Paul O. Dillon, Attorney at Law

An Estate Plan To-Do List to Get Planning Done

Even if your New Year’s resolutions have fallen by the wayside, don’t let the resolution to create or revise your estate plan pass without tackling it. A recent San Francisco Bay Times article, “Kickstart 2025 With 5 Estate Planning Resolutions to Secure Your Future,” offers a step-by-step list of the tasks to complete your estate plan.

Start by locating your estate planning documents. Review them to be sure they’re up to date. If your will includes people no longer living or beneficiaries you’re no longer feeling generous towards, you’ll need to make those changes.

Review your estate plan with an eye on the people you’ve named for specific roles. Will the executor or trustee be a good fit? What about the person you’ve named as Power of Attorney? Your estate plan should also include a Healthcare Proxy. As you age, you need to be sure the people in these roles can still physically get to the bank or the hospital and navigate online banking or healthcare portals on your behalf.

Digital assets are now part of everyone’s life. However, not everyone addresses their digital assets in estate plans. You’ll need to review and record your digital accounts, from emails to social media to cryptocurrency, and create a list of the accounts, login information and passwords. If you have two or three-factor identification, you’ll need to be sure your digital executor can access your mobile phone or email to confirm their identity. Many people use password managers to gather their information. However, a notebook will do as long as your digital executor knows its location.

If you haven’t reviewed your healthcare directives in a while, you’ll want to do so. Your wish to be kept off any life-support systems while in your thirties may have changed as you have gotten older. After COVID, many people who would have never wanted to be on a respirator learned that it was lifesaving, not life-ending. Speak with your healthcare proxy about your wishes, so they know what you want and your estate planning attorney to ensure that they are documented properly.

An experienced estate planning attorney can help you avoid or minimize the probate process. For instance, placing assets in a trust can take the asset out of your taxable estate if the right trust is used. The assets in the trust won’t go through probate and will remain private. If using Payable on Death accounts makes sense for your estate plan, be sure that the accounts you want to transfer to someone else on your death are titled correctly.

An estate planning attorney will guide you through the process to ensure that you have the right documents, so your loved ones can help you if you become incapacitated and know your wishes when you die. It’s a gift to those you love, easing their burden and building your legacy.

Reference: San Francisco Bay Times (Feb. 5, 2025) “Kickstart 2025 With 5 Estate Planning Resolutions to Secure Your Future”

Why an Updated Estate Plan Is Critical, Especially Now

Without a properly prepared and current estate plan, property is distributed following the intestacy law of the decedent’s state of residence. In most cases, the laws are centered around kinship, with spouses and children dividing percentages of the estate.

If you had something else in mind, it wouldn’t matter—the time to create and update an estate plan is while you’re living. We all know this. However, many just keep procrastinating. A recent article, “Make sure your estate plan is updated to reflect law changes,” from Los Altos Town Crier, explains precisely what pitfalls your loved ones will face if you put off creating an estate plan until it’s too late.

Probate can be minimized or avoided with a professionally prepared estate plan. The probate experience varies with the jurisdiction: in some courts, it’s a streamlined process, while in others, it is a series of delays, sometimes stretching out over months or even years. The time and costs of probate also depend upon the complexity of the estate. In some states, probate can cost 4—7% of the estate’s total value.

An estate planning attorney works with clients to create a means of passing assets to their intended beneficiaries without court involvement. This takes many different shapes depending on the family, the value of the assets, the structure of ownership, etc. Trusts, payable on death accounts, joint tenancy ownership and LLCs (Limited Liability Corporations) are just a few means of passing wealth without involving probate.

Estate planning attorneys help clients control how and when assets are passed to heirs. For instance, if someone had a child who is exceptionally mature and responsible, they may wish to provide the child with their inheritance upon their death. A trust can be created to address the concerns of a family with an adult child who, for whatever reason, cannot manage money. The trust can have a trustee who will be charged with distributing assets according to directions provided by the parents—after achieving certain milestones, at specific ages, or when the trustee deems funds should be distributed.

Incapacity is unpleasant to consider but is as much a part of estate planning as planning for asset distribution after death. Without having a plan for incapacity, the family may be forced to go to court and petition for a supervised conservatorship, a costly and stressful process.

