Disabled loved ones? Avoid this inheritance mistake

A real-life fact pattern with a client was that Grandma and Grandpa wanted to provide something in their wills to provide for their two grandsons who are disabled.  They decided they were going to leave them the farm.  The thought was not that their grandsons would live on and run the farm, but that it would be sold after their deaths and the proceeds would go to their grandsons who were both disabled.  Grandma and Grandpa had very good intentions, particularly since just the land alone had a fair market value of close to $10,000 an acre.  Great, right?  No.

This blog post is for families that include a loved one with a disability.  It is for parents, certainly, but also for extended family who choose to provide a bequest (personal property) or devise (real property, such as house and land) for a disabled family member.  The good intentions of family members in leaving money or property to a person with a disability might do more harm than good.

First, it is almost never recommended to leave an inheritance to a person with a disability unless there is a special needs trust for that person in place (I include Ohio’s “wholly discretionary trust” when I use the term “special needs trust”).  People with disabilities often receive benefits such as Medicaid, or Social Security Income, that could be jeopardized.

Second, the need for such a trust to be in place is the subject of this blog post—the critical mistake I’ve encountered with clients is that they have a special needs trust plan, but it has a certain type of special needs trust that only takes effect at death, called a testamentary trust.  There are trusts that are in existence now and are not funded until death, but that is not a testamentary trust.  To the contrary, with a testamentary trust, the trust itself actually comes into existence at death.  (Most of the situations that I have seen involve testamentary “supplemental services” trusts.)  If testamentary special needs trusts are valid and enforceable, what is the problem?  The problem is the real-life scenario in the top paragraph.

The last of the Grandma-Grandpa unit dies and leaves the 10-acre farmhouse and farm to disabled grandsons “Johnny and Joey.”  However, Johnny and Joey’s parents are still alive, and have a testamentary supplemental services trust (special needs trust), where the special needs trust does not come into existence until Johnny and Joey’s parents die.  In this scenario, there is no special needs trust in existence now, when it is needed.

Except in rare circumstances, I prepare stand-alone special needs trusts that are in existence immediately after they are executed (signed and witnessed).  If the boys’ parents or grandparents had a trust prepared that was already in existence, Grandma and Grandpa’s inheritance could have been left to the boys’ trusts, as well as  inheritances from others.  Because parents might not be the only people who choose to leave an inheritance for a person with a disability, their testamentary special needs trust is not the recommended choice in special needs planning.

If you have questions or would like to begin estate planning with a disabled loved-one in mind, email me at julie@juliemillslaw.com.


When should I update my estate plan?

An estate plan consists of a last will and testament, possibly a trust, along with additional documents necessary for situations involving incapacity or death.  Additional documents can include a financial power of attorney, advance directives (living will for end-of-life decision making, and a healthcare power of attorney), and a funeral declaration, among other documents.

You should review your estate plan every five years to see that it still reflects your wishes.  However, if any of the following occur, then you should review your estate plan sooner:

Marriage: if you get married, or particularly if you get re-married, you need to review your estate plan.  If you are married and die without a will, state laws of “intestacy” (dying without a will) might not result in a distribution of your assets as you would want.  Furthermore, divorce and re-marriage do not automatically remove your ex-spouse from existing documents.

Children (birth, adoption or marriage):  the critical reason for reviewing an estate plan after you add a child to the family is to name a guardian who will care for your child should you (and your spouse, if married) die.  This is not a decision that should be left to a judge you do not know.  Another reason is to direct assets to provide for your child if you are gone.

Divorce: many states have laws that treat ex-spouses as having “predeceased” their divorced spouse in certain situations with some estate planning methods.  It is best to not assume that such a law will pertain to your documents. Part of your divorce or dissolution journey should include an estate plan that removes your ex from your documents.

Death of a spouse: if a spouse dies, you want to be certain that you have successors listed in estate planning documents, and you want to update deeds and titles to property.  For example, if you have a financial power of attorney and your spouse is the only person you named to serve as agent, you will need to update this document with the names of others.  If you owned property jointly with your spouse, you will need to remove your spouse’s name if you intend to convey that property (you’ll need to have a new deed prepared to your home).

Change in assets:  when you acquire assets, you should ensure that your estate plan addresses where those assets will go upon your death.  If you have 8 acres that your two children will inherit and plan to divide equally, and then acquire 5 more acres, who will inherit the 5 acres if you do not specify it in your estate plan?

Relocation:  most estate plan documents are valid in other states if you move, as long as the documents were executed properly in the state where you lived when they were prepared.  There are special considerations in some instances, however, when you move.  For example, if you move from a community property state to a common law property state, or vice versa, then you should definitely have your current estate plan reviewed by an attorney in your new state.  Additionally, bond might be required for out of state executors and others, so you might consider choosing in-state people to serve in these fiduciary roles.

