Paul O. Dillon, Attorney at Law

Have a Trust or Use Payable-On-Death Account to Pass Wealth?

People use trusts and payable-on-death (POD) accounts to avoid having assets pass through probate. Nevertheless, trusts have several benefits to consider, explains a recent article from The Oregonian: “Liz Weston: What are benefits of living trusts over cheaper payable-on-death accounts?”

Imagine you want to benefit two loved ones and want them both to receive the same size inheritance. You create a savings account naming one person as a joint owner with the POD account. For the second, you open a brokerage account and name the other person as the account's beneficiary. The balances in both accounts may start out the same, but one may grow significantly over time while the other lags in value.

If the assets were placed in a trust, you could simply name both people as beneficiaries to receive equal shares, regardless of where the assets are placed.

Trusts also allow the grantor (the person creating the trust) to restrict when assets are distributed and even how the money is spent. If the trust is created to benefit a minor child, for example, you can direct the trust to distribute money for the child's health, welfare and education. If your beneficiary isn’t good at managing money, a trustee can be empowered to control the amount of money being distributed so it doesn’t vanish.

If one of your heirs is disabled and receives financial support from government programs, any inheritance could make them ineligible to receive benefits. In this case, you’d want to create a Special Needs Trust with an experienced estate planning attorney who would structure the trust to protect their eligibility and improve their quality of life.

Another benefit: if you become incapacitated, having a trust and a successor trustee means someone else can manage funds for you. They could pay your bills for you, for example, whereas someone named in a POD account can’t access funds until you have died. Your family may have to go to court to get access to the funds to pay for your living expenses, which takes time and can be costly.

Your last will and testament names an executor, the person responsible for administering your estate. This includes paying outstanding bills, taxes and funeral expenses, among other tasks. If all your assets are distributed to beneficiaries using POD accounts, the executor may have to ask beneficiaries to pay for the estate’s expenses. The POD beneficiaries are under no legal requirement to pay for your final expenses, which could create an unpleasant situation for the executor. A trustee could cover these costs for your estate and executor.

POD accounts sound like a good idea. However, they can lead to unexpected problems for family members. A better alternative is to consult an estate planning attorney and create an estate plan, including a will and trust, to protect you, your executor and your family.

Reference: The Oregonian (Oct. 5, 2024) “Liz Weston: What are benefits of living trusts over cheaper payable-on-death accounts?”

What Is Joint Life Insurance?

We never know what the future may bring, and waiting too long to investigate life insurance could leave loved ones in a financial bind, according to a recent article from Money, “What Is Joint Life Insurance and How Does It Work?” There are plans ranging from term and whole to individual and joint, and you’ll want to understand how each works before determining which policy best fits your needs.

Joint life insurance is a single plan covering the lives of two people with one premium, with the policyholders becoming each other's beneficiaries or passing benefits to their heirs. Depending on your coverage, these types of life insurance pay out death benefits when one or both of the policyholders dies.

This eliminates the need for separate policies for spouses or partners and minimizes paperwork and the underwriting and administrative costs associated with life insurance policies. This type of plan is often used for business partners, who can use the death benefit to fund the company if one of them dies unexpectedly.

Joint life insurance plans are usually permanent or whole-life policies and stay in effect as long as premiums continue to be paid or until the policy pays out. Investing in joint whole life insurance has certain advantages because it provides long-term certainty.

There are two kinds of joint life insurance—first to die and second to die.

A first-to-die life insurance policy pays a death benefit to the surviving policyholder when the other party dies. This ensures the living policyholder receives a payout, which can be used for living costs if the family’s primary income source is the first to die.

Situations where one spouse doesn’t qualify for life insurance may also make first-to-die life insurance a good idea. Insurance companies may be more willing to insure someone with pre-existing health conditions because there’s only one payout between two policyholders. However, the healthier spouse will most likely incur higher cost premiums with a joint policy than an individual plan.

The first-to-die joint policy terminates once the payout occurs, leaving the surviving spouse or partner without life insurance unless they have an additional individual plan. If the surviving party doesn’t have their own policy, they must purchase a separate policy to ensure their beneficiaries receive a death benefit.

