When designing your initial estate plan or updating your current plan, think about your beneficiaries. Would it be prudent to include language to protect your beneficiaries or to take certain actions to make their life easier if you become incapacitated or die?

• Consult with a qualified estate planning attorney and have an up-to-date, legally valid estate plan in place.
• Update your estate plan regularly – every three to five years or sooner if something major changes in your life.
• Follow your estate planning attorney’s advice for proper asset ownership.  If you have a trust, fund it.  Avoid jointly owned property and make sure your beneficiary designations match your current intent.
• If your beneficiaries have any special needs or issues, disclose them to your estate planning attorney during your consultation.  If you already have a plan in place, call your estate planning attorney and ask if the development affects your plan.
• Pass assets in a lifetime protected trust, not outright.  Trusts provide asset protection so the assets are used only by your beneficiaries and not your beneficiaries’ creditors.
• Include special needs language in your trust so that an inheritance doesn’t disqualify a beneficiary from receiving governmental assistance.
• Include addiction language so if your beneficiary is suffering from a drug, alcohol, or gambling addiction, an independent trustee will distribute assets for the benefit of your beneficiary, but not directly to him or her.
• Include specific personal items for individual beneficiaries so they have something special to remember you by.  Include a fair distribution system for remaining personal items.  A high percentage of family fights are over personal possessions and final arrangements.
• Write down and share your wishes regarding final arrangements.
• Include an ethical will in your estate plan.  This means that you jot down your wishes, guidance, and words of love for your loved ones.
• During your lifetime, tell your loved ones that you love them and that you’ve engaged in thorough estate planning.  Explain who’s in charge when you die or become incapitated.

If your current estate plan isn’t in writing or doesn’t fully consider your beneficiaries’ needs, consult with a qualified estate planning attorney.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

Many people put off the need for a will during their lifetime.  If you choose not to create a will, you may assume that your spouse will still be entitled to all of your assets.  The truth is, this may not be the case.  Take a look at the following information, to learn more.  If you’d like to make sure that you’re in control over how your assets are distributed, work with an estate planning attorney to create your will.  If you have any questions about how a will gives you control, contact an estate planning attorney.

Without a will in place, you’re not in full control over how your property is distributed.  If you choose not to create a will, it’s important to think about a few things.  This will help you get a better idea of how your assets will be distributed.

Do you own property jointly with another individual?  If so, this person will be given your assets after death.  This can be a one way to ensure that your spouse will be given certain property.  It’s important to carefully think through this ownership decision because there are pitfalls to joint ownership, even with a spouse.

Additionally, your state laws will determine how your individually owned assets are distributed after death, if you choose not to create a will.  You may assume that your spouse will get most of your assets, but this is likely not the case.  Many state laws, including Arkansas, ensure that children, even minor children, get a significant portion of an individual’s assets.

Take the time to handle your estate planning affairs so that you’re in full control over how your assets are distributed.  By creating a will, you can outline how you wish for your assets to be given away, making it possible for you to leave a large portion of your assets to your spouse.

If you have any questions, or if you’d like to create a will, consult with a qualified estate planning attorney.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

My son is a mess; he’s an alcoholic and just can’t get himself straightened out.  It’s embarrassing.  Do I really need to tell my estate planning attorney?  I really don’t want anyone to know.

Estate Planning Customization Requires Family and Financial Information

We know that it’s uncomfortable to talk about embarrassing family situations, including addictions such as alcoholism; but it’s necessary.  There is much your estate planning attorney can do to customize your estate plan to help your loved ones and to protect you.  If your plan isn’t customized to your particular situation, it won’t work.

It’s also necessary to disclose family dynamics, health issues, potential divorce situations, financial difficulties, and the like.  It all factors into the design and implementation of a comprehensive estate plan.  Your estate planning attorney will ask you to fill out written forms and then ask you questions during your estate plan design meeting.  The more information that you disclose, the better your estate planning attorney can diagnosis your needs and design an estate plan that matches your needs.

Your Estate Planning Attorney has Heard it Before

Your estate planning attorney won’t judge you, and you can be sure that he or she has previously heard similar stories.  We, as humans, are more alike, and experience more similar situations, than we know.

In addition, rest assured that all your discussions will be kept in confidence by your attorney.

How Your Estate Planning Attorney Can Help

If your estate planning attorney is aware of an addictive disorder, she will take it into consideration when designing your plan.

For example, it would likely be unwise to appoint an alcoholic to a position as a trusted helper such as personal representative (i.e. executor), trustee, guardian for minor children, or power of attorney agent.

In addition, if the person with the addiction is a beneficiary, an outright inheritance could make the problem worse or even kill him or her.  Instead, your attorney can design a life-time protected trust with a professional trustee.  Assets would be distributed to benefit your beneficiary, but not directly to him.  For example, the rent would be paid directly to the landlord and the medical bills would be paid directly to the medical provider.