Incapacity or death are the last things on the minds of new parents. However, when a new child joins the family, updating an estate plan to include naming a guardian becomes critical. If there is no will or the will has never been updated to reflect the addition of children, the court determines who will raise the children. Any interested party may petition the court to be appointed as a guardian. The court ultimately makes the decision. However, the decision by the parents, as expressed in an estate plan, will have more weight than an estranged sibling.

An estate plan protects the family by lessening the chances of family disputes and legal battles, which can lead to lifelong divisions. A meeting with an estate planning attorney will give you insight into the importance of having an estate plan and how it serves as a gift to loved ones.

Reference: Los Altos Town Crier (Oct. 29, 2024) “Make sure your estate plan is updated to reflect law changes”

How Does Property Pass to Heirs in Estate Planning?

Not everyone understands how different kinds of property pass to heirs. This becomes problematic when heirs learn they aren’t receiving assets they thought would automatically pass to them — or when taxes or court costs take a big bite out of their inheritance. A recent article from The News-Enterprise, “Understanding how property passes on is crucial to planning,” explains how assets are distributed.

There are four general categories for how property can pass to beneficiaries upon death: joint ownership, POD (Payable on Death) accounts, trusts and wills. Most estates include a combination of these methods. However, every estate plan is different and should be crafted to meet the individual's unique needs.

A primary residence typically passes to a joint owner, usually a spouse or domestic partner. This is why homes are owned by “Joint Tenants with A Right of Survivorship.” Property owned with a JTWRS title passes to the surviving owner when one of the owners dies. This is often how married couples own homes and joint bank accounts. These rules vary by state, so check with your estate planning attorney to be sure you own your home correctly.

Jointly held assets can also be owned without a right of survivorship. Each person owns a separate interest in the property, and ownership continues after death. When one owner dies, several steps must take place to distribute the decedent’s share to their heirs. A case will need to be opened in probate court, and a will needs to be submitted if there is one. Without a will, the decedent’s shares pass to their nearest heirs by kinship.

If you don’t like your relatives, having a will is necessary to prevent your assets from going to the wrong people.

How assets are owned should be clarified during estate planning. Many cases involve surviving spouses going to court against their own children because the ownership of joint property wasn’t established with a right of survivorship.

When accounts are set up as Payable on Death (POD) or Transfer on Death (TOD), the assets go directly to the person named on the account. It sounds simple and speedy. However, there are some risks. The assets may return to the taxable estate if the intended beneficiary dies before the primary owner. If the beneficiary receives means-tested benefits because of a disability, they might become ineligible for benefits like SSI or Medicaid. Even a small distribution could disrupt years of careful planning, if it is directly into their own name.

Trusts are commonly used to pass assets privately and smoothly. The distribution directions follow the trust's language and can be tailored as needed. Assets can be distributed based on meeting certain conditions, like getting married or attaining a college degree. A trust can also distribute specific percentages of the trust at certain ages.

Assets not distributed through the three methods described above pass through a will and the probate process. If there is no will, the laws of the state determine who inherits the property.

An experienced estate planning attorney uses well-formed strategies to help clients consider how assets are best passed to their heirs. Keep in mind that every situation is different, so what your neighbor or best friend may have done may not be suitable for you and your family. A consultation with an estate planning attorney is the best way to be sure that your wishes are followed.

Reference: The News-Enterprise (Oct. 12, 2024) “Understanding how property passes on is crucial to planning”

Why is a Will Important?

Everyone knows what a Last Will and Testament is. However, many Americans don’t have one, says a recent article from The News-Enterprise, “Why everyone needs a will.” Many people think they don’t need a will until they retire, are nearing death, or are concerned about the cost. However, the truth is, any adult with mental capacity needs to have a will. Every parent needs a will. And anyone who owns anything, whether a car, home, or bank account, needs a will.

Anyone who is married or owns assets with named beneficiaries or joint ownership still needs a will, which can be confusing to some people. Here’s why everyone needs a will.

Owning assets together, as in joint ownership, or owning accounts titled with another person’s name, as in payable-on-death, or owning assets with named beneficiaries, protect those specific assets from going through probate. However, everything else in the estate still must go through probate.

