With greater numbers of baby boomers approaching their retirement years, Americans have a heightened awareness regarding the importance of putting their affairs in order.  One need only Google the search phrase “do-it-yourself will kits” to know that marketers of online legal forms are eager to fill the void.

As more consumers begin to dabble in drafting their own legal documents, estate planners and financial advisors should advise their clients about the pitfalls of do-it-yourself estate planning.  While some of your clients may have convinced themselves that their DIY legal documents will pass scrutiny in the probate courts once they’re gone, it’s often not the case.    

Having practiced as a probate attorney for a number of years, I’ve seen my share of poorly drafted legal documents.  As a result, I often find myself representing heirs, executors, administrators and trustees in contested wills and in other expensive probate litigation proceedings.

In a high percentage of the probate cases that I’ve handled, I come away reflecting on how the heirs could have been spared the anguish, delay and expense of probate litigation had the deceased individual (testator) sought the services of qualified legal counsel.

An effective way for professional advisors to recommend a cautious approach for DIY clients is to share with them real-life stories, such as the following case I encountered. 

Litigation Over Mom’s DIY Will

This case involved one of my Florida clients, whose mother created her own typewritten will.  The mother had four adult children from two different husbands, but chose not to mention my client’s two half-siblings in the will.  Having been named in the will as personal representative for the estate, my client became the target of a lawsuit by her half-siblings who alleged undue influence, among other claims.

In addition to failing to mention the two children by a previous marriage, the mother’s will left out a residuary clause, which provides for the disposition of what’s remaining in the estate after specific devises have been made.  While the will mentions a minor grandchild as a beneficiary, there were no trust provisions established to ensure that the inheritance would be properly managed for the benefit of the child until the child reached legal age. 

In short, the will was poorly drafted and the cost to litigate the estate was nearly $22,000.  Perhaps more important than the financial diminution of the estate was the emotional trauma my client experienced, knowing that her half-siblings would sue her while she was still in the process of grieving her mother’s loss.   

State-specific Provisions

When heirs are disinherited or given unequal shares in a will, family disputes and litigation often occur.  Such situations require the advice of qualified legal counsel and can’t be resolved with DIY wills. 

In the above case, my client’s mother didn’t have the legal expertise to know that Florida is one of approximately 18 states that have adopted (either in its entirety or in part) the Uniform Probate Code (UPC), which addresses lines of succession (that is, who inherits what and in what order, if there’s no will).  The UPC, in addition to simplifying and standardizing the processes and rules of distributing property, sets forth provisions that are intended to protect spouses and children who are entitled to some minimum amount of property – even if the testator (such as the mother in the case above) fails to mention them as beneficiaries in the will.

Penny Wise, Pound Foolish

Professional advisors should remind clients that well-drafted estate-planning documents are a “gift” to one’s children.  Preserving one’s legacy and final wishes in the precise manner of one’s choosing shouldn’t be risked with the use of DIY forms.  In many cases, it will cost their heirs more in the long run than it would had the testator sought the expertise of legal counsel to either look over their documents or create them altogether. 

While legal professionals can’t provide clients with a guarantee that there won’t be a lawsuit when it pertains to disinherited siblings, unequal shares or other complex family dynamics, the likelihood of a successful legal challenge can be greatly reduced with carefully worded legal documents.

It has often been said that the path to knowledge begins with knowing what you don’t know. As usual, this year’s Heckerling Institute helps put the estate planning attorney on the path to knowledge by highlighting how much is uncertain.

Section 2001(b)(1) calculates the estate tax in the year of death as the sum of the tax on the taxable estate and the tax on the amount of adjusted taxable gifts over the aggregate amount that would have been paid on the gifts if they had been taxed as part of the decedent’s estate in the year of death. Section 2001(b)(2).

This works fine in a situation of a rising applicable exclusion. However, in the situation of a declining applicable exclusion, as we may have in 2013, it may cause an estate tax on prior non-taxable gifts.

Example: John has $6 million and gifts $5 million in 2011. He dies in 2013 with $1 million.

Section 2001 is intended to add back the prior gifts so that the $1 million is taxed at the rate of 50% rather than an effective rate of 34.58%.

