Should Pets Be Part of Your Estate Plan?

Most of us don’t have the luxury (or the need) to leave our pets $12 million, but to make sure that our pets are cared for, having a legally enforceable trust for a pet, which is allowed in New York State, can provide peace of mind. That is part of the answer to the question posed by the Times Herald-Record in the article “Who’ll care for your pets when you’re gone?”

A will is a document used in a court proceeding called probate, if you die with assets that are only in your name. When the will goes through probate, it becomes a public document. A trust, on the other hand, is a document that does not become part of the public record, unless it was created under a will. Some people use trusts for their beloved pets, to pay for their care and maintain their lifestyle. Some pets lead fancier lives than others!

Most people leave the care of pets in the hands of friends or relatives and hope for the best. Visit any animal shelter and you’ll see the animals whose owners could not take care of them, or whose friends or family members intended to take care of them, but for whatever reasons, could not care for them. Putting a pet trust into your estate plan, is a better way to care for pets, if you outlive them.

The pet trust has several steps, and an estate planning attorney will be able to set it up for you. First, you need to appoint a trustee of the trust funds. This person is in charge of the financial aspect of the trust, from paying vet bills, making sure pet health insurance premiums are paid, to providing money for the caretaker to buy supplies. It’s a good idea to have a secondary trustee, just in case.

Next, you name a caretaker of the pet. This person can be the same as the trustee, although it may be better to name a different person, to create some checks and balances on the funds. You can, if you like, give the trustee the right to appoint a caregiver or a back-up caregiver. Make sure you discuss all of these details with the trustee and the caregiver and their back-ups to be sure that everyone understands their roles, and all are willing to take on these responsibilities. Some pets can live a long time, and you want to have everyone understand what they are undertaking.

Third, you’ll need to designate the amount of money to be held in trust for the pets for medical care, daily living costs and support until the pet dies. Don’t forget to include the cost of burial or cremation.

Finally, name the persons or organizations you wish to receive any remaining funds.

An informal letter of instruction to both the trustee and the caregiver would be very helpful. Provide details on the pet’s personality, quirky behavior, preferences for food, treats, play and any information that will help all the parties get along well. You should also provide information on your pet’s vet, any registration numbers for microchips, medical and dental records, medications, etc.

Want to know more about putting pets into your trust? Check out this link.

Reference: Times Herald-Record (March 9, 2019) “Who’ll care for your pets when you’re gone?”

How Do I Include My Pet in My Estate Plan?

A recent survey of pet owners showed that nearly half (44%) of pet owners have prepared for the future care of their animals, in the event their pets outlive them. With traditional financial planning instruments like living trusts, life insurance, and annuities, pet owners can have peace of mind knowing their pets’ needs will be met.

Forbes’s article, “3 Financial Planning Tips For Pets Owners,” says that typically, “pet estate plans” should cover more than simply who will care for the pet, when you are no longer around. Expenses such as food, doggie day care, veterinarian bills and medication should also be considered.

20% of all respondents in the survey said they have financially planned for their pets’ future care. About 38% said they added the pet’s future caregiver as a beneficiary to a life insurance policy and 35% added more coverage to their life policies. 13% also recently purchased annuities naming the pet’s caregiver as the beneficiary.

However, many pet owners forget about end-of-life planning. Consider an individual trust for your pet or donating funds to your local humane society or pet shelter.

One question many have before adding a new animal to the family, is whether they can afford it. The cost of an animal from a breeder can be high, so a more affordable option is to check out your local humane society or animal rescue group. Remember that the costs of food, vet bills and other supplies are just as important to think about, before making a pet a part of your family. Pets are too often returned to animal shelters, because pet parents were unable to afford to properly care for the pet.

Last, ask about pet insurance at your veterinarian. Many clinics offer plans and staff members will be able to talk to you about the right option based on the type of animal, breed, age and other criteria of your pet.

Simple steps like these will make certain your pets are cared for properly and affordably.

Reference: Forbes (January 27, 2019) “3 Financial Planning Tips For Pets Owners”

How Would Cinderella’s Story Be Different, if Dad Did Estate Planning?

