WHEN IT COMES TO YOUR ESTATE PLAN, DIY JUST WON’T DO

The do-it-yourself mentality has become an integral part of many areas that inform our lives. Thanks to the Internet and even YouTube, consumers now have all the tools and how-to’s they need to create anything from simple arts and craft gifts, to more upscale inspirations like DIY fashion, printed merchandise or any number of home remodeling projects. This DIY mentality has even expanded to the potentially intricate, increasingly personal and definitely legal task of estate planning and the execution of your Will. Most often undertaken to save money, even the “simplest” DIY Wills may contain pitfalls that end up costing families large amounts of grief or money.

Seen it all

Mixing online programs like LegalZoom, Rocket Lawyer and Quicken WillMaker Plus to lay down the groundwork that will protect and provide for loved ones after you’re gone in the hopes of saving time and money in the here and now can be a recipe for disaster.  Most trust and estate lawyers likely will tell you that choosing these options for estate planning documents may be a real disservice to your heirs.

Estate lawyers should know. They’ve seen it all when it’s come to unraveling the intended bequests of DIY Wills that were erroneously drafted. When a person has passed there’s literally no resource available to clarify his or her intent. Some people will tell you a DIY Will is better than no Will at all. But a bad DIY Will inappropriately and incompletely done does NOT trump no Will status. If you shortchange the process on the front end, there can be significant legal costs incurred after death either due to errors in the execution of the Will or lack of clarity about dispositive wishes.

False sense of security

In fact, DIY estate planning may give benefactors a false sense of security even if you have only modest assets and plan to draft the “simplest of wills”—a term with which legal professionals take issue.  There is no such thing as a “simple will.” First, every individual’s circumstances are unique with particular family complexities that impact to whom and how assets should pass. Second, there are so many assets that pass outside an estate such as insurance policies, 401(k)’s and IRA’s to name a few that there must be careful coordination between probate (the Will) and non-probate or beneficiary assets. It’s imperative that you have a full understanding of what will happen with your assets when you die—which is why a conversation with a lawyer is critical.

With DIY sites, there’s limited, if any, professional guidance. Some sites do provide some attorney assistance, but you don’t get to choose the person with whom you’re working or have any sense of their background with trusts and estate law. For a sensitive subject like the financial protection of your loved ones, the client experience matters and so does interaction with a professional who knows you and understands your family situation.

You don’t know what you don’t know

The lack of appropriate guidance can lead to ignorance, which is a real deficit to DIY planning. Choosing a DIY option for your estate planning is like looking for cures to your ailments on WebMD—most individuals have no real idea what they need when it comes to protecting themselves and their loved ones. For example, every state has unique rules, particularly when it comes to estate/inheritance or “death” taxes. None of this is contemplated in a DIY will. Some sites may not offer the right tools for state-to-state differentiation. Others may offer graded packages and you may inadvertently or for cost reasons choose the wrong one.

Then, too, DIY sites do not lend themselves to the intricacies and/or depth of complex family and financial situations such as blended families, stepchildren and the like.

Plus, a host of other issues can unknowingly arise when upon death, your Will is passed on to the surrogate or probate court. The surrogate court oversees matters of probate, the administration of estates and the process of distributing the decedent’s assets to the proper beneficiaries. To name some of the most common problems that can arise with DIY Wills at this time:

Where’s the Will?

Another wrinkle that occurs with DIY Wills is when the individuals who take on the responsibility of executing their own Wills forget or simply don’t let anyone know where their Will is located.  If the original Will can’t be located, it’s as good as dying without a Will.

It’s also important to remember that your Will is a living, breathing document. This means it must be reviewed regularly and revised with changing life situations like marriage, childbirth, inheritance, etc. Choosing the DIY route to estate planning just may make an individual less aware or inclined to make regular reviews and subsequent revisions.

Covering All the Bases

But when you work with an estate attorney, you have an accountability partner who can help you stay on top of these very important matters—from the sometimes uneasy but serious and important planning process, to choosing the right fiduciaries, to reviewing your Will at least at five-year intervals, down to keeping the original document in safekeeping. Then, when the inevitable time comes for your loved ones to inherit and carry on your legacy, everything will be in order.

When it comes to providing for the precious people in your life, you will surely want nothing less than that.

At Phelan, Frantz & Ohlig, LLC, we take our responsibility to provide families with conscientious estate planning very seriously.  Please contact us if we can be of assistance to you in developing the appropriate estate plan for your family.

