Estate Plan Maintenance

by David Meyer on October 15, 2010

It is important to periodically review your estate plan in order to be sure your assets are distributed as you truly desire and to avoid tax traps. Your estate plan can be changed inadvertently through changes in investments, growth in net value or other common changes in your life or the lives of your beneficiaries without you being aware of it.

The following are some circumstances which can inadvertently have an effect upon your estate plan:

Divorce/dissolution or legal separation of Marriage:

If you are recently divorced or legally separated, you typically want to be sure that your former spouse does not continue to be your primary beneficiary.  For example, Washington law provides that upon dissolution of the marriage any beneficiary designation to the spouse is revoked as a matter of law. However, the United States Supreme Court has held that this statute does not apply to employment benefits. Thus beneficiary designations to the ex-spouse on 401K plans and other employment retirement plans as well as employment group life insurance policies would remain in effect regardless of the dissolution of the marriage.

Newly Married:

If you have recently married and have children from a prior relationship, you need to make sure that your children’s interests are adequately protected. Federal law provides that employment retirement plans must provide that retirement funds must be paid to the new spouse after one year of marriage unless the new spouse consents otherwise in writing.  With respect to employment based group life insurance, the benefits are to be paid to the named beneficiaries without regard to any possible community property interest the spouse might have under state law. If these results are not what you desire, you and your new spouse need to review your beneficiary designations with a knowledgeable attorney to be sure that all is done to accomplish what you desire.

Change of state of residency:

If you have changed residence to a different state since executing your estate plan, the laws of the state of your prior residence may be entirely different from that of your new residence. This is especially true as to any Health Care Directive (Living Will”) or Durable Power of Attorney for Health Care you may have in place. These documents are usually specifically authorized by a specific statute in each state which often specifies the format. A local hospital or doctor may not be compelled to honor such a document if it is not executed according to the statutory directive of this state.

Change in Assets:

Sometimes your estate plan is affected when you substantially change the type of investments in your estate.  For example, if you have sold your home and invested the proceeds, your revocable living trust and/or will may provide a different beneficiary of your home than of your investment accounts. If you have recently purchased or are contemplating the purchase of a life insurance contract or annuity or are about to roll over a retirement account into an IRA account, the new beneficiary designation may not be adequately coordinated with your revocable living trust and/or will. In such events you would be well advised to have your estate planning attorney review your entire estate plan to determine whether it adequately provides for the disposition of property as you desire and whether you may be exposed to unnecessary estate taxes.

Circumstances of the Beneficiary:

Your estate plan can be affected not only by your own circumstances, but also by the circumstances of your intended beneficiaries. For example, if one of your beneficiaries is saddled with a substantial debt or is a spendthrift, your bequest to him/her could benefit his/her creditors first. Another example is a beneficiary that is receiving government funded disability payments. Your bequest directly to that beneficiary may terminate that beneficiary’s right to continue receiving disability payments.  These results can be avoided through properly drawn trust language in your revocable living trust or will. You should let me know if any unique circumstances of your beneficiaries arise.

A review should not only include the review of your will and/or revocable living trust, but it should also review the beneficiary designations on life insurance policies, annuities, IRA’s and other pensions plans, bank and investment account ownership and a review of any asset title questions you might have. You should also let us know if you anticipate receiving any large gifts or inheritances. Your estate plan should provide for the disposition of these assets in the event that you do receive these before you die.

If you have not reviewed your estate plan for a couple of years or more, your estate plan may no longer adequately provide for the disposition of property or avoid taxation as it should due to the change in the nature of property or due to a dramatic increase or decrease in the value of your estate. In addition to a review upon the happening of the above referenced events, it is wise to review your estate plan with us every other year to avoid problems. The larger or more unique your estate or beneficiaries are, the more important this biannual review becomes. More often than not, there are only minor or no changes necessary and the cost for the review is very small. In those situations where major changes are called for the cost will be more but the savings your estate will enjoy and your peace of mind will far exceed any such cost.