With no will in place, the state statute determines who will receive any probate assets. However, even with all assets assigned to beneficiaries or joint owners, if there is a lawsuit over the death, the estate will receive assets from the lawsuit, and money will be distributed according to state intestacy laws if there is no will.

When property is held in joint ownership, when the second owner dies, who will receive the property? In the same way, accounts with payable-on-death beneficiaries must consider what will occur if the beneficiary should die first. The property or assets may end up in probate anyway. If there’s no will, the state’s intestacy laws will determine who receives the property.

Another common question about wills concerns the need to work with an experienced estate planning attorney. Here’s the big problem: if the will is flawed because the person or online platform does not comply with the state’s laws of how a will must be created and executed, the will may easily be deemed invalid. If this happens, there’s no way to fix the problem, and the person’s estate is subject to state statutes.

There’s no reason not to speak with an estate planning attorney to learn how different property types pass from one person to another, discuss the tax issues in estate planning, including how inheritance can impact beneficiaries and what happens if unexpected events occur. Unintended consequences are expensive for surviving spouses and heirs and are more likely to result if no professional guidance is involved.

Even if you have a trust, you still need a will. Trusts need to be funded for them to work, and sometimes, assets are left out of them. A provision can be included in the will to “pour over” any assets into an established trust to protect against assets going through probate.

Parents need wills, so their minor children can be protected. The will is the legal mechanism whereby parents name a guardian to raise minor children. If there’s no will, the court appoints a guardian. This is a decision most parents would prefer to make themselves.

Reference: The News-Enterprise (March 2, 204) “Why everyone needs a will”

Do You Know How to Probate an Estate?

Being asked to serve as an executor is flattering, as it shows someone you love trusts you enough to put you in charge of managing their estate. However, probating an estate is no simple task, says a recent article from The Mercury, “Planning Ahead: Do you really want to handle probating an estate on your own?”

Having an experienced estate planning attorney help with probate may be the difference between years of headaches and a few months of involvement, but not being overwhelmed with finalizing your loved one’s estate.

First, do you have time or energy to deal with many different bureaucracies? Financial institutions, insurance companies, annuity providers, governmental entities and other entities can be challenging.

Next, are you familiar with the laws, procedures and tax laws in Aunt Lucy’s state? If she lived in your state, you’re about to learn how your state works. If she lives in another state, you’ll need to learn a lot about how an estate is settled in a place you might never have been. However, you may need to travel to and take care of Aunt Lucy’s estate.

If your aunt owned property in more than one jurisdiction, being her executor may require you to become involved in a process called “ancillary probate,” where assets need to be transferred into the names of the beneficiaries listed in her will. You might need to work with an estate planning attorney from Aunt Lucy’s state to get this done.

Another consideration: are you prepared to navigate the family dynamics? This may not be too bad if you are Great Aunt Lucy’s only heir. However, you may become embroiled in family spats if your aunt had a family of children, grandchildren and great-grandchildren. If the family members are contentious, you may deal with more than bureaucracies.

A few other things you’ll need to know:

Some states have an estate tax, while others have an inheritance tax. Even if there’s no federal estate tax due on the estate, you’ll need to address these two taxes.

The inheritance tax follows the jurisdiction of the decedent, not the beneficiary. If the state has an inheritance tax, it doesn’t matter if you live out of state. Heirs still must pay the tax.

Non-probate property may still be taxed. In some states, like Pennsylvania, property passed through a Revocable Living Trust is still taxable for the state’s inheritance tax. So is property passing as “Payable on Death” (POD) or Transfer on Death (TOD). Jointly titled assets are taxable at a proportionate share of the value.

These details are just a few reasons an experienced estate planning attorney brings value to the estate. It’s not easy for a layperson to settle an estate without the help of skilled professionals.

Reference: The Mercury (Jan. 31, 2024) “Planning Ahead: Do you really want to handle probating an estate on your own?”

What Is the Purpose of a Living Trust?