Instead, Section 2001 could be read to tax the situation as a $6 million estate, or $2,940,800 less the unified credit of $345,800, which would result in $2,595,000 in tax.

The speakers at Heckerling were uncertain how the clawback issue would be resolved. However, they and I think it would be grossly unfair to give an applicable exclusion of $5 million in 2011 and 2012, only to have the decedent’s estate discover that those gifts resulted in an estate tax at the decedent’s death in 2013.

Of course, even if the clawback does exist, one would still be better off to use their $5 million applicable exclusion in 2011 or 2012. At least the appreciation on the asset would escape transfer taxes.

In our example, let’s say John’s $5 million of gifts in 2011 appreciates to $10 million by the time of his death. Thus, without the gifts in 2011, John’s estate would be $11 million and the tax would be $5,395,000, after use of his exclusion. Even with application of the clawback, the John’s estate would have saved quite a bit by doing the gifting. The tax would be $2,595,000 rather than $5,395,000.

As the days and hours ticked down in 2010, we faced a great deal of uncertainty on the extension of EGTRRA. With the potential “clawback,” we likely will be facing at least as much uncertainty in the waning days of 2012.

When a senior is no longer able to adequately care for themselves, there are two main options. One is to live in an assisted care facility such as a nursing home, and the other is to hire an in-home caregiver for private care. The latter option is ideal for seniors who prefer the comfort of their own home and some level of independence. Here are a few guidelines for hiring an in-home caregiver.

Determining a Senior’s Needs

There can be a considerable difference in a person’s specific needs, which will dictate the type of service that’s necessary. Some seniors will be able to dress, bathe and cook for themselves, while others will require assistance. There may also be medical needs that require a caregiver with an advanced skill set. Other times, a senior might primarily seek companionship and someone to run errands. That’s why it’s smart to write down a list of needs prior to contacting potential caregivers.

Agency vs. Direct Hire

Generally speaking, it’s best to go with an agency because they must meet certain requirements and tend to be safer than hiring directly. When looking at agencies, they should be evaluated on the quality and knowledge of their staff. Each caregiver should be run through a background check and be capable of meeting all of a senior’s daily needs.

For states that require licensure, a caregiver should be fully licensed. Being a member of the American Association for Homecare is ideal because it means that an agency is recognized for its professionalism. If a senior requires extensive care, it’s smart to have one or more backups available ahead of time to avoid any complications in the future.

Cost of Care

According to MetLife, “the average hourly cost of a home health aide worker is $19 per hour, with some states being as high as $30 per hour and as low as $9.” The exact cost will depend on the state and the level of care needed. It’s important to compare three or more agencies to find affordable pricing while still ensuring great care. Be on the lookout for additional fees like deposits and extra payments for holidays and weekends.

Monitoring the Caregiver

Upon hiring an individual, it’s a good idea to monitor that person to make sure they are fulfilling their duties and the senior is properly cared for. This can begin with asking the senior for input and determining their overall level of happiness. Dropping by unannounced from time to time while the caregiver is on the job is also effective for gauging how well they are performing their duties.

Knowing what to expect and what constitutes quality in-home care should result in the right hire. That way a senior’s needs can be met and a caregiver can be around for the long haul.

Unless you have a complete, valid and executed “Guardianship Appointment” then a court will decide who will raise and care for your children.  All of the below is eliminated and unless the appointed guardians are incapacitated, your wishes will be followed.

A minor is a person under the age of eighteen years.  A guardian of a minor is an individual appointed by the court who has legal custody of the person or property or both of an individual under the age of eighteen. 

The Probate and Family Court, the Juvenile Court, and the District Court have the power to appoint guardians for minors. 

The Court may nominate the guardian if a minor is under the age of fourteen.  A minor aged fourteen or older may, before a justice of the peace, notary public, or municipal clerk, nominate the guardian on the petition.  The Court, after notice to or assent of the parents, will conduct a hearing and appoint a guardian. 

The guardian must prepare and submit to the Court an annual inventory and accounting of the minor’s assets.

Grandparents, aunts, uncles and friends can file for guardianship of a minor.   The Petition must be filed in the County where the child is living.   

Sometimes it is necessary to file for Emergency Temporary Guardianship when there is an emergency (the parents are incapacitated).  Once documents are filed with the Court, a hearing is held.  The Court may provide a Temporary Order for Guardianship.  This Temporary Order is only good for 30, 60 or 90 days.  With a Temporary Order of Guardianship, the Court will provide instructions on what the guardian MUST do before getting Permanent Guardianship.  All parties need to be notified that a Temporary Guardianship has been named.

If there is not an emergency (death of the parents), after all required Court documents are filed, a notice needs to be given to other parties.  The other parties are generally the biological relatives of the child (ren), or any other party that has an interest in the child (ren).   What is the problem with this?  Anyone connected to the child(ren) can contest and seek custody of the child(ren).

Remember, all of this is a cost that your estate will pay. 

IN ORDER TO AVOID THESE ISSUES AND MAKE SURE THAT YOUR CHILD(REN) ARE CARED FOR BY THE PERSON(S) THAT YOU WANT, CONTACT ME TO DISCUSS YOUR ESTATE PLANNING.

In 1969, Elisabeth Kübler-Ross published her groundbreaking book On Death and Dying which introduced what became known as the five stages of grief: denial, anger, bargaining, depression, and acceptance. These stages were originally based on Kübler-Ross’ years of working with dying patients but came to be applied to people who are grieving the death of a loved one or experiencing a significant loss (such as divorce, chronic illness, losing a job, etc.). Kübler-Ross’ five stages are controversial within the grief support community due to the ways in which popular culture has used them to try to explain grief and prescribe how the bereaved should behave as if the stages were a “how to” list.  Those who work with the bereaved know that grief is not a linear process, and each individual’s grief journey is unique.  Kübler-Ross herself never meant these stages to be used as a rigid framework to be applied to everyone who mourns. In On Grief and Grieving: Finding the Meaning of Grief Through the Five Stages of Loss (Scribner, 2005), the last book she wrote before her death in 2004, she said of the five stages, “They were never meant to help tuck messy emotions into neat packages. They are responses to loss that many people have, but there is not a typical response to loss, as there is no typical loss. Our grief is as individual as our lives.”

No two people grieve in the exact same way. Even within a family each person will grieve differently based on the relationship they had with the person who died. Current grief theory reinforces the personal nature of each individual’s grief journey and focuses on what might help the bereaved create meaning from the experience of the death and come to an understanding of what the death means in terms of their personal beliefs and their identity. The bereaved often feel alone in their grief, that others don’t understand or are judging them for somehow not grieving “right.” Grief is not something that someone goes through with a definitive end point.  The goal of grief work has moved away from getting over the death, to instead finding a way to incorporate the memory of the person who died into your life in such a way that over time their death feels less painful.

Children often talk about aspirations they have for themselves based on their relationship with their deceased family member, “I want to do well in football because my dad used to be my coach,” or “I want to be as kind as my sister was.” The people we love are a part of our lives forever and even after their deaths, our memories of them and their influence upon us affects our beliefs, behavior and goals.

Bob

I often consider what clients care about most. First, clients are often looking for the best way to gift to their children or grandchildren.

Clients give to their children and grandchildren in many different ways. Parents and grandparents give to their children and grandchildren in countless ways, from the moment of birth, they are giving of their love, affection, and nurturing.

Parents and grandparents often want to give for education. A 529 plan is designed for this purpose. By gifting to such a plan, the donor can remove the assets from their own estate and yet retain control over the assets. This may be estate planning’s “Holy Grail.” Not only may a gift to a 529 plan qualify for an annual exclusion, with an election, it may qualify for the use of up to 5 years of exclusion. That means that a donor may make a contribution of $70,000 completely excluded from the gift tax.

In addition to gifting to a 529 plan, donors may give an unlimited amount for tuition if paid directly to an educational institution. A similar exclusion applies for the payment of medical expenses directly to a medical provider. These exclusions are provided in the often-overlooked Section 529(e) of the Internal Revenue Code.

Of course, direct gifts to either a child or grandchild will qualify for the $14,000 annual gift tax exclusion (and GST tax annual exclusion).