 

Love the Second Time Around Counts. So Does A Sound Estate Plan That Protects Your Kids

Love is lovelier the second time around, or so Frank Sinatra crooned. Old Blue Eyes knew what he was talking about, but ask an estate attorney or two and they’ll agree that second loves and the blended families that may result merit special consideration when it comes to estate planning.

According to Pew Research Center, 40 percent of new marriages include at least one person who was previously married. And 20 percent of weddings feature two people who have both been married before. These statistics breed yet another phenomenon. Blended families. These families, in which one or both spouses have children from a prior marriage, are on the rise, and they’re complicated. When it comes to estate planning, blended families and the complex relationships they involve have thrown the traditional family, in which the children are children of both spouses, a curve ball.

Blended families, new estate planning issues

Today’s changing family dynamics from divorce, midlife remarriage, domestic partnerships, etc. have brought additional challenges to estate planning. While there’s no such thing as a “simple” or “traditional” Will, poses unique considerations. In a Will for a traditional family, the issues are pretty clear cut. Most assets are left to the surviving spouse. Upon the death of the surviving spouse, the remaining assets go to the couple’s common children.

But using the same distribution strategy for a blended family may have negative consequences for your kids from a previous marriage. (more…)

One of the Most Important Conversations You’ll Ever Have

It’s never too soon to talk about end-of-life wishes with your family

Let’s face it. It isn’t easy but it’s a conversation we all need to have. It’s that serious conversation about your end-of-life wishes.  It’s uncomfortable enough to talk about money matters and how your assets are to be distributed upon death. But end-of-life conversations go well beyond assets to mortality issues. They’re sad and scary, and uncomfortable, conversations definitely not for the faint of heart.

Families often think they have all the time in the world to do this. But life can turn on a dime. Or the years progress, and no one takes charge of initiating a conversation. Developing a plan now and sharing it within your nuclear family is in everyone’s best interests. When all family members are in good health and anticipating a positive future, the conversation can be held in a safe and calm environment. Once a family is in crisis mode, they are mired in the emotions of sadness and grieving, and it is almost impossible to think straight.

Talking about these issues is a mutual obligation that parents and adult children share. Parents have a responsibility to make their personal wishes clear to avoid missteps in the way care will be administered and, upon death, how assets will be distributed. The point is to avoid the anger, hurt or squabbling that comes when family members do not have a clear understanding of what a parent wants. In turn, grown kids have a responsibility to do the right thing for their parents and provide them with the gift of knowing that their end-of-life wishes will be followed.

Be prepared

The best way to have an important discussion like this is preparedness. Conversations centered around end-of-life wishes must be planned. No one wants to arrive at a family get-together only to discover without warning that the conversation is about mortality. It is often advisable to meet with an estate attorney prior to the conversation to get your wheels turning and understand the issues. Perhaps you might even consider holding the meeting at your estate attorney’s office. Attorneys have knowledge of unique estate issues that may arise and have objectivity in helping make decisions and appointing children to assume various roles. They also have the sensitivity to understand the delicacy of these discussions.

Delicacy and discretion are helpful when initiating the discussion. One way to get things rolling is mentioning a friend who is experiencing a difficult time with helping her adult children understand and execute her wishes in the face of her terminal diagnosis. Or a friend who had the task of serving as executor of his mother’s estate and the tremendous amount of work brought with that task.  You can say these scenarios led you to think about how important it is to have a plan in place.

All family members must be involved in the discussion. The plan that’s developed affects everyone, so sharing the nuts and bolts of it is in everyone’s best interests. Make sure family members who live locally are in the room.  If out-of-town family members cannot attend, a second-best alternative would be to Facetime or Skype them in.

As with all meetings, sending out an agenda-like document helps to further set expectations. This is, after all, a business discussion but one focused on delicate family matters. If there were ever a time to show compassionate leadership, the time is now.

The heavy lifting: Assigning roles

Managing end-of-life issues requires the appointment of several fiduciary and health-related oversight roles, some which take place while you are alive and others after you pass. Each responsibility is aligned with the appropriate document. Assigning the right individual to each of these roles is imperative. Choosing is not a question of playing favorites or being the oldest child. Serious thought must be given to the skill set involved with each responsibility and which of your family members would be best-suited to handle a particular responsibility. There’s also the emotional weight involved with serving in these roles.

The roles and matched documents include the following:

It’s imperative that all these documents are kept in a safe place, possibly in care of your estate attorney, so they are in easy reach when the time comes to access them. What’s more, with most records being digital today, a list of passwords to all your retirement and other accounts should be stored for easy access as well. It is not uncommon for passwords to be kept in a sealed envelope with your attorney.

Living, Breathing Documents

Creating these documents is not a one-time occurrence. As your life and circumstances change, so should your estate plan.  Reviewing these documents every five years is your best bet for assuring that upon a crisis or your death things will be carried out according to your wishes. As difficult as a planning conversation is, you might even consider it an exercise for generational learning and a time for your kids who are now parents themselves to write a will that among other things will appoint a guardian.

Even with these documents in place, the responsibilities that come with executing them can be sudden. Even with preparedness, the events that require them to be put into motion are sad, emotionally charged and life changing. But life is a precious journey and death is a part of it. Discussions like this can bring about gratitude for life and health in the present and reinforce the preciousness of our journey and the important gifts of love, respect and kindness families share.

At Phelan, Frantz & Ohlig, LLC, we take our responsibility in helping a family navigate these conversations very seriously.  Please contact us if we can be of assistance to you and your family in having one of the most important conversations you will ever have.

CAPITAL GAINS TAX: A CHARITABLE TRUST MAY BE THE ANSWER

APPRECIATED ASSETS CAN MEAN HIGH CAPITAL GAINS

Many individuals own stock with an extremely low basis, the sale of which would result in significant capital gains. This is often the case for individuals who spend a significant portion of their career with one company and acquired stock during their employment or who inherit a portfolio that is not actively managed and accrues significant growth. Because of the potentially high capital gains, individuals frequently are reluctant to sell some or all of these assets. Of course, the fact that assets have appreciated indicates the investment has been successful, but there is a point at which the unwillingness to sell assets (because of capital gains taxes) can have a negative effect. For instance, investments may be at a higher risk because they are not diversified or the stock in question does not provide suitable income.

ACHIEVE CHARITABLE GOALS WITH A TRUST

If you are charitably inclined, creating a charitable trust may be an option to reduce the low basis stock in your portfolio. The highly appreciated asset is transferred to a trust in which you give yourself an income stream of either a fixed dollar amount per year or fixed percentage based on the value of the assets transferred to the trust. The trust defines whether you will receive the payments for a fixed number of years or for the rest of your life. You also will have the ability to add an additional beneficiary, such as a spouse, to continue to receive the income after your death. At the conclusion of the established term, the assets that remain in the trust will be paid to the charity or charities you have selected.

REBALANCE YOUR PORTFOLIO WITH CHARITABLE TRUST

When the assets are transferred to the trust, the trustee, who you have selected but must be independent, will sell the assets and then invest the funds in a more diversified portfolio. These decisions will take into account the assets transferred, the rate of payment you select, the number of years income payments are to be made, and the number of beneficiaries. In the year you create the trust and the assets are transferred to it, you will receive a charitable deduction on your income tax return based on the value of the transfer, the number of years of the trust, the payout rate and the number of beneficiaries. Your accountant and attorney will work together to maximize the amount of charitable deduction you will be able to take on your income tax return.  By making this transfer, you have simultaneously maximized the benefit of a charitable gift while avoiding the payment of capital gains tax on the highly appreciated asset. Finally, you have not given up the benefit you received from the underlying asset as you have converted it in to an income stream for a period of time.

CONSULT YOUR PROFESSIONAL ADVISORS

Obviously, this is a fairly sophisticated planning tool so you will need to determine if it makes sense by discussing it with your trusted professionals. You, along with your trustee, should seek guidance in the establishment of such a trust from your financial advisor, attorneys, and accountant. Many charitable institutions will assist in the creation of such a trust if you are naming them as the ultimate beneficiary. In the right circumstance, using a charitable trust can provide income tax savings by eliminating capital gains and providing a charitable deduction while also allowing you to retain the value of the underlying asset for a period of time. The attorneys at Phelan, Frantz & Ohlig are experienced in all aspects of estate planning, including trusts.

GRETCHAN R. OHLIG BECOMES PARTNER

PF&O LOGO

We are pleased to announce that Gretchan R. Ohlig has become a partner in our firm, and we are now Phelan, Frantz & Ohlig, LLC. The firm will continue its practice specializing primarily in trust and estate planning and administration and real estate transactions. We have served families in Westfield and the surrounding communities for almost a century with personalized service and sophisticated legal expertise. Phelan, Frantz & Ohlig looks forward to continue serving our clients and their families.

FIVE THINGS TO KNOW BEFORE MAKING AN OFFER ON YOUR DREAM HOME

At Phelan, Frantz & Peek, we love working with first-time home buyers and introducing them to the home buying process with its ups and downs, twists and turns. Here’s a sneak peek at the top 5 things we want our purchasing clients to know before they put in an offer:

1.  START WITH A FULL LOAN REVIEW

In most cases, the lender pre-approval is only as reliable as the piece of paper its printed on. Many buyers wait to talk to their lender until they are far along in the process and often not until they have actually put in a bid on a home. A prospective buyer can start this process much earlier and when they do so, they should insist on a Full Loan Review (americanunited.com/approval-first/). Experienced lending partners will be able to facilitate this request. Once approved, the buyers can position themselves as a much more attractive purchaser in the negotiating process.

2.  INSIST ON A FULL HOME INSPECTION

Even though every New Jersey real estate contract states that a property is being sold “as is,” buyers have every right to conduct a full home inspection to “kick the tires” and satisfy themselves that the home they are purchasing has no material defects. During the inspection period, a buyer should have the property evaluated by a licensed home inspector and a wood-destroying insects inspector. A radon test also should be completed by your home inspector.

3.  SCAN FOR UNDERGROUND OIL TANK

In addition to a thorough home inspection, buyers should also invest in having the surrounding property scanned for an underground tank. Older homes may have had oil heat at one time or another. In many cases, owners had these underground oil tanks decommissioned by having them cleaned out and filled with sand, but leaving the tank itself in the ground. This method of decommissioning a tank is no longer industry standard because many were later found  to have leaked and caused soil contamination even though they had been legally decommissioned. Buyers should invest the couple hundred dollars to have the property scanned to satisfy themselves that no tank exists and, if one does, insist on its removal and any associated remediation before proceeding to close.

4.  TITLE INSURANCE IS WORTH EVERY PENNY

A title insurance policy protects the new homeowner from any loss suffered as a result of an issue with ownership of the land. These issues are rare, but may arise for a variety of reasons including a forged deed, undisclosed heirs having an interest in the property, mistakes made in the public record or fraud. The one-time premium is relatively minimal compared to the peace of mind such protection offers.

5.  CLOSING DATE IS NOT SET IN STONE

A contract closing date is always an “on or about” date. It is practically impossible to settle on a fixed closing date weeks in advance given the many moving parts to a home purchase. There are home inspections to complete. Lenders require an appraisal and homeowners’ insurance, as well as a significant amount of financial information from the buyers. Title companies must be given time to complete their search. And Sellers often have their own agenda about when they will be vacating the property. It is your lawyer’s job to coordinate all these factors to make the transaction as uncomplicated as possible. The attorneys at Phelan, Frantz & Peek pride themselves on being accessible and responsive in order to make your home buying experience a positive one.

RECIPE FOR A TRUST

You’ve decided you want to set up a trust but telling your attorney that you need a ‘trust’ is like telling a baker that you need a ‘cake’ – it leads to a cascade of questions: What’s the occasion? What ingredients do you want in the cake? Do you want to share it with lots of people or only a few? How much do you want to spend? Are there any food allergies to consider? In short, just like there are different kinds of cakes for different occasions, there are dozens of different types of trusts for different purposes. To cook up your custom trust, an experienced estate planning attorney will explore all these questions with you.

WHAT’S THE OCCASION?

There are a variety of reasons clients may want a trust:

This is in no means an exhaustive list, but a few examples of the occasions an individual may seek to establish a trust.

WHAT INGREDIENTS DO YOU WANT IN THE CAKE?

Trusts can own almost any asset, including cash and real estate. Trusts also can be the beneficiary or owner of a life insurance policy or the beneficiary on an IRA or 401K. The implications of a trust owning each of these assets varies, so it is critical to discuss your plans in this regard with an attorney and accountant before making a move. It also is important to discuss the “amount” of ingredients you want to put into the trust. Depending on the type of trust, your ability to manage or access assets put into it can be limited, so it may not make sense to transfer all of your assets into a trust.

DO YOU WANT TO SHARE IT WITH LOTS OF PEOPLE OR ONLY A FEW?

Like a Will, a trust should set forth how the assets held in it will be distributed to beneficiaries upon your death. A trust is even more flexible than a Will, however, in the sense that it also may provide for the provision of income or assets during an individual’s life.

HOW MUCH DO YOU WANT TO SPEND?

Creating and maintaining the formalities of a trust can be costly. In some cases, a trust may become a tax paying entity, which means that an annual income tax return should be filed. In addition, the individuals responsible for implementing the trust – the trustees – are entitled to a commission based on the value of the assets held by it and any income made by those assets.

