How frequently you should review your estate plan depends on how old you are and whether there has been a significant change in your circumstances. If you are over age 60 and you haven't updated your estate plan in many decades, it's almost certain that you need to update your documents. After that, you should review your plan every five years or so. But if you're younger, you don't need to do so nearly as often.
Here are a few age ranges and what they mean in terms of estate planning:
18-30 Everyone needs a durable power of attorney, health care proxy and HIPAA release so that they have people they choose to step in and make decisions for them in the event of incapacity.
30-40 Once you begin accumulating assets, get married, and have children, it's important to create an estate plan to care for your loved ones in the event of your death. It also can't hurt to update your durable power of attorney, health care proxy and HIPAA release, since the people you may have appointed at 18 (your parents?) may not be the people you want in these roles at 35.
40-60 Unless there's been a change in your circumstances, and assuming you've set a good plan in place during your 30s, you probably don't need to review your estate plan during your 40s and 50s.
60-70 Once you've hit your 60s, it's time to take a look. Your children are probably grown. You may have grandchildren. And, hopefully, you've accumulated some wealth. The people you appointed to step in in the event of incapacity when you were 35 may not be in a position to assist when you're 65. You may have retired or are contemplating doing so. And, unfortunately, the chances of disability or death increase with every year.
70+ Now it's time to review your plan every three years or so. Changes happen -- to your health and that of your loved ones, to the tax laws, to the programs supporting long-term care or disability care. It's important to have a plan in place and to adjust it as circumstances change.
Change in Circumstances
While the timeline above outlines when you should review and perhaps update your estate plan, it needs to be supplemented by the following potential changes in circumstances that would warrant a review of your plan to see if it still meets your goals and needs:
Marriage. You're likely to want your assets to go to your spouse and to name him or her to be your agent in the event of incapacity.
Divorce. Likewise, if you get divorced, you probably won't want your assets to go to your ex-spouse or to rely upon him or her to step in if you were to become incapacitated.
Children. Once you have children, you'll want to provide for them and to name someone to step in as guardian in the event of your death or incapacity and that of their other parent, if any. Generally, once you have a plan in place you do not have to update it unless you have more children.
Disability. If you or someone who would inherit from you becomes disabled, you will need to plan to protect and manage your assets, whether for yourself or for your beneficiaries.
Wealth. If you accumulate sufficient assets to exceed the thresholds for state and federal estate taxes -- $11.4 million federally -- you may want to plan to reduce or eliminate such taxes.
Moving. If you move to a new state or country, it will be important to have your estate plan reviewed to make sure it works in the new jurisdiction.
In short, until you reach age 60 or 70, reviewing your estate plan every five years probably is overkill. But do so whenever you have a change in circumstances such as those listed above. If you're over 60 and haven't updated your estate plan in many years, now's the time. Then, having a review every five years is definitely a good rule of thumb.
“Many business owners build their businesses hoping that they will continue to generate income for their heirs, after they pass away. However, businesses often die or lose significant value when the owner dies.”
When considering how to make sure your business continues to thrive, it’s important to remember that if you do nothing, your business already has a default plan in place: if no additional planning is done, your business is an asset of your estate and will be subject to probate.
Forbes’ article, “Business Succession Planning In The Internet Age,” says that there are four issues with this default plan. First, it can take years for a court to probate your estate. In that time, your business can dry up, when probate is finalized. Next, if you do not have an estate plan, your heirs may fight over who will inherit the business. Whoever inherits the business under the state’s intestate succession laws may also not be the best person to make sure your business will continue to grow and be successful. Finally, if you have co-owners, they might not like your heirs and could get into disputes with the new owners that harm the business.
There are two legal tools to look at when reviewing your options: a buy-sell agreement and good estate planning.
A Buy-Sell Agreement. This is a contract between the co-owners of a company that addresses a variety of business-changing events, such as when an owner dies. Rather than the deceased owner’s equity being a part of the assets distributed during probate, the buy-sell agreement can include an agreed-upon amount that will be paid to the estate, in exchange for the business repurchasing the equity. The purchase is often financed with a life insurance policy on each owner of the business.
Estate Planning. Instead of allowing your business to be subject to probate, a business owner can work with an estate planning attorney to make the business an asset of the owner’s trust.
With either option, be sure you note the important digital assets for the continued operation of your business. Your business’s digital assets may include customer lists, intellectual property and creative products. It is important to remember these tips on considering your digital assets:
Understand the policies that impact your tools. