to easily designate access to others in the event of your death. If such a function is offered, use it to document who you want to have access to these accounts.

Just make certain the people you named to inherit your digital assets using the providers’ access-authorization tools match those you’ve named in your estate plan. If not, the provider will probably give priority access to the person named with its tool, not your estate plan.

Truly comprehensive estate planning

With technology rapidly evolving, it’s critical that your estate planning strategies evolve at the same time to adapt to this changing environment. With us as your Personal Family Lawyer®, we can help you update your plan to include not only your physical wealth and property, but all of your digital assets, too.

We know how valuable online property can be, and unlike many lawyers, we have the experience and skills to ensure these assets are preserved and passed on seamlessly. Moreover, we can do this while respecting and protecting your privacy rights. Contact my firm today to get started.