What is Estate Planning and Why Do I Need It?

by Julie O'Brien on September 22, 2009

The word “estate” can evoke an image of ownership of vast amounts of property by a wealthy person – hardly the image most of us have of ourselves. Yet “estate planning” is something each of us needs to do on some level – acknowledging that change is inevitable, and that we all have people and things about which we care. An estate plan is a coordinated effort to make decisions about the future, and a well-considered plan involves consideration of several different types of legal documents and their interrelationship to one another. Some of the documents that commonly make up an estate plan include:

The Will

A will is the most common estate planning document. As estate planning attorneys frequently say, if you die without a will, the state will provide one for you (disposition of assets according to the laws of intestacy.) The laws of intestacy provide a generic one-size-fits-all scheme for the distribution of assets. Understandably, most of us prefer to make our own choices.

A will can be simple, or it can be quite complex. A person or entity is named to oversee the estate – called a personal representative (sometimes referred to as an “executor” or “administrator”) Some of the functions of a personal representative are taking control of assets, paying bills and/or taxes, and distributing assets after death in accordance with the provisions of the will.

The Trust

A trust can sometimes be a will substitute, or it can be part of a will or work in conjunction with it. A trust basically creates a three-way relationship among the person establishing the trust (the “trustor” or “grantor”), the person(s) for whose benefit the trust is created (the beneficiary), and the person overseeing the trust assets (the “trustee”). In many circumstances, one person fills more than one of these roles.

A crucial attribute of a trust is the ability to extend your wishes for how your assets are distributed past the time of death or disability – or even just past the end of the wish to continue managing your assets. Another desirable feature of a trust is the responsibility (referred to as “fiduciary duty”) the trustee must take on in order to protect trust assets for the benefit of the beneficiary according to the wishes and directions of the trustor.

The Community Property Agreement

Washington law provides that spouses can enter into a community property agreement, a binding contract between them. The most common form of a community property agreement is referred to as “three-pronged,” because it accomplishes three purposes: (1) converts existing separate property into community property, (2) provides that all property acquired in the future will be community property, regardless of the source of funds used to acquire it; and (3) transfers all property to the surviving spouse upon the death of the first spouse to die. While such agreements seem quite simple, they should be tailored to each couple to determine if they truly desire all three of these purposes. In addition, a community property agreement should be judiciously used because it can have serious consequences in the future. It gives a spouse an instant interest in all your property and inheritance right which may not be contested. It can easily interfere with tax planning, can affect the outcome of a property settlement in divorce, and can prevent planning for Medicaid benefits. Once entered into, most community property agreements cannot be revoked by one party alone.

Durable Power of Attorney for Property

A durable power of attorney for property designates a person who will make property and financial decisions for you in the event you become incapacitated or otherwise unable to make these decisions for yourself. This document has a great deal of flexibility in how it can be used – the powers it grants to the designated person (referred to as the “attorney-in-fact”) and in the circumstances under which it can be used. Typically, this document provides that it will only be effective upon your incapacity or disability (what is known as a “springing power”), but it can be, and sometimes is, effective immediately.

At The Meyer Law Firm, P.C., you will find professionals with the knowledge of this area of law combined with the experience and sensitivity to fully appreciate your particular needs. If you think you would like to know more about making an estate plan, give The Meyer Law Firm, P.C. a call to set an appointment to review your situation.

What are Health Care Directives and Durable Powers of Attorney for Health Care, and Why Should I Have Them?

by Julie O'Brien on September 22, 2009

When establishing an estate plan, it is important not only to plan for death but to also plan for managing our persons and our estates in the event we become incapacitated. Also, it is very important to many people that they give direction on how they are to be treated in the event of a terminal illness or permanent vegetative state. The following explains the documents providing such protection.

Health Care Directive (sometimes referred to as a “living will”)

A health care directive specifies your wishes concerning the use or non-use of life-sustaining treatments should you become terminally ill or permanently unconscious. The directive provides guidance for those who might be in a position to make decisions for you. While you might think something like “everyone who knows me knows I am not the type of person who would want my life to be artificially prolonged”, there is a vast difference between making such an assumption and having your wishes clearly specified in a legal document. The latter provides peace of mind that you have done everything possible to have some control over such crucial matters. And should your loved ones actually be called upon to make such decisions, the documents provide peace of mind for them as well. Further, physicians are trained and take an oath to do whatever possible to keep people alive. Without specific direction to withhold treatment, they must continue life sustaining treatment.

