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Is Your Estate Plan up to Date?

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Is Your Estate Plan up to Date? Is Your Estate Plan Up to Date? Presented by Kelly S. Davis, Esq. Davis Elder Law Office, P.C. 1807 Capitol Avenue, Suite 200B Cheyenne, Wyoming 82001 307-433-0921 Let’s talk of graves, of worms and epitaphs; Make dust our paper with rainy eyes Write sorrow on the bosom of he earth. Let’s choose executors and talk of wills. – Wm. Shakespeare – Richard II: Act III Scene ii How Does the Legal System View Death? • Death is an event that results in the transfer of ownership of assets • Estate planning is the process through which we control how and to whom those assets are transferred How Does the Legal System View Death? • Without a good estate plan the legislature has decided how and to whom assets are transferred • Can be confusing • Can have unintended/undesired consequences • Can be costly “Do I Need a Will?” • A basic estate plan includes a Will • A well-drafted and thoughtful Will sets out how you want your estate handled • With a good Will you gain control over how your estate is going to distributed “Do I Need a Will?” • With a good Will you can: • Designate who will inherit • Specify how much and when they will inherit • Disinherit those you don’t want to inherit “Do I Need a Will?” • With a good Will you can: • Nominate who will be the “executor” • Identify who will be the back-up executor(s) • Waive the executor’s bond “Do I Need a Will?” • With a good Will you can: • Nominate who will be guardian(s) of your child • Identify who will be the back-up guardian(s) • Authorize payments to guardian for care of child “Do I Need a Will?” • With a good Will you can: • Make a trust to provide support for spendthrift(s) • Make a trust to encourage a college education • Make a trust to care for a disabled loved one “Do I Need a Lawyer?” • A Will is only as good as it is written • You can write your own Will (Holographic Will) • But, do you know what is required? • Things can easily go wrong --- (The Tale of Rose) “Do I Need a Lawyer?” • A Will is only as good as it is written • What about “on-line” or “kit” Wills? • They are cheap, but do you know what’s needed? • Things can easily go wrong --- (The Tale of Lester) “Do I Need a Lawyer?” • Hiring a lawyer, you get the benefit of: • Knowledge • Experience • Counseling “Does Having a Will Avoid Probate?” • No. A Will is just your instructions on what you want done and by whom when you die • A Will does not transfer title • Executor does that with court permission • A Will does not appoint the executor • The court does by issuing Letters Testamentary “What is Probate?” • Different types of probate procedures: • Formal – with court supervised administration • Mandatory if probate estate exceeds $200,000 • Informal – no court supervised administration • Optional if probate estate under $200,000 “What is Probate?” • Summary Distribution for Real Estate – (Informal) • Requires publication and court order • Optional if probate estate under $200,000 • Affidavit of Distribution – (Informal) • Filed with county clerk • Optional if probate estate under $200,000 “What is Probate?” • The legal process in which: • Court determines what instructions to follow: • Testamentary – Follow the Last or Latest Will • Intestate – No Will, therefore statutes control “What is Probate?” • The legal process in which: • Court appoints Executor if there is a Will • Court appoints Administrator if there is no Will • No one appointed in summary probate “What is Formal Probate?” • Notice given that probate opened • Invitation to contest • Creditors to file claims or be forever barred • No creditors notice in summary probate “What is Formal Probate?” • Assets Inventoried and Valued • Assets may be sold if necessary to pay bills or make distributions • Sale of real estate requires court approval • Can’t transfer title without court order “What is Formal Probate?” • Spousal and family allowances paid • Not paid in summary probate • Just and proper claims paid • Not paid in summary probate The Public Perception of Probate • Due to a lack of familiarity with the process, the public often views probate as: • Time consuming • Frustrating • Expensive • Unnecessary Alternatives to Probate • Probate avoided by not having a “Probate Estate” • Probate Estate – Property owned by the Deceased at the time of death in which there is: • No beneficiary designation • No survivorship interest • No transfer instruction Alternatives to Probate • Non-Probate Estate – Property with: • Beneficiary designations (e.g., life insurance, IRA, etc.) • Survivorship interests (e.g., life estate, JTWROS, etc.) • Transfer instructions (e.g., TOD, POD, Lady Bird, etc.) “Living Trusts” • “Living Trust” – A traditional estate planning technique used to: • Avoid estate taxes • Speak from the grave • Avoid probate “Living Trusts” • Three (3) parties in any trust: • Grantor – Establishes or funds the trust • Trustee – Manages or administers the trust • Pick the trustee carefully! • Beneficiary – Benefits