Paul O. Dillon, Attorney at Law

Making Your Own Decisions Through Estate Planning

Estate planning is often set aside in favor of more fun activities, like vacation planning and preparing for family holidays. However, once done, it provides great peace of mind. A recent article from MLT News, “Estate planning—making personal choices,” looks at what an estate plan encompasses.

Durable Power of Attorney for Finances and Health Care. These documents allow you to name the person you choose to make financial or health care decisions if you cannot because of illness or incapacity. They can take effect immediately upon being executed or created as “springing” documents that take effect when you are deemed incapacitated. However, springing POAs may lead to delay, so most people choose Durable Powers. Your estate planning attorney will explain the best options for you.

Advanced Directives focus on your wishes for medical care when you are unable to communicate and are nearing end-of-life or likely not to live without artificial means. Your advanced directives can be very specific about what kinds of treatment you want or when you would prefer to be taken off life-support.

Disposition Authorizations are used to convey your wishes for burial, cremation, memorial services, or other terms for what you want to happen to your body after you die. These vary by state, so check with your estate planning attorney. While difficult to consider, if you have strong preferences, it’s best to have them in a written document.

Last Will and Testament direct how you want your assets to be distributed after death. A will is also used to nominate a personal representative or executor who will settle your estate. If you have minor children, your will nominates a guardian to raise them. This is a highly personal choice you can make with a will. Otherwise, the court will decide who will care for your children.

Trusts are used to manage assets during life and after death. A trust is a separate legal entity created to hold assets and distribute them to beneficiaries. A revocable trust allows the person who establishes the trust (the “grantor”) to control the assets held in the trust. However, the trade-off for continued control of assets is that they don’t have the same level of protection as an irrevocable trust. An Irrevocable Trust requires the grantor to give up control of the assets. However, the assets are better protected against creditors and are not countable for Medicaid purposes.

Your estate plan should also include checking on beneficiary designations, which are used in a variety of financial and investment accounts, IRAs, 401(k)s and insurance policies, to pass assets directly to beneficiaries upon your death.

An estate plan includes tax planning to address tax liability by taking assets out of an estate and placing them inside trusts or LLCs (Limited Liability Companies), depending on the family’s circumstances.

For families with members who are disabled, Special Needs Trusts are used to safeguard funds to plan for the individual’s future while maintaining their eligibility for means-tested government benefits.

By creating a comprehensive estate plan with an experienced estate planning attorney, you get to be the one making decisions about your future and your legacy. Without it, the laws of your state and the courts will make decisions about what will happen to you during serious illness, who receives the assets you’ve saved and who will raise your children. We know you’d rather make these decisions than have them made for you.

Reference: MLT News (March 4, 2025) “Estate planning—making personal choices”

Making Your Own Decisions Through Estate Planning

Estate planning is often set aside in favor of more fun activities, like vacation planning and preparing for family holidays. However, once done, it provides great peace of mind. A recent article from MLT News, “Estate planning—making personal choices,” looks at what an estate plan encompasses.

Durable Power of Attorney for Finances and Health Care. These documents allow you to name the person you choose to make financial or health care decisions if you cannot because of illness or incapacity. They can take effect immediately upon being executed or created as “springing” documents that take effect when you are deemed incapacitated. However, springing POAs may lead to delay, so most people choose Durable Powers. Your estate planning attorney will explain the best options for you.

Advanced Directives focus on your wishes for medical care when you are unable to communicate and are nearing end-of-life or likely not to live without artificial means. Your advanced directives can be very specific about what kinds of treatment you want or when you would prefer to be taken off life-support.

Disposition Authorizations are used to convey your wishes for burial, cremation, memorial services, or other terms for what you want to happen to your body after you die. These vary by state, so check with your estate planning attorney. While difficult to consider, if you have strong preferences, it’s best to have them in a written document.

Last Will and Testament direct how you want your assets to be distributed after death. A will is also used to nominate a personal representative or executor who will settle your estate. If you have minor children, your will nominates a guardian to raise them. This is a highly personal choice you can make with a will. Otherwise, the court will decide who will care for your children.

Trusts are used to manage assets during life and after death. A trust is a separate legal entity created to hold assets and distribute them to beneficiaries. A revocable trust allows the person who establishes the trust (the “grantor”) to control the assets held in the trust. However, the trade-off for continued control of assets is that they don’t have the same level of protection as an irrevocable trust. An Irrevocable Trust requires the grantor to give up control of the assets. However, the assets are better protected against creditors and are not countable for Medicaid purposes.