Durable Power of Attorney for Health Care

A durable power of attorney for health care is similar to a durable power of attorney for property, but it relates to decisions concerning health care and other health-related matters. With this document, you appoint the one you want to make decisions concerning your medical care and to implement your wishes stated in a Health Care Directive. This power of attorney would not typically be given to be effective immediately.

At The Meyer Law Firm, P.C., you will find professionals with the knowledge of this area of law combined with the experience and sensitivity to fully appreciate your particular needs. If you think you would like to know more about making an estate plan, give The Meyer Law Firm, P.C. a call to set an appointment to review your situation.

Problem Heirs – I Want To Do My Estate Plan, But It’s Not That Simple

by Julie O'Brien on September 10, 2009

Most of us are aware of the need to have a good estate plan to pass on our assets at our death. Yet this important task is often postponed. Because of the importance of such a plan, we want it to be perfect. Sometimes our hesitancy to go ahead and make a plan is rooted in ambivalent or possibly even negative feelings about one or more of our heirs – a child or grandchild who would normally be a beneficiary of our assets. Often we love these people and want them to have our assets, yet very real concerns paralyze us and keep us from moving forward. The resulting lack of moving forward penalizes others about whom we care and prevents us from having the peace of mind that comes with having designed a satisfactory estate plan.

An experienced estate planning attorney has an arsenal of tools to address such concerns. An estate plan will be our last message to our heirs, and we want it to resonate through the years with our values. On the one hand, we don’t want it to be driven by disappointments and worries that may or may not be temporary. On the other hand, neither do we want our decisions to be based on possibly unrealistic hopes that our heirs will “straighten up” after we die.

Common concerns and some possible solutions include:

  1. “My daughter takes money for granted.”
    Your estate plan can include a trust, providing for distributions to heirs at specific times or at specific ages. A trustee will be appointed – someone you know and feel comfortable with or even a professional – who can be objective and fair in the management of undistributed funds for further growth. You may grant the trustee a great deal of discretion – or very little discretion – in the making of decisions.
  2. “My son does not recognize the limits of his inheritance. I am concerned that he might sell or give away his inheritance rights.”
    A “spendthrift” provision can and should be part of your estate plan. Such a provision keeps an imprudent heir from transferring his interest in your estate to another. Such a provision also safeguards estate assets from claims other parties may have against your heir for debts incurred.
  3. “I disapprove of my children right now, so I wish to leave everything to my grandkids instead.”
    An experienced attorney can assist you in avoidance of payment of federal generation-skipping transfer tax, if necessary, and provide counsel in other potential pitfalls of choosing to bypass one generation in favor of another.
  4. “My daughter suffers from physical and/or mental disabilities, and it is unlikely that she will ever be able to manage her own affairs.”
    A Special Needs Trust can provide for the future needs of a disabled child, while still allowing the child to take advantage of state and federal benefits. You will not have to deplete your assets to fund such a trust.
  5. “I’ve given up all hope of my son ever recovering from his alcoholism/drug abuse.”
    Your estate plan can be crafted to leave an impaired heir’s usual share to a treatment plan, a rehab center, or a non-profit organization instead of directly to the heir. In this way, you are addressing the problem directly, leaving the assets to a worthy cause, and in a wonderful way honoring your impaired heir by recognizing the struggle in which he is involved. For example, if a parent is a member of Al-Anon (the organization for those whose lives have been affected by someone else’ drinking or drug use), a bequest can be made to that organization.
  6. “My daughter is married to (or is likely to marry) someone I do not trust, so I don’t want to leave anything to her.”
    Washington law does create a presumption that assets belong to a couple through what is known as community property law. However, bequests to one marital partner are not community property if they are kept separate. This can be assured by placing the assets in trust for that person. An attorney can counsel you as to how to avoid assets becoming community property.
  7. “I have some items of personal property which have special meaning to me, and I want certain people to have them. I don’t want these items to be possibly mingled by my child with my general estate.”
    Washington law allows for items of personal property to be transferred through a list, which is included by reference into your will or trust. You can maintain the list yourself without the formalities necessary to revise your will or make a new will. You can change your mind and can even add items you may not yet own.

