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. Davis, Esq. Davis Elder Law Office, P.C. 1807 Capitol Avenue, Suite 200B Cheyenne, Wyoming 82001 307-433-0921
Member National Academy of Elder Law Attorney