If you’re in the estate planning process, disclose uncomfortable family, health, and financial issues to your estate planning attorney.  You can trust him or her to keep your confidences and to use the information to help you and your beneficiaries.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

There are lots of ways you can have your trust distribute money to your beneficiaries.

Here is a checklist of some of the jargon, considerations, and approaches involved in trust distribution. Too often people view these critical and personal decisions as mere “boilerplate”. Doing so may well jeopardize your intended goals for setting up a trust. You need to take the time, and think through the “what ifs” to make it work.

When preparing a trust agreement consider all aspects of distributions decisions. Who should make the decisions? Who are the trustees? Should you instead provide for a distribution committee to make these decisions? When and how should these decisions be made? Start with personal details, and then conform those decisions to meet tax law requirements for the particular trust. Here are some points to consider:

• Should there be any limits on the standards for distributions?
• Should different trustees have different standards by which they can make distributions? For example, an institutional co-trustee may be given an unlimited standard (“comfort and welfare”) while an individual trustee may be limited to maintaining a beneficiary’s lifestyle (“ascertainable standard”). You may view the institution as a stronger and more independent decision maker that will not be pressured by a beneficiary in the same way that a family member trustee might be.
• It’s common to limit distributions to the beneficiaries in the areas of health, education, maintenance and support (“HEMS) to what the tax law calls an “ascertainable standard”. This is loosely translated as maintaining the beneficiary’s “standard of living”.  Lots of people are comfortable with this standard for distribution, but what does it mean? What is a beneficiary’s standard of living? When should it be determined? When you sign the trust (or the will creating the trust)? After you die? After Junior starts spending that big insurance policy he collected after your death?
• How should the trustee balance distributions when there are multiple current beneficiaries of one trust? It is common to name the surviving spouse, and the children all as beneficiaries of a by pass trust (intended to safeguard the current $2 million federal exclusion, or often a lower state exclusion, from tax in the surviving spouse’s estate). Who should be favored, if anyone?
• How should the trustee balance distributions when there are current beneficiaries (e.g., your third spouse), and remainder beneficiaries (children of your first marriage) of one trust? Some guidance as to how the trustee should balance distribution decisions should be provided. Who, if anyone, should be favored ? In some cases a unitrust approach is advisable (e.g., pay 4% of the value of the trust each year to the spouse, the remainder on her death to the children). It’s reasonable and clear. But often it’s too simplistic and rigid to accomplish your goals. If so, you need to provide parameters.
• Who should be included in the definition of beneficiaries? If your children are named as beneficiaries of a trust, should their children also be included (although generation Skipping Transfer tax (GST issues) will have to be considered)?  How do you define grandchildren? Should adopted children be included? Should your children’s spouses be included? Partners?
• Should the other resources available to a beneficiary be considered? If grandma set up a trust to pay for you daughter’s lifestyle, should the trust you set up distribute what effectively will be a duplicative amount? Should a beneficiary be required to take out a reverse mortgage (or otherwise tap home equity) before the trust can pay out? If you mandate that support be considered, this could be a risk. If your spouse is a beneficiary of a by pass trust (not included in her estate) and the QTIP trust (marital trust taxed in her estate) mandates that distributions consider all resources, increasing the distributions from the by pass trust will effectively increase the tax on her death. Is that the intent?
• Must all beneficiaries of a trust be treated equally? Equal sounds simple and superficially “fair” but does nothing to account for changed circumstances, different needs, etc. If one child beneficiary has a major health issue, is equal distribution really appropriate?

Contact the Deborah Sexton Law Office at (479) 443-0062 or www.arkansas-estateplanning.com to get answers to questions you may have.  Deb offers free half-hour consultations.

This information in this article is brought to you by Martin M. Shenkman, CPA, PFS, MBA, JD, AEP® through The NAEPC Foundation.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

There are many different varieties of wills and trusts to fit the needs of each individual.  Only a qualified attorney should draft these documents.  To give
you an idea of the options available to you, please see the below common definitions of several types of wills and trusts.  If you have further questions, please contact the Deborah Sexton Law Office at (479) 443-0062 or www.arkansas-estateplanning.com.
Deb offers free half-hour consultations.

Basic will:  A basic or simple will generally gives everything outright to a surviving spouse, children or other heirs.

Will with contingent testamentary trust:  Frequently, married couples with minor children will pass everything to their spouse, if living, and if not, to a trust for their minor children until they become more mature.

Pour-over will:  The so-called “pour-over” will is generally used in conjunction with a living trust.  It picks up any assets that were not transferred to the trust during the
person’s lifetime and pours them into the trust upon death.  The assets may be subject to probate administration, however.

Tax-saving will:  A will may be used to create a testamentary credit shelter trust.  This trust provides lifetime benefits to the surviving spouse, without having those trust assets included in the survivor’s estate at his or her subsequent death.