Second-to-die life insurance, or survivorship life insurance, doesn’t pay out until both policyholders die. These plans are often used to leave money for beneficiaries or pay for funeral expenses. A second-to-die policy can be helpful with estate planning because heirs don’t pay estate tax on the death benefits unless they exceed estate tax thresholds.

Determining which policy best suits your family depends on several factors, including how you expect beneficiaries to use the proceeds. Life insurance policies should be part of a discussion with your estate planning attorney and align with your overall estate plan.

Reference: Money (Sep. 15, 2023) “What Is Joint Life Insurance and How Does It Work?”

Top Five Estate Planning Mistakes

Everyone should have an estate plan, whether it’s a simple will or a detailed and complex one with trusts and strategies for multiple generations. The more care and thought put into the plan, says a recent article, “5 Common Estate Planning Mistakes to Avoid” from Kiplinger, the better the outcome. There are some common mistakes you can avoid with a little foreknowledge.

Failing to plan for incapacity. People think about creating wills and trusts with their mortality in mind. However, incapacity planning is just as important, in some cases, more important, than death. A good estate plan identifies the people authorized to make important decisions on your behalf concerning finances, health care and other important issues. It also empowers them to do so with powers of attorney. Once you are unconscious or otherwise incapacitated, you can no longer legally assign someone else to act on your behalf. Preparing for others to make decisions for you should not be overlooked.

Neglecting funeral and burial wishes. If you were kind enough to purchase a burial plot and make funeral plans, don’t make your children have to conduct a scavenger hunt. Talk with them about it and tell them where they can find the deed to your plot and the contract with the funeral home. Name a point person who will be in charge of the funeral and burial arrangements and make sure they know your wishes. If you want to be cremated, make it clear to loved ones. The more information you share before your death, the more likely your wishes will be followed.

Not considering the tax implications of transferring property. Don’t leave your loved ones a huge tax bill. It may seem generous to gift property to heirs during your lifetime. However, in many instances, giving when you have passed will create a far smaller tax burden. Your estate planning attorney will work with you to determine how to minimize taxes and maximize your gifts.

Name back-ups for key decision makers. The unthinkable happens. Spouses perish in the same accidents. If no secondary beneficiary has been named, who inherits the estate? Name additional and alternative beneficiaries in case of unfortunate occurrences. You should name a backup executor, financial power of attorney and health care agent. If a person named in your estate documents cannot fulfill their role because of death, incapacity or other reason, the court will name substitutes.

Forgetting to clarify and update beneficiary designations. If your will says you want all of your children to get an equal share of your estate, but one child is on a joint investment account and another is on a Payable Upon Death checking account, you’ve created potential disputes. It’s important to list out the beneficiaries, their asset shares and create a directive to your bank to set the interests in your accounts upon your death. Your bank may require you to change how accounts are titled to achieve your goals. Therefore, you should take care of this while you are living, so you can make any needed changes.

Reference: Kiplinger (Oct. 20, 2022) “5 Common Estate Planning Mistakes to Avoid”

Does an Elder Orphan Need an Estate Plan?

Estate planning for the future is even more important for elder orphans than for those with a spouse or family members, according to this recent article “Savvy Senior: How to get help as an elder orphan” from The Virginia Gazette. There is no one single solution, but there are steps to take to protect your estate, health and provide for long-term care.

Start with the essential estate planning documents. These documents will protect you and ensure that your wishes are followed, if you become seriously ill or when you die. These documents include:

A durable Power of Attorney to designate someone to handle financial matters in the event of incapacity.

An Advanced Health Care Directive, including a Living Will, to tell your health care provider what kind of care you want if you become incapacitated.

A Health Care Power of Attorney, naming a person of your choice to make medical decisions on your behalf, if you are unable to do so.

A Will to direct how you want your property and assets to be distributed upon your death and to name an Executor who will be in charge of your estate.

Your best option to prepare these documents is an experienced estate planning attorney. Trying to do it yourself is risky. Each state has its own laws for these documents to be valid. If the documents are not accepted, the court could declare your will invalid and your directions will not be followed.

People with families typically name a responsible adult child as their power of attorney for finances, as executor or for health care decisions. If you do not have adult children, you may ask a trusted friend or colleague. Name a person who is younger than you, organized and responsible and who will likely be available and willing to service.