Your estate plan should also include checking on beneficiary designations, which are used in a variety of financial and investment accounts, IRAs, 401(k)s and insurance policies, to pass assets directly to beneficiaries upon your death.

An estate plan includes tax planning to address tax liability by taking assets out of an estate and placing them inside trusts or LLCs (Limited Liability Companies), depending on the family’s circumstances.

For families with members who are disabled, Special Needs Trusts are used to safeguard funds to plan for the individual’s future while maintaining their eligibility for means-tested government benefits.

By creating a comprehensive estate plan with an experienced estate planning attorney, you get to be the one making decisions about your future and your legacy. Without it, the laws of your state and the courts will make decisions about what will happen to you during serious illness, who receives the assets you’ve saved and who will raise your children. We know you’d rather make these decisions than have them made for you.

Reference: MLT News (March 4, 2025) “Estate planning—making personal choices”

Why Is Estate Planning Important?

Estate planning is part of long-term planning, no matter what the size of a person’s investment portfolio or their total net worth. It protects the individual and their property, which is why everyone needs an estate plan. Estate planning is an umbrella term used to refer to everything from asset allocation after death to planning for incapacity and end-of-life healthcare decisions, according to a recent article in The Daily News, “What to know about estate planning.”

Typical components of an estate plan include a last will and testament, power of attorney, healthcare directives and trusts. Most surveys conducted in the last few years show only a third of all American adults have a will, and more than half think they don’t need an estate plan because they don’t own enough assets.

Here’s all you need for an estate plan to protect yourself and your loved ones:

A will is the document used to distribute assets after your death. Working with an estate planning attorney who knows the laws of your state is the best way to ensure that your wishes are followed. Trying to do this on your own or with an online platform puts your will at risk of being deemed invalid by the court, which would put your entire estate into the hands of your local probate court.

The will is used to name an executor to carry out the directions you’ve expressed in the will. It is also used to name a guardian if you have minor children. Without a will, or if a will is found to be invalid, the court will name someone to take over distributing your assets. If you have young children and both parents are deceased, the court will decide who should raise your children.

Trusts are used to protect assets, minimize taxes and safeguard assets for beneficiaries. There are many different types of trusts, and an experienced estate planning attorney will know which type is best for your family. For instance, if a family member is disabled, you may need a Special Needs Trust. Your estate planning attorney will also discuss whether you need a Revocable or Irrevocable Trust.

Trusts are used to shield assets from creditors and may be part of Medicaid planning. Another benefit is that assets in a trust don’t go through the probate process. If you are concerned about disgruntled family members poring over your will—which becomes a public document after it is entered into probate—you may wish to use a trust to keep your estate and your assets private.

Planning for incapacity is an integral part of an estate plan. Suppose you become incapacitated without any estate planning. In that case, your family will need to go to court to be able to speak with your doctors, talk with the health insurance company and take part in your healthcare decision-making. Court proceedings are costly and take time; they are not something you want to be embroiled in during a health emergency.

Your estate plan should include a Power of Attorney, which names another person to act on your behalf if you are incapacitated. You’ll also want a Healthcare Proxy to permit another person to make medical decisions on your behalf. An Advanced Directive will express your wishes for what kind of care you want if you can’t communicate your wishes.

Having an estate plan expresses your wishes for more than your property distribution. If you don’t have an estate plan, contact an estate planning attorney to discuss your intentions for assets, beneficiaries and your future. Most people are surprised at how relieved they feel once this task is taken care of. The peace of mind knowing you and your family are protected is well worth the effort.

Reference: The Daily News (Jan. 30, 2025) “What to know about estate planning”

What Is a Flexible Irrevocable Trust?

Estate planning attorneys use a variety of trusts and often recommend irrevocable trusts, according to a recent article from Kiplinger, “Sophisticated Planning with Flexible Irrevocable Trusts.” Irrevocable trusts are commonly used for Special Needs Trusts to help individuals become eligible for Medicaid and veterans’ benefits and to minimize tax liabilities.

The term “irrevocable” can cause concerns for people who are used to maintaining complete control over their assets. However, careful drafting of these documents can allow indirect control over assets, income and ownership, while providing flexibility usually not associated with irrevocable trusts. A flexible irrevocable trust provides the ability to respond to changes in circumstances, a welcome option for many.