There are so many misconceptions around trusts, especially thinking trusts are only for wealthy people, according to a recent article, “2 Key Benefits of Living Trusts” from Forbes. During your lifetime, a living trust is an extension of yourself. There are no tax benefits or tax liabilities until you die, when living trusts provide benefits compared to assets not held in trust.

What happens to different types of assets after death?

If you own assets with beneficiary designations, these will be passed to beneficiaries outside of probate. These are typically retirement accounts, life insurance, some investment accounts, pensions and annuities.

If you have joint ownership of assets, they will become the property of the surviving joint owner(s) after death. The most common jointly owned assets are real estate, bank and investment accounts.

If you own assets as an individual, they will go through probate. While bank and investment accounts do permit transfer-on-death (TOD) and payable-on-death (POD) elections to bypass probate, this is not appropriate for every situation.

Two of the most common benefits of having a living trust are avoiding probate or reducing the probate estate and having greater control over the distribution of assets.

If one spouse passes and owns all liquid funds (and/or a privately owned business) in their own name, the survivor may be left without funds to pay bills while the probate estate is being settled. Having a living will means the survivor, if named as a beneficiary of the trust, has access to assets during probate.

Probate also incurs expenses and can take months to settle an estate. Any assets going to through probate become part of the public record, which can create a host of other issues. A large estate in probate can become a burden on the surviving spouse and family.

When assets go through probate, the court has the final word on how assets are distributed. This may align with your will, but it might not. Suppose assets are held in a living trust. In that case, probate or at least reduce the number of assets going through probate and control the distribution of the assets without your personal financial information becoming part of the public record.

Your estate planning attorney can create a living trust, naming you as the trustee and a person to serve as a successor trustee. Your successor trustee will be responsible for distributing the assets in the trust upon your death.

There are many ways to create the trust. The spouse is typically the successor trustee, with varying levels of access to assets during the surviving partner’s lifetime, with the remainder going to children or relatives. Trust laws are state-specific, so speak with an experienced estate planning attorney to create a trust that suits your unique situation.

Reference: Forbes (Jan. 24, 2024) “2 Key Benefits of Living Trusts”

Documents You’ll Need to Update after Divorce

Divorce is a challenging and emotionally draining experience. Even when the divorce process is over, there’s still more to be done. Failing to update beneficiaries after a divorce can have serious consequences, as reported in The National Law Review article “The Crucial Importance of Updating Documents After Divorce.”

A recent case, In the Matter of the Estate of Michael C. Jones, illustrates what can go wrong. The couple divorced in 2018, and their settlement required Michael to pay Jeanine $200,000 with a provision that any outstanding payments would become a debt owed by his estate in the event of his death. They maintained an amicable relationship. However, in 2019, Michael became seriously sick, underwent emergency surgery, and died just days after the surgery.

Before passing, Michael executed a banking Power of Attorney, appointing Jeanine as his POA while in palliative care. She organized his funeral, paid his bills and took care of their former marital home. At the time of his death, Michael had paid Jeanine about $100,000 as per the terms of their divorce settlement.

While caring for his home, Jeanine discovered several US series EE bonds that designated her as the pay-on-death beneficiary. She cashed them in and received more than $77,000.

After his death, Michael’s daughter from a prior relationship applied to the court to be appointed as administrator of the estate. She took the position that since Jeanine had received $77,000 from the bonds, the estate only owed her $23,000 as per the terms of the divorce settlement. Jeannine objected, asserting the bonds were not included in the money owed her in accordance with the divorce.

Under New Jersey law, a divorce or annulment automatically revokes any beneficiary nominations on financial instruments, unless explicitly stated otherwise. It also terminates the former spouse’s interest in jointly held property. The law aims to protect individuals who fail to update beneficiary designations.

However, federal law governs the beneficiary designation on treasury bonds, argued Jeanine. In this case, federal law supersedes state law. The trial court disagreed and included the $77,000 as part of the $200,000 owed to Jeanine. The case went to the Appellate Division, which found for Jeanine, stating that federal law takes precedence over state law, and she was entitled to both amounts.