If the person you name as executor lives in another state, you will need to check with your estate planning attorney to see if there are any special requirements.

If you do not have a friend or even a distant relative you feel comfortable assigning this role to, your estate planning attorney may be able to suggest alternatives, such as an aging life care manager. These professionals are trained in geriatric care and often have backgrounds in social work or nursing.

If you are reluctant to complete the legal documents mentioned above or start having them prepared and then fail to complete them, you may face some unpleasant consequences. A judge may appoint a guardian to make decisions on your behalf. This guardian is likely to be a complete stranger to you. They will be legally empowered to make all decisions for you regarding your health care, end-of-life care and even your burial and funeral services.

Unless you are comfortable with a court-appointed person making health care and other decisions for you, call an estate planning attorney and start making plans for the future.

Reference: The Virginia Gazette (April 1, 2022) “Savvy Senior: How to get help as an elder orphan”

What Legal Documents Should You Have?

You might think that the coronavirus pandemic has caused everyone to get their estate planning documents in order, but the 20^th annual Transamerica Retirement Survey of Retirees found that 30% of all retirees have nothing prepared—not even a will. That’s not good, for them or their families, says this timely article “6 Legal Documents Retirees Need—but Don’t Have” from MSN Money.

The survey revealed some troubling facts:

Only 32% have a Health Care Power Of Attorney or Medical Proxy, which allows named persons to make medical decisions on the retiree’s behalf.

Only 30% have an Advance Directive or Living Will, sharing their end-of-life wishes for medical care.

A mere 28% have a designated Power of Attorney, so an agent can act on their behalf to pay bills and manage finances, if they are too sick to do so.

Worse, only 19% have written funeral and burial arrangements. Their families will be left to make all the decisions.

18% have a Health Insurance Portability and Accountability Act (HIPAA) waiver, which is needed so someone else may speak with health care and insurance providers on their behalf.

11% have a Trust of any kind.

The study shines a bright light on a big problem that will be faced by families, if their elders have not taken steps to prepare for incapacity or death. Ignoring the problem does not make it go away. It becomes more complicated, expensive and stressful for the loved ones left behind.

These documents and a last will and testament are needed, so families have the legal right to take care of their loved ones while they are living, as well as handle their estates after they pass.

Without them, the family may find themselves having to go to court to have a guardian appointed in the event their senior loved ones are too ill to manage their financial affairs.

If the loved one should die and there is no will in place, the court will rely on the state’s estate laws to determine who inherits assets. An estranged family member could end up owning the family home and all of its contents, regardless of their absence from the family.

An experienced estate planning attorney can work with the family in a safe, socially distanced manner to have the necessary documents created, before they are needed.

Reference: MSN MONEY (Dec. 15, 2020) “6 Legal Documents Retirees Need—but Don’t Have”

What Needs to Happen after a Spouse Dies?

Making funeral arrangements, paying medical bills and closing down accounts are just the start of the tasks that a surviving spouse must take charge of, advises the recent article “Checklist for Handling the Death of a Spouse” from U.S. News & World Report. It can be overwhelming, especially with the intense emotions that come with such a large loss.

Having a checklist of specific tasks may make this difficult time less stressful. This is because you will be able to see what has been accomplished, and what is yet to come.

Start by getting organized. Make a list of what you need to do and add to it as you think of new tasks. You should also track what you are doing, using a notebook to keep a record of who you spoke with and when. If you need help, don’t be afraid to ask a family member or trusted friend. Being organized is a big help, when there are so many things that need to be done during such a hard time.

Review your spouse’s will and estate plan. Gather all the documents, from their last will and testament to insurance policies, trust paperwork and related documents. Call your estate planning attorney, since she can help you with settling the estate.

Identify the executor. If you are the executor, then you are the person in charge of managing the estate, including distributing assets. If someone else has been named, contact the person and be sure they are still willing and able to undertake the responsibilities.

Obtain original death certificates. All of the financial, legal and property matters will require an original death certificate, with a raised seal. It’s easier to have more than you need, so order ten to fifteen.