The story never really focuses on why Cinderella is placed in such a dire position in the first place. However, The National Law Review article titled “A Cautionary Fairy-Tale–If Only Cinderella’s Father Had An Estate Plan” does. It starts with a light-hearted tone, but the details quickly move to how many different ways that this family situation could have been prevented with proper estate planning.

To refresh your memory: Cinderella’s mother died, her father remarried and then he died. She is basically a slave to her evil stepmother and stepsisters, in her own home.

Let’s start with what would happen, if there had been no estate plan. If the family lived in Missouri, half of her father’s estate would go to her stepmother, and half of the estate would be split between Cinderella and her stepsisters. As a minor, her portion of the estate would be placed in an UTMA account–Uniform Transfers to Minors Act. There would be a court-appointed custodian, who would be required to use these funds for her health, education, maintenance and support. The court would have likely appointed the Evil Stepmother, who would not likely have complied with the guidelines. A second option would have been for the money to be placed in a trust for Cinderella’s benefit, but the Evil Stepmother would likely have been named a trustee, and that would not have worked out well either.

What Cinderella’s father should have done, was to create a Revocable Living Trust Agreement, stating that certain assets are the separate property of the father (Schedule A), that certain assets are the property of the Evil Stepmother (Schedule B) and that certain assets are community property of the father and the Evil Stepmother (Schedule C).

A neutral successor trustee would have been named—a friend, fiduciary, corporate trustee or perhaps the Fairy Godmother—to oversee the trust. At the death of the father, the trust should have directed that the trust be divided into two subtrusts, known as an A/B split trust.

The Survivor’s Trust (Trust A) would have gathered all the Evil Stepmother’s separate property and one half of the value of the community property assets. Trust B (The Decedent’s Trust) would have all of the father’s separate property, as well as half the value of the community property assets. The trust could have been structured, so that the Evil Stepmother could use the Survivor’s Trust assets as she wanted and could only receive income, if the assets to the Survivor’s Trusts were depleted.

The neutral successor trustee would either work with the Evil Stepmother or make sure that Cinderella’s share of the Decedent’s Trust was not being improperly depleted. At the death of the Evil Stepmother, the assets in the Decedent’s Trust would go to Cinderella.

Cinderella’s father could have also taken out a large life insurance policy to ensure that she was cared for, with the proceeds to be distributed to an UTMA account, with a neutral custodian or to a support trust with a neutral trustee.

The only way Cinderella could have recovered any assets would have been through litigation, which is the likely way this story would have turned out, if it happened today. It’s not ideal, but if a child has been left with nothing but an Evil Stepmother and two nasty stepsisters, a lawsuit is a worthwhile effort to recover some assets. Assuming that the Evil Stepmother either adopted Cinderella or was appointed her guardian by the court, there would be a fiduciary obligation to protect her, and an accounting of assets at the time of her father’s death would have been prepared.

Estate planning would have preempted the story of Cinderella. It does serve as a clear example of what can happen with no estate plan in place. Whether your blended family enjoys a great relationship or not, have your estate plan created, so that if things turn wicked, your beloved children will be protected.

Reference: The National Law Review (Jan. 16, 2019) “A Cautionary Fairy-Tale–If Only Cinderella’s Father Had An Estate Plan”

 

If you liked this blog post, check out these:

Include a Letter with Your Estate Plan

Am I Too Young to Think About Estate Planning?

Stressed About Estate Planning? We’ve Got You Covered!

What if Your Heir Dies Before You?

The idea of a child dying before a parent is a heartbreaking thing to consider. However, these sad events do take place. The difficulty of discussing this might lead you away from thinking about it when doing your estate plan, but that’s not a productive response. The article “Legal Matters: If predeceased by an heir in a valid will, what happens with that inheritance?” from Carroll County Times tackles this topic without flinching.

First, review your will with your estate planning attorney to see if your will has already made a provision for this event. Your will should be reviewed from time to time anyway, especially when there has been a major tax law change. If there is nothing in your will currently addressing this situation, you can change the will to what you would want to happen.