There are a few takeaways from this case. First, anyone undergoing a divorce should check how their state laws treat divorce’s impact on beneficiary nominations on financial instruments and jointly held property. Second, change beneficiary designations on every document and financial instrument—going through old file folders and investment records to search for anything important. Third, if your wish is for your ex-spouse to remain as a beneficiary, include this in the settlement documents. Fourth, speak with your estate planning attorney about your divorce so any necessary changes can be made to your estate plan promptly, including wills, trusts and any documents used for incapacity.

Divorce, like estate planning, requires attention to detail to ensure that your wishes are followed.

Reference: The National Law Review (Jan. 20, 2024) “The Crucial Importance of Updating Documents After Divorce”

What Should I Do to Get My Affairs in Order?

Estate planning is one of the most important tasks you can do for your family. It has many different steps. Using a checklist can help be sure your wishes are met and simplify the process for loved ones, according to an article from Forbes, “Estate Planning Checklist: Get Your Affairs In Order.” Every plan is different. However, there are several primary steps everyone needs to take to protect their future and secure their legacy.

Identifying What Needs to Happen to Protect Wealth: Asset protection is crucial to estate planning. One way to do this is to create a Medicaid protection plan. Nursing home care is expensive and not covered by Medicare or other medical insurance, except in very limited situations. Medicaid does cover custodial care in a nursing home. However, you need limited assets to qualify. A Medicaid plan helps ensure that you can access care while protecting wealth. Ask your estate planning attorney about a Medicaid Asset Protection Trust.

You may also need to protect assets against creditor claims, be sure an irresponsible heir doesn’t burn through any inheritance, or take steps to limit or avoid estate taxes. All of these can be accomplished with the help of an experienced estate planning attorney.

Consider Your Heirs and Their Needs: You may face unique circumstances impacting the people who inherit your wealth or your ability to provide for them. For instance, a direct inheritance could jeopardize their eligibility if your family includes a special needs individual who receives government benefits such as Supplemental Security Income (SSI) or Medicaid. You may need to have a Special Needs Trust (SNT) created.

Other issues to consider when creating your estate plan include leaving money or other assets to minor children not old enough to inherit or manage funds or leaving money to someone you don’t trust to manage it. By thinking about who you wish to provide for, you can make informed choices about the strategies and tools used to create your estate plan.

A Plan to Transfer Assets: Once you’ve clarified your heirs’ needs and any potential threats to your wealth, you’ll be better positioned to create an estate plan to facilitate the transfer of your property to the people or charities you want after death.

Your estate plan will likely include the following:

• A last will and testament.
• Pay-on-death accounts.
• Jointly owned property.
• Revocable Trusts.
• Irrevocable Trusts.

Prepare for Incapacity: Preparing for possible incapacity should be a key part of your estate planning checklist. This includes:

• Creating a durable power of attorney—to allow someone of your choosing to act on your behalf in managing assets and making decisions for you.
• Naming a healthcare proxy—giving someone the power to make medical decisions for you.
• Creating a living will—allowing you to convey your wishes for medical care regarding being kept alive by artificial means.

Address Other Issues: If you have minor children, your will is used to name a guardian. You may also mention your pets and designate a person to care for them and arrange financial support for their lifetime. You can also include instructions for your funeral, although the will may not be reviewed for a while after your passing. Talk with your estate planning attorney about how to best handle this in your jurisdiction.

Reference: Forbes (Dec. 25, 2023) “Estate Planning Checklist: Get Your Affairs In Order”

Why a Trust Works for Multi-State Property Owners

If you own real estate when you die, it is most likely your estate will be required to go through probate. This can take months to years and becomes expensive, as explained in the article “Why a trust is so useful for those who own real property in multiple states” from Coeur d’Alene/Post Falls Press. However, here’s the thing to be aware of: if you own property in more than one state, your estate must go through the probate process in every state where you own property.

A few strategies must be considered for snowbirds with homes in northern and southern regions or who own out-of-state rental property.

Some families will add an intended heir to the title (deed) of the real estate while the primary owners are still living. This is rarely recommended, since it can open the door to any number of problems. If the intended heir has a financial crisis, like a lawsuit, divorce, creditor issues, etc., the jointly owned property is an attachable asset.

Another solution people try is the “Pay on Death Deed.” This is a special type of deed where the recipient gets the real property on the death of the owner. This strategy has a few problems. However, the main one is that not all states allow these types of deeds to be used.