Should any of the above scenarios seem familiar to you, The Meyer Law Firm can assist you. We have the experience, sensitivity, and creativity necessary to address your particular concerns. We can provide you with a perspective of your entire estate situation, including heirs you may have in addition to the “problem” heir. We have knowledge of the law and the various alternatives available, and can draft documents based on the informed choices you make. Achievement of such a plan assures you that you have faced the realities and proceeded forward to design a plan. That plan will reflect your personal values and be in your best interest and consider the interests of all those about whom you care – including but not limited to the “problem” heir. If you would like to discuss such an estate plan, give The Meyer Law Firm, P.C. a call to set an appointment to review your situation.

Undue Influence

by David Meyer on August 25, 2009

The Meyer Law Firm, P.C. has been successfully involved in and litigated many cases where undue influence was exerted over a decedent. In fact, in a majority of estate disputes concerning the validity of the will or trust or a lifetime gift there is some allegation of undue influence. The following provides some general information regarding to undue influence.

What is Undue Influence?

The Supreme Court of Washington states that undue influence occurs when one person’s free will is overcome and substituted by the will of another person. In other words, the person is not exercising his/her own wishes but that of the party exerting the influence. It is an issue which comes up frequently, not only in the context of making a will or trust, but also in dealing with transfers of property by a vulnerable person.

Undue influence typically occurs when a vulnerable person is dependent upon the party exerting the undue influence in either an emotional or physical manner. For example, caregiver are often found to unduly influence their clients to give them property by gift or by will. Oftentimes, family members who take charge of the financial and/or physical care of the vulnerable person might abuse the trust which the family and vulnerable adult have placed in that person.

How Do You Prove Undue Influence?

Normally the party claiming the undue influence has the burden of proving undue influence by the legal standard of “clear, cogent and convincing evidence”. This is an enhanced burden of proof that is often very difficult to establish.

Undue influence is usually proved by circumstantial evidence rather than by the direct testimony of witnesses who observed someone compelling a decedent to act in a certain manner. The Washington Supreme Court in the case of Dean v. Jordan, 194 Wash. 661, 79 P.2d 331 (1938), stated there are basically six indicators to which one can look to establish undue influence. The first three are considered the most important. Those criteria are:

It is not necessary to show all of the indicators and seldom would all be present.

  1. Fiduciary Relationship. If the perpetrator is in a confidential or fiduciary relationship with the decedent, the perpetrator is likely to be in a position to impose his/her judgment onto the decedent. Fiduciary relationships are readily found to exist in any situation where a vulnerable decedent would be expected to trust, and rely to a large extent, on another for aide or assistance in any manner. The presence of a fiduciary relationship between the person making a will or gift and a beneficiary is a key element of most undue influence cases, and the perpetrator has the burden to prove that the act was not the result of his/her influence.
  2. Participation in the preparation/procurement of the will. This factor is often combined with a fiduciary relationship to create what courts often call a “strong inference of undue influence.” The participation or procurement often follows a pattern of the beneficiary’s attorney, or an attorney found by the beneficiary, drawing up the will or creating the gift transfer documents.
  3. Receipt of an unusual or unnaturally large part of the estate. This is a subjective evaluation, based on the beneficiary’s relationship and role in the decedent’s life, and how it compares to the size of his or her bequest relative to the roles/bequests to others who might be expected to take.
  4. The age, health and mental vigor of the testator. Physical or mental weakness does not, in its own right, establish undue influence. It is simply a factor that can make one more susceptible of being influenced.
  5. Opportunity for exerting undue influence. Cases finding this factor to be important typically have involved beneficiaries who actually lived with the decedent and have constant contact with him/her. The “opportunity” is more significant if the decedent was relatively isolated and lacked contacts with others who might have provided the testator with countervailing influences.
  6. “Naturalness” of the act. Another indicator of whether undue influence may have been present is whether the act is “natural” – that is, whether the gift or bequest distributes the decedent’s estate to the natural objects of his/her bounty. Naturalness depends upon the circumstances of the decedent’s life and relationships.

These criteria are very subjective, and it is difficult to predict how a court will determine any particular set of facts.

If you believe you have been disinherited because someone has unduly influenced your loved one, give The Meyer Law Firm, P.C. a call to set an appointment to review your case.