ARE THERE ANY FOOD ALLERGIES TO CONSIDER?

In many ways, this question can be the most critical. Trusts frequently are created to protect and grow assets for those who may not be able to manage them on their own. Whether a special needs trust or a trust created for minors, the unique circumstances your beneficiaries must be considered in drafting the terms of your trust.

These are important pieces of the pie (no pun intended) to be considered. The estate planning attorneys at Phelan, Frantz & Peek are experts in the creation of trusts for all occasions and in a variety of flavors. Contact us to make an appointment today to discuss your needs.

 

WHY EVERY COLLEGE FRESHMAN NEEDS A POA

Hate to say it, but August is the beginning of the end of summer! It is an exciting time for the college kids in your life, especially for the new High School graduates heading off to college for their freshman year. In all the lists of things needed to move in to that dorm and tackle college successfully, there is rarely a suggestion to execute a Power of Attorney prior to leaving home. Most parents do not feel as if their college age children are independent from them yet. Mom and Dad are often paying tuition and all the costs associated with living away from home. Your child is still calling and texting on a regular basis asking for advice on everything from what to eat for dinner, how to have that difficult conversation with a roommate, to writing the first college paper and yes, asking for money!

THEY DON’T SEEM LIKE ADULTS YET

However, if your child is 18, he or she is a legal adult. The fact that you are his or her parent no longer grants you the legal right to assist your child or intervene on his or her behalf. Once someone is an adult the law says she or he can designate who they want to act for them if they are unable to act for themselves and the law does not presume it would be a parent. Therefore, having your child execute a Durable Power of Attorney (POA) once they turn 18 should be on every parent’s to do list. (more…)

WHAT’S UP WITH NJ ESTATE TAX?

Recent reports out of Trenton suggest that the evolution of the New Jersey estate tax — thought to be complete in January 2018 with the full repeal of the tax — may face further developments. Revelations that the repeal has resulted in a higher drop in state revenue than anticipated have led to calls for reinstatement of the estate tax in some form. The uncertain future of the New Jersey estate tax adds an additional layer of complexity to the estate planning process.

NJ ESTATE TAX ELIMINATED IN 2018

For many years, the estate tax exemption in New Jersey was relatively low. An estate tax was imposed on individuals with net assets in excess of $675,000 at death. Many residents sought to avoid the hit by establishing domicile in a more tax-friendly state, such as Florida, which had the accompanying result of impacting New Jersey’s income tax collections. In 2016, then-Governor Chris Christie and Republican lawmakers introduced a law to phase-out the estate tax. In 2017, the estate tax exemption was increased to $2 million and in 2018 it was eliminated altogether.

IS IT COMING BACK?

While New Jersey still has an inheritance tax which is imposed when someone other than an immediate family member (parent, spouse, child or grandchild) or charity receives an inheritance, lawmakers knew that the fiscal hit would be significant. News issued recently by the Department of Treasury reveals that the hit has been harder and more precipitous than initially believed, however. Analysts predict that estate and inheritance tax collections for 2018 will decline more than $100 million, in large part because of the 2017 bump in the estate tax exemption and the complete elimination of the tax in 2018.

FLEXIBILITY IN YOUR ESTATE PLAN IS ESSENTIAL

Calls for restoration of the estate tax have been coming fast and furious. Whether it will come back and, if it does, whether it will be restored at the $2 million exemption amount or less, remains to be seen. Regardless, it is critical that individuals and families in the process of updating or creating an estate plan include flexibility in their Will to account for the variety of scenarios that may come to fruition. Consultation with a knowledgeable and thoughtful estate planning attorney with experience in New Jersey’s estate tax is an essential part of this process. The attorneys at Phelan, Frantz & Peek are all mindful of this possibility when we discuss planning with our clients.

Congrats On Your Remarriage! Hope You Have A Prenup.

Remarriage On The Rise

According to a recent report from the Pew Research Center, there is an increase in remarriage among people who are 55 and older. The report shows that 67% of previously married people ages 55 to 64 had married again and half of all adults 65 and older had remarried. Chances are high that most of these individuals have grown children from their first marriage – grown children with opinions about their parent’s new betrothed and questions about how the marriage might impact them.

Grown Children vs. New Spouse

These questions may center around a child’s anticipated inheritance – will the money now go to the new spouse? Or, they may be concerned with their parent’s partner’s ability to make healthcare decisions without consulting them. (more…)

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