How do flexible irrevocable trusts work? Assets are not transferred directly into the irrevocable trust. Instead, they are transferred to a legal entity like a Limited Liability Corporation (LLC), an S-Corporation, or a Family Limited Partnership (FLP) controlled by an individual. An interest in the entity is then transferred to the irrevocable trust. Nonvoting interests in the entity are then transferred to the trust. Done correctly, the individual retains control of both the entity and the asset.

In this situation, the person who is directing the creation of the trust will need to designate the initial trustee who will oversee transactions and activities for the trust. Some people are more comfortable appointing themselves as the initial trustee. However, it’s better in this case if they are not the initial trustee. For instance, if they are the initial trustee for a trust created for their children, distributions will be limited to pay for the health, education, maintenance and support, known as HEMS, if the goal is to exclude assets from the estate for tax purposes.

HEMS distributions, however, could eliminate or impede beneficiary protection from creditors. The creditor could say the beneficiary has a right to the HEMS distribution and take this amount from the trust.

The trustee, when not the individual who created the trust, may have total control to make distributions, which provides better asset protection to the trust’s beneficiaries. You must be 100% certain that the trustee will act on your instructions.

When selecting a trustee, keep two things in mind: while you are living, you want the trustee to follow your instructions, and after your death, you want someone whose judgment you trust implicitly. The best candidate may be an adult child if the family dynamics and history support this decision.

Having the ability to remove the trustee and designate a new one without cause is another critical part of drafting the trust.

If the need to replace the initial trustee occurs, be careful not to select someone who is related to you, a lineal descendent, or an uncle or aunt. Don’t name someone who is an employee of a business of which you own a significant share. While a related or subordinate person may be a successor trustee, they should not be the primary trustee.

These types of trusts require the knowledge of an experienced estate planning attorney. Consult an estate planning attorney if your circumstances warrant a flexible, irrevocable trust.

Reference: Kiplinger (Jan. 30, 2025) “Sophisticated Planning With Flexible Irrevocable Trusts.”

What Is the Difference between Equal and Fair Inheritances

Deciding how to disperse a lifetime of assets among heirs is a common issue seen by estate planning attorneys. The idea of being “fair” to family members generally refers to a wish to divide the estate equitably, according to a recent article from The News-Enterprise, “Fair isn’t same as equal when dividing estate.”

Assets are commonly distributed by giving each person an equal share. If a beneficiary has died, their share passes to their descendants, or the living heirs divide the decedent’s share.

In some cases, gifts already made to heirs need to be taken into consideration. Let’s say one child has received a $18,000 gift to help purchase a house. The parents may deduct this amount from the beneficiary’s overall inheritance to keep asset distribution fair to the other children.

If one of the children has supported a parent, provided housing, or devoted time and effort towards their care, the estate plan may give the caregiving child more to recognize their dedication. Caregiving adults give up a great deal to care for aging parents, sometimes delaying their careers or losing out on career or social opportunities. This seems like a reasonable response. However, it may engender resentment by non-caregiving siblings. An estate plan should be very clear about this distribution method, and a letter of intent may be useful in case of any court challenges.

When the family includes disabled individuals, distribution may be based on their short- and long-term needs. For instance, an adult child who is unable to support themselves may be the recipient of assets through a Special Needs Trust. If they inherit assets directly, they may become ineligible for government benefits. A Special Needs Trust requires the help of an estate planning attorney to ensure that the SNT is created properly.

When adult children have achieved different levels of financial success, parents can also provide more for the children who need more help. A conversation with all the children should occur so they understand why one sibling is receiving more than another.

Blended families face challenges when distributing assets between stepparents and stepsiblings. Assets are usually divided between spouses, and then the spouses distribute their shares of the estate to their children. Marital trusts may be needed to ensure that no child is disinherited, and an experienced estate planning attorney will be able to structure the estate properly to achieve this goal.

Suppose spouses in a blended family have significantly different levels of assets. In that case, the couple may leave additional assets to the spouse's heirs with a higher net worth. How assets are distributed will also depend on whether or not the couple has merged their finances and whether or not each has agreed to waive their spousal claim on each other’s estates.

An estate planning attorney works with families to decide how they wish to distribute their wealth and guides the process to make it as conflict-free as possible. Fair is not always equal. However, planning and full transparency can build bonds between family members.

Reference: The News-Enterprise (Dec. 7, 2024) “Fair isn’t same as equal when dividing estate”

How Does a Special Needs Trust Work?

The most straightforward description of a special needs trust is designed to hold assets for a disabled person without putting benefits received from the government at risk. It’s essential for those planning for a loved one’s future to understand how special needs trusts work, how they are funded and what they can and cannot accomplish. A recent article appearing in Success, “What Is a Special Needs Trust?” provides more insight.