from the trust “Living Trusts Avoid Estate Taxes” • Living Trusts – Avoid estate taxes for married couples • Preserves first to die’s estate tax exemption • Mostly obsolete • 2017 federal estate tax – $5,490,000 • Portability – transfer exemption to spouse “Living Trusts Speak from the Grave” • Probate terminates with final distribution (1 year) • Trusts can go on for years depending upon purpose • Sprinkle/support/spendthrift • Educational incentive trust • Special Needs Trust “Living Trusts Avoid Probate” • Living Trusts – Avoid the necessity of probate • Probate done when you die owning probate assets • Living Trust owns assets and trust doesn’t die • Since trust doesn’t die, no need for probate • Trust must be “fully funded” to avoid probate • Need “Pour-Over” Will “Living Trusts Avoid Probate” • Living Trusts are not a “cure all” • Must stay “on top” of management • Trustee may not understand fiduciary duties • May still require probate if not fully funded • Living Trusts do nothing for Medicaid planning “Other Alternatives to Avoid Probate” • Outright Gifting – Tax, control, and Medicaid issues • Survivorship designations – JTWROS, Life Estate, etc. • Beneficiary designations – Life insurance, annuities, etc. • Transfer(s) on death – TOD, POD, Ladybird deeds, etc. “Death isn’t the Biggest Risk” • People often don’t just die • Frequently a period of slow deterioration • 40% of those over 65 will go to nursing home “Death isn’t the Biggest Risk” • 68% of those over 65 become cognitively impaired • 5.2 million over 65 (1 in 8) deal with Alzheimer’s • 43% of those over 85 have Alzheimer’s • By 2025 Alzheimer’s cases in Colorado, Idaho, Nevada, Utah and Wyoming will double “Who Picks Up the Pieces?” • If you are no longer able to manage your affairs you will need someone to step in: • Trustee? • Guardian? • Attorney-in-Fact? “Who Picks Up the Pieces?” • A Trustee manages and administers trusts • The Trustee only deals with trust assets • The trust must first be established • The trust must first be funded • Trusts can be expensive to set up “Who Picks Up the Pieces?” • Guardian – A Court appointed fiduciary • Manages affairs of incompetent (Ward) • Must file reports with the Court • Must post and maintain a fiduciary bond “Who Picks Up the Pieces?” • Guardianship should only be a last resort • Takes time to establish • Takes away the rights of the Ward • Expensive to establish and maintain “Who Picks Up the Pieces?” • Durable Power of Attorney avoids guardians • Doesn’t take away rights • Inexpensive to establish and maintain “What is a Power of Attorney?” • A Power of Attorney is an instrument granting someone authority to act as agent on behalf of the grantor (principal) • Terminates upon death or incapacity • Can be revoked by the grantor “What is a Power of Attorney?” • A “Durable” Power of Attorney does not terminate upon incapacity • Because authority to act continues upon incapacity, can avoid guardianship “What is a Power of Attorney?” • Powers of Attorney can help elders: • Remain autonomous • Avoid guardianships • Limit costs at a vulnerable stage of life “What is a Power of Attorney?” • Words matter in a POA • Durability created by statutory language • It is the words contained in the POA that grant authority, not the title “POA” Words Matter in a POA • An Agent is a fiduciary • Only powers listed in POA are granted • Agent cannot do what is not granted Words Matter in a POA • Plenary powers (what court would grant) vs. • “Hot powers” (what court won’t grant) Words Matter in a POA • Transfer/convey vs. gift • Restricted gift vs. unlimited gifting Words Matter in a POA • Need comprehensive POA powers to do Medicaid planning • Online forms often do not grant the powers that are needed Choices Matter in a POA • Select your agent carefully • Agent must be: • Trustworthy • Able • Willing Choices Matter in a POA • Better to have one good agent rather than multiple agents at the same time • Agent needs to understand they serve as a fiduciary Why Choices Matter • But research on Powers of Attorney reveals • If misused, “vast potential for abuse” Dr. Virginia Vincenti, Researchers Study Elder Financial Exploitation, Reflections Magazine, 2015, University of Wyoming, College of Agriculture and Natural Resources Uniform Power of Attorney Act • The Wyoming Elder and Vulnerable Adult Task Force recommended adoption of the Uniform Power of Attorney Act (UPOAA). • Enacted 3/6/2017 – Effective 1/1/2018 Uniform Power of Attorney Act • UPOAA is primarily a set of default rules that preserve a principal’s freedom to choose both the extent of an agent’s authority and the principles to govern the agent’s conduct Control Over End of Life Decisions • Heath Care Power of Attorney – • Appoints health care decision maker • Advance Directive – • Expresses health care wishes • Replaces “Living Will” Where to From Here? • Estate planning is not a DIY project • Good effective planning requires • Understanding of issues • Knowledge of elements of planning • Be safe ---- Work with an attorney Questions? Kelly S.
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