Living trust without tax planning:  Generally, the surviving spouse has full
control of the principal and income of this type of trust.  Its main purpose is to avoid probate.  If required, the trust can also be used to manage the assets for beneficiaries who are not yet ready to inherit the assets outright because they lack experience in financial and investment matters.

Bypass trust:  This type of trust avoids probate and allows the first spouse to die of a married couple to set aside up to $5,000,000* in assets for specific heirs while  providing income and flexibility to the surviving spouse.  The appreciation on assets in the trust can avoid estate tax.

QTIP trust:  A type of trust known as a QTIP trust allows the first spouse to die to specify who will receive his or her assets after the surviving spouse dies.  Use of a QTIP also permits the deferral of death taxes on the assets until the death of the surviving spouse.

QTIP means “qualified terminable interest property.”  The income earned on assets in a QTIP trust must be given to the surviving spouse for his or her lifetime.  After the death of the surviving spouse, however, the assets then pass to beneficiaries chosen by the first spouse to die, frequently children of a prior marriage.

Qualified domestic trust:  Transfers at death to a noncitizen spouse will not qualify for the marital deduction unless the assets pass to a qualified domestic trust (QDOT).  The QDOT rules require a U.S. Trustee  (unless waived by the IRS) and other measures that help ensure collection of a death tax at the surviving noncitizen spouse’s later demise.

For more information or to set up a free half-hour consultation, contact the Deborah Sexton Law Office at (479) 443-0062 or go to www.arkansas-estateplanning.com.

Note:  Additional trusts may be used for current income tax savings or to remove life insurance from the taxable estate, but the above-described documents are generally at the center of a person’s estate plan.

*The applicable exclusion amount is the dollar value of assets protected from federal estate tax by an individual’s applicable credit amount.  For 2011, the applicable  exclusion amount is $5,000.000.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

Working on any heavy job site can be very treacherous for even the heartiest of work ethics, and some of the more stoic in attitude might hold off on the right medical attentions for sometime before admitting a disability, here is where a brief understanding of Medicaid law can be more convenient than working at the issue from the dark. Knowing the benefits, and being able to navigate some of the harsher and more unfriendly qualities of the system, can yield more of that vital experience that makes impatience impractical by totally isolating that person out for an indifferent treatment.

Inheritance planning in light of an injury taken too far beyond repair, an option that must be confronted early as the loved one may not be able to speak for themselves, and it is here that family members may feel reluctant to speak-up for an overwhelming fear of making the wrong decision. Whether with children understanding what is going on, or even in the situation where no one is left to inherit anything, there is still this vital portion of life where it can only be advantageous to think of a living will or a trust as forethought before any other unwanted steps.

Even if the hospital visit is a quick step to recovery, there may have been lasting effects in other ways that may lead to further need of aid, and patience with how an established system works is just as vital when disability planning, how Medicaid law functions in the mixture of the competing interests. Sometimes it may even feel as though that health is not even the issue at all, but careful planning at any point in life can only make it easier to live with certainty for the future.

Probate law differs from state to state sometimes county to county, but there are many elements that remain the same throughout each practice and school, it is these fundamentals that a person who may be disabled can rely upon even when recovery seems hopeful. Either will or trust will allow for the settlor, or the person whose estate is initiating the legal proceedings, to defend their equal rights even if they do not happen to be there themselves.

Without a medical standard to handle affairs of a delicate nature, or in the event of not having created a living will or trust, the person’s affects get jostled around until there is nothing left to manage. This could be true in the case of personal property or children left without any parents, and in this case conservatorship is appointed by the court systems, being able to make decisions and advise as the representative in place of the incapacitated person or for the children.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

In most cases, an adopted child is treated identical to a natural child when it comes to inheritance. If you die without leaving a Will, your adopted children are entitled to an equal share of your estate, the same as any natural child.

On the other hand, if you give a child up for adoption, that child is no longer considered your natural child and, therefore, is not entitled to any share in your estate.

To summarize, if you are adopted, you are considered a natural child of your adopted parents, and not a child of your biological parents.

If someone leaves a Will instructing their children inherit without specifically naming each child, these adoption rules are enforced. In the event each child is named in the Will, this takes precedence.

Should an adopted child be omitted from a Will written by their adoptive parents, they can contest the Will and receive an equal share if there is reason to believe the child was not intentionally left out.

If you have given a child up for adoption, you can still leave that child an inheritance, but it is necessary to identify him or her specifically in your Will. He or she does not have automatic inheritance rights.

Stepchildren do not have inheritance rights, even if you raised a stepchild from a young age. Children from a previous marriage, especially if you have remarried, have special considerations. You may require a trust for those children to guarantee their inheritance.

Estate planning laws can be very complicated. For this reason, it is recommended you obtain assistance from experienced attorney to develop a solid estate plan protects your loved ones and their inheritance.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.