Individuals with disabilities who qualify for financial support through Medicaid or Supplemental Security Income (SSI) must have limited assets and income. They become ineligible for benefits and resources if they exceed their state’s limits. A Special Needs Trust (SNT) keeps assets separate.

An estate planning attorney creates the SNT and names a trustee for the funds. The trust's assets are to be used for housing, transportation, education, health and other expenses not covered by government benefits.

In some cases, the SNT shouldn’t be funded until necessary. Once money or other assets are in the trust, its use is restricted. Parents are advised to ensure that well-meaning grandparents or other family members don’t bequeath assets directly to their disabled loved ones. They have the option of creating an SNT of their own or bequeathing assets to the SNT created by the parent.

There are different kinds of SNTs. A Third-Party Special Needs Trust is created by a parent or other involved person to benefit a disabled child. If any assets are in the trust when the beneficiary of the trust dies, the person who created the trust decides who receives them. They may choose to donate the assets to a charity or a family member.

If an adult becomes disabled later in life, a different type of trust is used: a First Party Special Needs Trust. These trusts are created to own the assets of the disabled individual. For instance, if someone becomes disabled due to a car accident and receives a legal settlement, the money would go into the trust. This allows the disabled person to continue to receive government benefits. When the person dies, the funds spent on their care are paid back to the government through the Medicaid Repayment Program.

Parents or loved ones need several other legal documents to protect themselves and their disabled family members. An estate planning attorney will draft a will to ensure that the parent’s assets pass into the Special Needs Trust. Everyone should have a Power of Attorney and Medical Power of Attorney to protect themselves in case of incapacity.

Checking beneficiary designations is especially important if a family member receives funding from a Special Needs Trust. The person named on the beneficiary designations receives assets upon the owner’s death, which could put their government benefits at risk. All assets must go into the Special Needs Trust to protect their Medicaid eligibility.

Planning for the future is essential for parents of disabled children and adults. It can’t fix everything, but it can relieve some of the worry, knowing that their loved one’s future is protected.

Reference: Success (Oct. 20, 2024) “What Is a Special Needs Trust?”

How Professionals Use Estate Planning

Estate planning encompasses many aspects of an individual’s life, including asset management, wealth transfer and tax planning. With the help of an experienced estate planning attorney, a secure financial future and protection for loved ones can be accomplished. A recent article from mondaq, “Estate Planning for Professionals” provides useful details.

Estate planning includes protecting personal assets from creditors. The tools most often used include trusts, retirement accounts and insurance. Which type of trust is needed depends upon each person’s circumstances and should be tailored to meet your needs. Available trusts include gift trusts, revocable trusts, marital trusts, trusts to benefit children and special needs trusts, to name a few. Trusts also transfer business assets out of direct ownership while minimizing estate taxes.

Retirement accounts, including IRAs, are considered savings vehicles but serve other purposes. Certain retirement accounts include ERISA spendthrift protections, which also allow unlimited accumulation free from creditor claims while protecting someone from taking too much out of their account. ERISA, a federal law, does not protect IRAs, so any protection for the IRA is state-specific. In some states, assets in IRA and Roth IRAs are protected from creditors in case of bankruptcy.

Business owners are often advised to use LLCs and corporations to protect assets from creditors. However, the entity used depends upon the nature of the business and the owner’s circumstances. Keeping business and personal assets separate is a foundation of estate planning, which should also incorporate retirement and succession planning.

Succession planning should be done as soon as a business reaches a certain level of stability and success. If family members are part of the business, assigning key roles, clarifying responsibilities and planning for how ownership will transfer when the founding owners decide to retire or if they die while still operating the business needs to be in place. How the business will be transferred, which can occur in many different ways, must be clarified.

Divorce is an unpleasant fact of life for many families. Protecting assets must be weighed along with maintaining relationships, particularly where children are involved. A pre-nuptial agreement for the professional or business owner should be part of planning for marriage. Drafting the document when the relationship is good can clarify issues and hopefully preclude some acrimony if the marriage doesn’t go well.

An estate plan requires time to prepare, as documents including a last will and testament, power of attorney, healthcare power of attorney, advanced directives and trusts all require careful drafting. Any estate plan must be reviewed every few years to ensure its efficacy.

Reference: mondaq (Oct. 18, 2024) “Estate Planning for Professionals”

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?”

Here’s When You Need to Update Your Will

If you’ve got a will and an estate plan, you’re ahead of most people who are completely unprepared for the future. However, having a will is just the start, says a recent article from AARP.org, “6 Times When You Should Update Your Will.”