Change in status of guardian, trustee or executor:  did the person you named as the guardian of your child die?  Move to Europe?  Become incapacitated?  The same consideration is valid for an executor or trustee.  If yes, consider reviewing your documents to remove them and replace with alternatives.  Perhaps after you named your cousin to serve as the guardian of your three children, she has had four children—would she be able to care for seven children?  After you named your brother to serve as guardian of your child, he started a career where he travels more than he is home—would that be a suitable situation for your child?

Your estate plan reflects your wishes for the way everything will be handled at your death, and designates certain people to carry out those wishes.  Both the plan, and the people designated in the plan, should be current.

Contact me at julie@juliemillslaw.com to discuss reviewing and updating your estate plan.

Happy *World Adoption Day*! #WorldAdoptionDay

Not flesh of my flesh, nor bone of my bone, but miraculously still my own.  Never forget for a single minute, you didn’t grow under my heart but in it. — Fleur Conkling Heyliger
Happy “World Adoption Day“!  One of the best steps to take once you adopt a child is to make sure you have an estate plan in place to secure your child’s future.  You need, at least, a last will and testament naming someone to serve as guardian if something happened to you.  A trust that can provide for your child’s education and well-being should be considered.
Under Ohio law, as with most states, children who were adopted are considered legally no different than children who were born to the parent or parents.  They inherit under the statutes of descent and distribution and other laws without regard to being adopted.  Ohio has a special interest in adoption thanks to Wendy’s founder Dave Thomas and his foundation, the Dave Thomas Foundation for Adoption, which finds adoptive families for children waiting in foster homes.
Congratulations to all families touched by adoption.  #worldadoptionday

Probate: What is it?

“Probate” is a court-supervised legal process that happens after someone dies.  The purpose of probate is to make sure that the debts and taxes of the person who died are paid, if possible, and that the deceased’s assets are distributed according to how he or she intended.

  1. Assets: generally, only the assets belonging solely to the person who died are probated. Other assets can often be transferred outside of probate, such as real property held in survivorship (your deed will say “survivorship”), many assets with beneficiary designations such as retirement accounts and life insurance and assets held in a trust.   These are just a few items on a long list.
  2. What starts the probate process? You file the deceased person’s will with your local county probate court.  Then, a timeline begins ticking where you file certain documents within certain timeframes, creditors have a certain deadline by which they need to respond if the deceased had debts, etc.
  3. Do I need an attorney? It depends. If real property (house, land) is involved then hiring an attorney is highly recommended.  If there are few assets, no real property, then perhaps an attorney might not be necessary.  The attorney’s fees are paid by the estate.
  4. How long will the probate process take? It typically takes about nine months but can take longer if certain taxes are owed or if there is a will contest.
  5. What will I have to do as the Executor? File the will with the probate court, gather and safeguard the deceased’s assets, have assets appraised, pay final bills, and distribute assets.

Contact me if you need guidance or representation through the probate process at julie@juliemillslaw.com.

The Classics: Fab Four of Estate Planning Mistakes

  1. “I’m not wealthy so I don’t have an estate: Everyone has an estate.  Estate planning is about what you own, not just what everything is worth.  If you have a car, a house, a bank account, or anything, you have an estate.  Estate planning encompasses how you plan for the distribution of your assets.  Estate planning can be a simple will, or it can be complicated trusts.
  2. Pets. Legally, pets are your personal property.  As with all property, you should plan for what will happen to them if you die.  Obviously this takes on critical importance with pets, since so many pets end up in cages in shelters when their owners become incapacitated or when they die.  Include instructions for the care of your pet in your will, or set up a pet trust.
  3. Designation of agents, naming of executors and trustees. Most clients do not want to “play favorites” with naming their children as agents to powers of attorney, executors in a will, trustees to a trust, so they want to name all three (or however many) children as “co-“ agents.  Under some states’ laws, co-agents can act independently of each other without requiring signatures on everything of, say, all three children.  This can still be a nightmare.  Financial institutions prefer one person for their own liability reasons.  Unless there’s an odd number to break a tie, disagreements can hamper efforts to care for an incapacitated parent or deal with estate matters.  If all three signatures are required, this can be burdensome if all three children live in separate states.  Choose one child—typically the closest geographically and most responsible financially—then list other children as successors.  (Choosing a guardian for your children is crucial also.  See this important post.)
  4. Buried or cremated? Where? Besides arguments over the distribution of belongings, the other main creator of arguments is decisions surrounding burial, cremation, and cemetery location.  Be absolutely clear in your estate plan about what you want.  Do you want buried?  If yes, in what cemetery?  Do you want cremated instead?  If yes, do you want your ashes scattered (and where), or stored in an urn (and with whom)?  Fights occur because of cemetery location first, since extended family want you in your hometown even if you’ve lived away for decades.  Disposition of your body is the second cause of fights, in my experience.  Some people are abhorrent to thinking of a loved one decomposing in a grave, or being reduced to ashes in an oven.  Finally, if you choose cremation and want your ashes scattered, be sure your wishes are legal.  The wish to “throw my ashes up in the air as you’re going down Space Mountain at Disney World” is not legal.