Talk with other professionals. The financial advisor, CP, and insurance broker, in addition to the estate planning attorney, will need to know that your spouse has passed. You will also need to notify the Social Security Administration. If your spouse was receiving benefits, depending upon when in the month they died, you may need to return money.

Avoid any big decisions. This is not the time to sell the house, move to another state or make any other large decisions, unless you must for financial reasons.

Carry out your spouse’s wishes. There is comfort in carrying out your loved one’s wishes. Giving money to a charity as per the will’s direction or handing a prized possession to a family member who will treasure it can be heartwarming, since it reminds you of the values that your spouse held dear.

Take time for yourself and your loved ones. Mourning and healing from loss are not easy times. Take the time to process the loss and grieve with other family members. Find comfort from those you love.

Reference: U.S. News & World Report (Aug. 28, 2020) “Checklist for Handling the Death of a Spouse”

Should I Get Attorney to Write My Will?

Drafting a will is an essential part of estate planning. Even though it’s vitally important, a recent survey from AARP revealed that two out of five Americans over the age of 45 don’t have one.

The Reflector’s recent article, “Things people should know about creating wills,” says that writing your wishes down on paper helps avoid unnecessary work and stress when you die. Signing a will allows heirs to act with the decedent’s wishes in mind and also will make certain that assets and possessions go to the right people.

Estate planning can be complicated. That is the reason why many people turn to estate planning attorneys to make sure this important task is done correctly and legally. Here are some of the estate planning topics to discuss with your lawyer:

List of Your Assets. Create a list of your assets and determine the ones covered by the will and those that will have to be passed through joint tenancy on a deed or a living trust. For instance, life insurance policies or retirement plan proceeds will be distributed by the beneficiaries you named in each account. Remember that your will can list other assets, like memorabilia, antiques, cars and jewelry.

Naming a Guardian. Parents with minor children should definitely designate the person or persons whom they want to become guardians, if they were to die unexpectantly. They can also use their will to name a person who will be in charge of the finances for the children.

Remembering Your Pets. It’s common for pet owners to use their will to detail guardianship for their pets and to leave money or property to defray the cost of their care. However, remember that pets don’t have the legal capacity to own property, so don’t leave money directly to pets in a will. A pet trust is legal in most states and is the best way to leave money and name a caretaker for your pets.

Stating Your Funeral Instructions. Settling probate won’t occur until after the funeral. As a result, any funeral wishes in a will frequently aren’t read until after the fact.

Designate an Executor. This is a trusted individual who will execute the terms of the will. He or she should be willing to serve and be capable of executing the will.

Those who die without a valid will become intestate. This will result in their estate being settled, based on the laws of where that person lived. A court-appointed administrator will have the authority to transfer the assets and property. This administrator is bound by the state’s intestacy laws and may make decisions that go against the decedent’s wishes. To avoid this, work with an experienced estate planning attorney to draft a will and other estate planning documents.

Reference: The Reflector (July 15, 2019) “Things people should know about creating wills”

What Do I Need to Know About My Own Funeral Arrangements?

You’ve heard about death and taxes. While having a plan for your death may not be a big priority, creating a plan for your family when you pass is something everyone should do.

WHNT’s recent article, “How to plan for life after death,” says the first step is having that conversation with someone you trust. It may be a close friend, a family member or an attorney.

Next, think about some important considerations like what you want in terms of a funeral service, burial or cremation, if you want life insurance to pay your last expenses and how your estate should be handled.

The National Institute on Aging has created a comprehensive list of considerations for those who are facing end of life decisions. It’s also a great resource for caretakers.

This planning will may make the process easier for those you leave behind, especially if you work with an experienced estate planning attorney.

There are also some fundamental decisions that can also ease the financial burden on your loved ones.

The average North American traditional funeral costs between $7,000 and $10,000. This price range includes the services at the funeral home, burial in a cemetery and the installation of a headstone at the cemetery.

The National Funeral Directors Association reports that the median cost to move the remains of a loved one to a funeral home in the U.S. is $325. Embalming can run about $725, and the average cost of a vault in the United States is $1,395, as of 2017.