If you don’t make this change and a child predeceases you, the laws of your state will govern what happens.

In Maryland, the law of the Estates and Trusts Code says that your child’s estate will still receive the share you had designed in your will, regardless of whether they died before you. Therefore, whoever is an heir to your child’s estate, will receive what your deceased child was awarded in your will.

The law also states that the legatee—your deceased child—must be identified in the will to receive whatever share of your estate you directed. If you don’t want to leave a portion of your estate to the heirs of your deceased son or daughter, you must specify exactly how you want your estate to be divided, if one of your children should die before you do.

Is it worth getting into these specifics? Yes. For one example, if you’ve had a bitter feud with a son-in-law for decades and you don’t want to leave him anything, then you’ll want to make sure to specify that in your will.

Each state has its own laws governing what occurs when an heir predeceases the parent. For example, in the past in Maryland, a legatee’s right to receive a share of the estate did not enjoy any protection, if he died before the author of the will. If the will did not contain specific directions on how that share should be distributed if the legatee died before the author of the will, the share simply remained in the estate, and the legatee’s heirs did not receive any assets.

Speak with a local estate planning attorney to clarify what would happen to your assets and what you would like to have happen.

Reference: Carroll County Times (Dec. 21, 2018) “Legal Matters: If predeceased by an heir in a valid will, what happens with that inheritance?”

Don’t Neglect Planning for Long-Term Care

If you don’t have a plan for long-term care, welcome to the club. However, you may not want to be a member of this club, if and when you need long-term care. A recent report from the U.S. Department of Health and Human Services found that people age 65 and older have a very good chance—70%—of needing long-term care. Despite this, most people are not putting plans in place, according to an article from Westfair Online titled Keybank poll reveals clients aren’t planning for long term care.”

This is true for people with assets exceeding $1 million and for people with more modest assets. In a study by Keybank, fewer than a quarter of high net-worth clients had plans in place for long-term care. This poses real financial risks, to the individuals and their families.

Consider the costs of long-term health care. One study from Genworth Financial reports that in 2017, the national median cost of a home health aide was roughly $49,000 a year, assisted living facilities could cost $45,000 (that’s not including medical services), and a private room in a nursing home came close to $100,000 annually. Costs vary by region, so if you live in an expensive area, those costs could easily go much higher.

Why don’t people plan ahead for long-term care? Perhaps they think they will never become ill, which is not the case. They may think their health insurance will cover all the cost, which is rarely the case.  They may believe that Medicare will cover everything, which is also not true.

Everyone’s hope is that they are able to be at home during a long illness, or during their last illness. However, that’s often not a choice we get. This is a topic that families should discuss well in advance of any illness. Talking with family about potential end-of-life care and decisions is important for setting expectations, delegating responsibilities and avoiding unpleasant surprises.

The other part of a long-term care discussion with family members needs to be about estate plans and decisions about the disposition of assets. Everyone should have a will, and all information including deeds, trusts, bank and investment accounts and digital assets should be discussed with the family. You’ll also need a power of attorney and health care proxy to carry out your wishes. An experienced estate planning attorney can help create an estate plan and facilitate discussions with family members.

Long-term planning is an on-going event. Life changes, and so should your long-term care plan, as well as your estate plan. You should also keep communications open with your family. They will appreciate your looking out for them before and after any illness.

Reference: Westfair Online (Sep. 7, 2018) Keybank poll reveals clients aren’t planning for long term care

Why Do I Need a Will?

Many celebrities die without wills. This past year saw a host of celebrity estate snafus. It’s as if they were sending a message from beyond that they didn’t care about how much turmoil and family fights would take place over their money and assets. Some of these battles go on for decades. However, as reported in Press Republican’s article “The Law and You: Important to make a will,” even if you think you don’t have enough property to make it necessary to have a will, you’re wrong. It’s not just wealthy or famous people who need wills.

Do you really want other people making those decisions on your behalf? Would you want the laws of your state making these decisions? Your family will do better, if you have a will and an estate plan.

For example, in New York State, if you don’t have a will, your surviving spouse will receive the first $50,000 plus one half of remaining property. Your children, whether they are minors or adults, will get an equal share of the other half.