However, often clients do not want to gift directly to their child or grandchild, but want to keep the assets in trust. An irrevocable trust with limited withdrawal powers can be a great way to obtain the annual gift tax exclusion even though the gift is in trust.

Whether gifting outright, in trust, or via a 529 plan, clients often want to gift for the children’s and grandchildren’s benefit as part of the legacy they leave.

Food for thought,

Bob

The International Cemetery, Cremation and Funeral Association recently held their summer university. I attended the ICCFA University College of 21^st Century Funeral Services and came away with a new perspective on how funerals are changing.

Dr. Alan Wolfelt, a psychologist trained in life transitions who spoke there, said, “More and more people in North America are asking ‘Why have a funeral?'”

People are saying, “When I die, just get rid of me no muss, no fuss. Maybe have a party, but I sure don’t want a funeral.” “Dad said he didn’t want us to go to any trouble, so we are just going to do what he said.” “We just thought it would be easier, faster, and cheaper.”

Wolfelt said that efficiency should not be confused with effectiveness. He said, “We’ve gone from funerals to memorial services to celebrations to parties. In the process, we have lost the connection to grief and emotion.”

People are losing sight of the value of holding some kind of ritual service, a safe place to grieve and mourn. Very often, the people who don’t recognize a death with a funeral or memorial service are in a psychologist’s office six months later with problems related to unexpressed emotions.

We in the U.S. have become an increasingly “mourning-avoidant” culture, where people tend to want to avoid sadness. At a meaningful funeral, people laugh one moment and cry the next as they share stories that cause laughter as well as tears. This experience of “paradoxical emotions” results in what Wolfelt calls the “sweet spot of emotional experience.”

Traditional clergy doing cookie-cutter funerals with little relevance to the deceased or their family have also contributed to the decline of funerals. Wolfelt and Doug Manning, founder of the In-Sight Institute (which certifies nondenominational “Funeral Celebrants”), both noted the declining number of Americans who attend church and the growing number of interfaith families.

The 2010 American Religious Identification Survey estimated that approximately 15% of the American population do not attend religious services or consider themselves church affiliated. If you grouped all the identified “nones” into a state, it would be the second largest state in the union, right behind California and before Texas.

In our highly mobile society with fewer ties to church or a specific religion, there is a growing corps of Funeral Celebrants who can offer families a personalized and individualized funeral or memorial service experience.

A Funeral Celebrant is trained in the specific area of conducting funerals and memorial services for families who are not affiliated with a religion or theology. Celebrants can assist a family with no clergyperson, as well as those uncomfortable with traditional religious funerals, on whom to call when there’s a death.

The use of Certified Celebrants originated in New Zealand and Australia, where 80% of the population chooses cremation and many people do not attend a church. Civil Celebrants, who are licensed by the government, perform over 50% of the funerals and weddings in those countries.

Doug Manning brought the idea of Certified Funeral Celebrants to North America in 1999 when he founded the In-Sight Institute. In-Sight has certified more than 1,600 Celebrants across the U.S. and internationally.

Another 36 Certified Celebrants graduated at the end of this ICCFA University. I’m proud to be one of them.

A correspondent in a recent Dear Abby column posed a great end-of-life preparation question. He or she was a single person with grown children who wrote, “I want to make sure I am not a burden to them even after death. I have a will and no bills. What else do I need to do?”

Dear Abby replied with questions about whether he/she had an advance directive for health care, at least one health care advocate named to carry out those wishes, a cemetery plot selected and paid for and money set aside for a funeral or memorial. If those items were taken care of, the person just needed to make the children aware of it.

That sounds simple enough – maybe too simple. Estate planning attorneys know many of their clients need trusts, beyond a basic will. Dear Abby could have gone further with her advice to reduce being a burden. Here are five tips from The Doyenne of Death® to round out Abby’s advice:

Tip One: Write your own obituary. It’s your life story, tell it your way. Your kids may not know all the details that you’d want known. They can edit it down for the newspaper to minimize print obituary costs or run it free online in all its full glory. Colorful, humorous obituaries can make you famous when they go viral. Plus, you’ll take that burden off the kids’ shoulders.