According to the 2018 NFDA Cremation & Burial Report, the 2018 cremation rate is estimated to be 53.5%, and the burial rate is projected to be 40.5%.

Forbes says that roughly 42% of people opt to be cremated because of the costs involved with a standard funeral in the United States.

Reference: WHNT (June 30, 2019) “How to plan for life after death”

Why Are Wills So Important?

Drafting a last will and testament is an important part of estate planning. However, even with the critical importance of having a will, a recent AARP survey found that 20% of Americans over the age of 45 don’t have one.

Detailing your wishes helps to eliminate unnecessary work and potential stress and anxiety, when a loved one dies. Wills let your heirs act with the decedent’s wishes in mind, and a will can make certain that assets and possessions wind up in the right hands.

The Oakdale Leader’s recent article, “Things People Should Know About Creating Wills” says that when you meet with an experienced estate planning attorney, he or she will discuss the following topics with you:

Assets: Create a list of known assets and determine which assets are covered by your will and which are to be passed through joint tenancy, beneficiary designation, or a living trust. For instance, life insurance policies or retirement plan proceeds will be distributed directly to the named beneficiaries. A will also can cover other assets, such as photographs, personal items, autos and jewelry.

Guardianship: Parents’ wills should include a clause that states who they want to become guardians of their minor children.

Pets: Some people use their will to state the guardianship for their pets and to leave money or property to help care for them. However, it is important to remember that pets don’t have the legal capacity to own property, so don’t give money directly to pets in your will. In some states, you can establish a pet trust.

Funeral directions: Probate won’t occur until after the funeral, so funeral wishes in a will often go unnoticed. You can let your executor know your wishes in a separate document.

Executor: An executor is a trusted person who will carry out the terms of your will. He or she should be willing to serve and be capable of executing the will.

People who die without a valid will become intestate, which means the estate will be settled based on the laws of where that person lived. The court will appoint an administrator to transfer property. However, the administrator is bound by law and may make decisions that go against the decedent’s wishes. To avoid this, make sure you have a valid will and other estate planning documents.

Reference: Oakdale (CA) Leader (March 27, 2019) “Things People Should Know About Creating Wills”

Why Would a Guy Like Me Need a Will?

Wills don’t have to be complicated, but it’s best to work with a seasoned estate planning attorney. Wills must be dated, signed, witnessed and notarized. If you don’t have a will, it delays the process considerably and may delay payment of the deceased’s assets to his or her heirs. To eliminate some of the mystery from the will creation process, here are several items that all wills need to have to be legally binding. The Daily Advertiser’s recent article, “Where there is a will, there is a plan in place“ provides some definitions for key concepts and reminders for the estate planning process.

Testator. The creator of the will must provide his name, address and intention to create a distribution process for his assets. He must also state that the will being made is his last will and testament, revoking any other prior wills. Revocation of prior wills is important to show that the decisions made in the current will are final and the recent date on the will evidences how current the will is and to know which will (if there are others) supersedes all others.

Debts. The will must explain how any outstanding bills will be paid. These include the funeral costs, medical costs, taxes, court costs for settling the estate, and any other expenses the deceased may have at his death.

Heirs. A will should detail who gets what. Specific bequests should state a full description of the physical asset or, if money is to be distributed, then a percentage of the estate’s value or specific amount should be listed. Most testators don’t know the effect that death taxes or final expenses will have on an estate. Therefore, percentages work better, because it’s a percentage of what is available to be distributed.

Executor. This is the person who will take the will through the probate process, account for the decedent’s personal property, pay taxes and debts, and distribute the assets to the heirs, according to the will. Choosing an executor is an important decision. He or she should be trustworthy and knowledgeable about financial matters.

Guardian. A guardian needs to be named to care for minor children. This person should mirror the parents’ values and ideas as to the care and raising of the minor children. A relative or parent shouldn’t be selected just based on kinship. If a guardian isn’t selected, the court will choose one, and that person may not be capable of handling young children over the long-term.

Funeral Arrangements. You may not want a big expensive funeral, but without specific instructions, your funeral arrangements might be overly grand and out of character with your personality. Just add a paragraph detailing your wishes.

Reference: Daily Advertiser (March 10, 2019) “Where there is a will, there is a plan in place“