An experienced estate planning attorney will know whether or not your state allows the Pay-on-Death-Deed.

The best solution for most people owning property in multiple states is using a living trust.

The living trust provides the same directions as a last will and testament about who should receive what assets from your estate after your death, including real property. It also names a trustee, who manages the assets in the trust and distributes them after your death.

A key reason to use a living trust is the assets owned by the trust are outside of the probate estate. These assets pass to beneficiaries according to the terms of the trust and do not go through the probate process.

Once the living trust is established, the trust may hold title to any real property, regardless of where the property is located. The trustee does not have to deal with the courts in multiple states.

There is a tendency to think trusts are only used by the very wealthy. However, this is not true. Anyone who owns real property and doesn’t want it to go through one or more probate proceedings benefits from using a trust.

An experienced estate planning attorney can establish the trust and guide you through putting assets into the trust.

Reference: Coeur d’Alene/Post Falls Press “Why a trust is so useful for those who own real property in multiple states”

Can You Completely Avoid Probate?

When you die, your estate will typically need to go to your heirs through the probate process, which can take several months, might be expensive and will be stressful for loved ones. The article “How To Avoid Probate In 2023” from Forbes applies to avoiding probate in any year and contains useful tips and recommendations.

Simplified Procedures in Some States. Estate law is state-specific, so in some states, there is a means of transferring wealth for a small estate. An estate planning attorney will know how your jurisdiction works. Eligibility varies based on the estate's total value, the types of assets transferred and who the heirs are. Just because the process is simplified doesn’t mean there won’t be some court involvement. The estate may be vulnerable to creditors, and estate taxes may be owed to the state, so you’ll still want to take steps to protect your estate.

Gifting Assets With Warm Hands. In 2024, you can gift up to $18,000 per person without triggering a gift tax. Married couples may gift a combined $36,000. Let’s say you and your spouse have two children. You may give $36,000 to each child, taking $72,000 out of your estate. This is used as a simple way to reduce a taxable estate. However, don’t gift without carefully analyzing what you and your spouse need to live on. You’ll also want to be sure that you have enough funds for emergencies.

Creating a Trust. Creating a trust is another way to take assets out of your taxable and probate estate. Money, investment accounts and even insurance policies can be moved into trusts. The trust is a legal entity, and once assets are transferred into the trust, they are owned by the trust and not by the person who established the trust. The language in the trust document outlines exactly how you want the assets to be distributed, and a trustee must be selected to manage the trust.

Many different types of trusts serve a variety of purposes. A revocable living trust allows the grantor to change or modify the trust whenever the grantor wants. Nevertheless, the high level of access and flexibility comes with a cost—the assets in the trust may be subject to creditor claims and estate taxes.  An irrevocable trust cannot be changed and provides better protection. Your estate planning attorney will know which type of trust best suits your needs. A trust may also be useful when planning for incapacity and qualifying for Medicaid for long-term care.

Joint Ownership. Owning property with another person can help transfer assets after death. However, some risks are involved. If you and the other person have a falling out or disagree over how the property should be managed, or one wants to sell and the other doesn’t, you could end up in court. In addition, if the other person is sued or goes through a divorce, you may find yourself owning assets with someone you didn’t plan on being in business with.

Pay-on-Death Accounts. Some, but not all, banks and financial institutions allow accounts to be set up to pay another person upon the death of the owner. If possible, you’ll need to list a beneficiary on the account, and the assets will transfer automatically to that person outside of probate. Make sure to update your beneficiary designations, so the correct person receives the assets upon your death. If you have multiple children and only one child’s name is listed as beneficiary, they have no legal obligation to share the assets with their siblings. Using Pay-On-Death accounts should be coordinated with the whole of your estate plan, if an equal distribution is your goal.

If a will is prepared improperly, your family could become embroiled in a court proceeding to settle the estate. The best way to avoid or minimize court involvement is to work with an experienced estate planning attorney who can create a plan addressing your unique situation and achieve your goals.

Reference: Forbes (Nov. 30, 2023) “How To Avoid Probate In 2023”