If you have a spouse but no children, your spouse will inherit everything. If you have children and no spouse, then the children get everything, divided equally.

If you have no spouse, no children and living parents, then your parents will inherit everything you own.

If your parents are not alive, your siblings will get it all.

Adopted children are treated by the courts the same as biological children, when there is no will. Stepchildren and foster children do not inherit, unless they are specifically named in the will.

If you have been in a long-term relationship with someone and never married, even if they qualify for health care benefits from your employer under the “domestic partner” provision, they are not considered a spouse when it comes to inheritance. At the same time, if you are not legally married and your partner dies, you have no legal right to inherit from your partner’s estate. No matter how long you have been together, how many children you have together, if you are not legally married, you have no inheritance rights.

Check your state’s laws for the rights of “common law marriages;” New York State does not recognize these as a legal union. In very limited cases, New York State has been known to recognize common law marriages from other states where they are legal, but that is the exception and not the rule. There are limits here as well: both parties will have to agree to be married, must represent to others that they are married and may not be married to anyone else.

If you want someone who is not your legal spouse to receive your assets, you need to meet with an estate planning attorney and have a will drawn up that meets the requirements of the laws of your state. An estate planning attorney will be able to explain how your state laws work and what provisions are and are not acceptable in your estate.

An estate planning attorney will also help you consider other issues. Do you want to leave anything to a charity that matters to you? Do you want anyone else besides your children to receive something after you pass? Is there anyone who needs a trust, because they are unable to manage their finances, or you are concerned about their marriage ending in divorce? Making these decisions in a properly prepared will, can protect your family and lessen the chances of your wishes being challenged.

Reference: Press Republican (Dec. 18, 2018) “The Law and You: Important to make a will”

Include a Letter with Your Estate Plan

You have your vital documents in order, and you keep them current. You have a will or trust. Your living will, also called health care power of attorney is complete, and you have spoken with the person you have named as your health care decision-maker about your end-of-life wishes. You have taken care of all your legal and financial issues, including final instructions and a list of who will receive particular items.

While your loved ones will appreciate that you have thoughtfully taken care of these essential issues and will not leave them with a mess to clean up one day, there is one more thing you should do. You need to sit down and create something your family members and close friends will treasure for the rest of their lives. You should write and include a letter with your estate plan.

Words are Important

People can carry sadness for a lifetime because a parent never said “I love you” to the child. The parent might be shocked that the child felt unloved. Some people think they do not have to tell someone they love them, because they show their affection in the daily tasks of providing a home and upbringing for the child.

In addition to the worldly goods that you give to your loved ones, leaving a “last letter” behind can help them deal with their grief at losing you. You can use the letter to accomplish things you might not have done as much as you wish you had. You can write one letter that speaks to several people or write multiple letters.

What to Put in the Letter

You can begin by telling the people in the letter that they are important to you. You should tell them that you love them and let them know in writing how proud you are of them. No matter how many times you have spoken these words to them before, they can hold a letter in their hands for years and read it over and over.

Sometimes people write letters of apology to those they have hurt at some point in their lives. Apologies are helpful in making peace with one’s life. If you cannot bring yourself to say the words during your lifetime or you anticipate that the person would respond in an unacceptable manner, you can do your part by putting the apology in a letter.

If you can forgive someone who did something wrong to you, it can be cathartic to write a letter of forgiveness. These letters take great care, as they can be interpreted as sanctimonious or judgmental.

What Not to Put in the Letter

While it might be tempting to take one last jab at someone you feel wronged you, the last letter is no time to be spiteful. If you cannot write something kind to a person, do not write anything.

What to Do with the Letter

All you need to do is tuck the letter in with your legal papers. One day, when your loved ones go through your will or trust, they will get a pleasant surprise and something to cherish.

You should talk with an elder law attorney near you about the ways that your state rules might vary from the general law of this article.

References:

AARP. “How to Write a Last Letter to Your Loved Ones.” (accessed January 8, 2019) https://www.aarp.org/retirement/planning-for-retirement/info-2018/letter-to-remember.html