A will needs to be kept up to date. Changes need to be made when life-changing events occur to ensure that it still reflects your wishes. A skilled estate planning attorney should make these changes to ensure that the will is valid.

Changes to your marriage or family. Anytime you undergo a significant change, like welcoming a new child into the family or starting a divorce, you must make sure your will is updated. If you are in the middle of a divorce and you die, do you want your old will to give the spouse you were divorcing everything? There are also situations where people neglect to update their wills, and a first wife receives a surprise windfall while the current wife is left in the cold, financially speaking.

Changes in your heir’s situation. If an adult child develops a substance abuse problem, you may not want them to inherit a large sum of money all at once. You may create a trust and name a trustee, setting conditions on their ability to inherit. If an heir becomes disabled and applies for government benefits, you’ll want to create a Special Needs Trust not to make them ineligible for support and programs.

Relocating to a new state or even a new country. The Census Bureau reports that more than 1.2 seniors move across state lines every year, and many Boomers choose to live overseas. Wherever you go, you want to be sure your will is still valid. Estate laws vary from state to state, so the will you created when you lived in Illinois won’t necessarily be valid in Arizona. If you move to another country, you must have a will drafted to comply with local laws.

Your net worth increases or decreases significantly. Whether your net worth goes up or down, a change in your financial circumstances warrants a look at your will. If you inherited a big sum, you may want to add some philanthropy to your estate plan, or you may want to change how your estate is distributed. Any reallocations need to be documented properly.

You want to make a change. Life is full of changes. Someone you picked to be your executor five years ago may have died, and you haven’t decided who you want to replace them. You could also have a falling out with a family member and want to reduce their inheritance. Most importantly, don’t try to amend an existing will yourself. Speak with an estate planning attorney to ensure that your wishes are followed, and the changes are valid.

It’s been more than four years since you’ve reviewed your will. Estate plans are never one-and-done documents. Even if your life hasn’t changed, tax laws have. Your will needs to be revisited every three to five years to ensure that it works to accomplish your goals and protect loved ones.

Reference: AARP.org (Sept. 23, 2024) “6 Times When You Should Update Your Will”

Estate Planning Lessons from Mickey Mouse and Cinderella

At the center of every fairy tale is a human story centered around basic life experiences, as any English major will tell you. Therefore, it’s no surprise that the stories and characters from Disney hold life lessons for estate planning, as described in a recent article, “9 Estate Planning Lessons From Disney Movies,” from Forbes.

For a blended family story, look no further than Cinderella. When her father died and left his estate to an evil stepmother with two equally wicked daughters, he may not have thought of the impact it would have on poor Cinderella. By structuring the estate plan to provide for his daughter from the first marriage, he could have prevented Cinderella from being economically dependent on her stepmother. Leaving a portion to Cinderella and the remainder to the stepmother could have ended the story long before the prince entered the picture. Putting assets into a trust for Cinderella and naming a neutral party as trustee is another option her father could have explored.

Snow White’s seven dwarfs is a tale of planning for dependents. Each dwarf has their own behavior traits and needs, just as children do. For minors or children with special needs, unique circumstances need to be addressed by estate planning. Parents need to put a clear guardianship plan in place to protect dependents and be sure they are cared for by people who understand their needs. Without a plan, which includes a will naming guardians and a Special Needs Trust if appropriate, the court may appoint a guardian who might not be a good fit for the child. Establishing trusts can ensure that funds are available for education and living expenses, adding another person looking out for the child.

Who better represents incapacity than Sleeping Beauty? Facing a health crisis in which people can’t make their own decisions requires planning. A financial power of attorney and healthcare proxy ensure that someone you know and trust will be able to act on your behalf if you should eat a poisoned apple and fall into a deep sleep. By planning for incapacity, you can prevent court intervention and ensure that your healthcare choices are followed.

The Princess and the Frog exemplifies the need for good business succession planning to ensure that the business has a future. Does a business owner want to pass the business on to the next generation or sell it? This requires planning for taxes and estate planning. How should assets be gifted to minimize tax liabilities?

Failing to have an estate plan often leads to a sad ending for family members. Without it, there’s no guarantee of a kind-hearted prince or magical enchantress stepping in to make things right. Consult with an experienced estate planning attorney to protect your children and yourself from the twists and turns of life.

Reference: Forbes (Sept. 27, 2024) “9 Estate Planning Lessons From Disney Movies”