Contact me at julie@juliemillslaw.com to discuss your will or trust, or planning for your pet.

August is #NationalMakeAWillMonth!

August is #NationalMakeAWillMonth.  What are you doing to celebrate—having a will prepared this month?  Instead of discussing what happens with a will, here’s what happens without one.

When you die and you have not prepared a will, you die intestate.  The laws of “descent and distribution” in your state kick in, and the court uses these laws to decide who gets what.  The court appoints a person to administer your estate.  The court decides who will care for your children.

Without a will:

  • You don’t decide who gets what assets you own
  • You don’t dictate who winds up your affairs
  • You don’t choose who will parent your children
  • You don’t decide where your pets will go
  • You don’t decide whether you’ll be buried or cremated, or where you’ll be buried

Celebrate #NationalMakeAWillMonth by having a will prepared this month.  Take control of what happens to your assets at death!

All I want is a simple will.

Legal resources for handling your own legal matter should be made more readily available for the public since the cost of hiring an attorney can be too expensive for too many.  In some situations, handling your legal matter yourself can be done if you are diligent about researching what you need, what is available, and what is required.  Unfortunately, the trap of “you don’t know what you don’t know” can ruin the best-laid plans, particularly estate plans.

“All we want are simple wills.”  This statement is followed by the direction that the couple (let’s assume they’re married) wants to leave everything to their spouse first, then the kids.  That does sound simple:  Mike and Carol Brady’s will would leave everything to each other then to their kids.  What could go wrong?

A popular do-it-yourself-will website posted an article that shows the reader how easy it is to write your own will.  First, name your executor.  Second, name “guardians for young children.”  Third, describe how assets will be divided and distributed.  Fourth, sign in front of two witnesses, then have them sign.  This is great too—again, what could go wrong?  This does sound easy.  Who needs an attorney!

Let’s examine the Brady’s “mirror wills” (they mirror each other—all to spouse, then to kids equally).  The first red flag is that the Brady’s have children from other relationships, and like most blended families, the kids aren’t adopted.  In most states, stepchildren do not inherit (unless specifically named).  Here, a typical will would state “I leave all my assets to my wife Carol; if she predeceases me, then to my children in equal shares.”  Mike dies, and all of his assets go to Carol.  Carol dies, and her mirror will states “…all of my assets to Mike; if he predeceases me then to my children equally.”  At Carol’s death, she had inherited all of Mike’s assets from when he died.  Since Mike predeceased her, then all of her assets, including from Mike, go to Marcia, Jan and Cindy.  Those are her children.  Greg, Peter and Bobby are her stepchildren.  What do the boys get?  Nothing under this standard, simple will!

Now let’s examine the do-it-yourself article.  Name your executor—not too hard, although the article did not mention naming successor executors, but most people would know that.  However, “Name guardians for young children.”  I name my brother John Doe and his wife Jane as guardians because they know and love my kids.  What if they divorce—now my kids might be in the middle of a custody fight because both were named guardians.  What if my brother John is killed in a car accident—does my sister-in-law keep my kids?  She would if both are named.  Or at brother John’s death would I then want my kids to go live with my sister so my kids remain with a family member?

The best (insert a little sarcasm) advice is “describe how assets will be divided and distributed.”  That appears easy to do—divided evenly among my 3 kids.  I see that phrase often in wills, “to my children equally.”  Dad dies, Kid 1, Kid 2, and Kid 3 each get an equal share of his estate.  But what if Kid 3 died before Dad?  An attorney would counsel you, and prepare accordingly, whether you want your estate divided between Kid 1 and Kid 2, or if you want one share to Kid 1, one share to Kid 2, and one share to go down to the children of Kid 3 (Dad’s grandchildren).

Most people who do their own wills and estate plans think the documents are good, but they don’t know what they don’t know, and they definitely won’t know because they’ll be dead when any problems are discovered (“oops, Dad disinherited his grandkids”).  Simple wills are not that simple in many instances.