Tip Two: Decide what kind of disposition method you want, and discuss it. Dear Abby assumed the person would be buried, not cremated. A national average of 42% of Americans are choosing cremation, with rates of 60-78% of populations in Western states opting for burning over burial. You can also donate your body to science, but the paperwork must be filled out while you’re alive and in sound mental shape.

Tip Three: Put your funeral plans and information on file with a reputable funeral home, and let your kids know you’ve pre-planned. If you can afford to pre-pay with a guaranteed funeral trust or insurance policy, let them know you’ve done that and where to find the paperwork.

Tip Four: Don’t assume the kids will be levelheaded about splitting up your personal possessions. If they get along reasonably well, have a sit-down meeting at your home. Story telling about the history of some items can start the conversation. Let siblings discuss which of your items they want. Then put labels on those items to help head off disputes after you’re gone. Or, make an itemized list of who gets what pieces of personal property and attach it to your will.

Tip Five: What about being a burden before death? Very few of us go from being healthy to dead quickly. The idea of going to sleep and not waking up is appealing but unlikely. What insurance do you have in place to help you avoid being a burden if you become a frail elderly or demented person? A health care crisis without insurance is a fast track to bankruptcy. Medicare only covers so much.

It’s also a good idea to make a master file of information on accounts and benefits that you have – everything from attorneys, banks and brokerages to passwords, utilities and veterans information. If you have a will and no bills, these additional five tips will truly help avoid being a burden on your kids.

Bob

Family harmony is important. “The family is a haven in a heartless world.” Christopher Lasch. But, unfortunately, when family disputes arise, they can be deep rifts. “Family quarrels are bitter things. They don’t go by any rules. They’re not like aches or wounds; they’re more like splits in the skin that won’t heal because there’s not enough material.” F. Scott Fitzgerald.

One such deep rift involved an 85-year-old Austrian grandmother who had over $1 million (in Euros). She cut up her money in tiny pieces rather than having it go to her heirs. The story is here: http://www.foxnews.com/world/2015/11/05/grandmother-tries-to-spite-heirs-by-shredding-up-11-million-fortune-prosecutors/

If you want to disinherit some or all of their family, you don’t need to take out the scissors. You could simply say that they are leaving those family members nothing and say to whom the assets should go, like a charity or friends.

Often, when some or all of the family is disinherited, it makes sense to leave those people a reduced bequest and then include a “no contest” or “in terrorem clause”. Such a clause leaves the person nothing if they challenge the estate plan, which all of my Trusts include. By doing this, the people to be cut out have an incentive not to make trouble by contesting the plan. In order to be effective, the reduced bequest should be significant, so as to discourage them from losing it if they were to challenge the estate plan.

Perhaps the best way to make sure wishes are carried out is for the you to communicate those wishes during life so that heirs are not surprised after you are gone.

As estate planning attorneys know, parents usually leave their assets equally to their children. However, we also know, both personally and professionally, that sometimes an equal division is definitely not fair. Sometimes children have different needs and abilities. For example, one child might be a successful physician, while another might be an award winning teacher. Both professions are valuable and have merit. However, society values those contributions disproportionately.

Another situation warranting an unequal division of assets might be where one child worked for decades on the family farm, which represented the majority of the value of the assets.

A recent article in The Wall Street Journal examined various reasons and may be found at http://online.wsj.com/article/SB10001424053111903648204576554620047917688.html.

There are still more reasons parents might choose to treat their children unequally. For example, one child might have cared for the parents in their declining years. Another child might have special needs. Whatever the reason, the estate planning attorney’s job is to ensure that their clients’ wishes are carried out. It is important to remember that an unequal distribution might trigger a challenge to the estate plan.

There are various ways to discourage such a challenge. First, an in terrorem, or no contest clause may be included in the Will and/or Trust. With such a clause, a challenger will take nothing. This is an especially potent device when the would-be challengers are given something, even if a smaller share. Another way to encourage children to honor the parents’ wishes is by having the parents write a side letter as to their reasons for the unequal treatment. It is better to have this as a side letter so that it is more difficult for would-be challengers to use external evidence to show that those reasons do not exist and, therefore, the distribution should be equal after all.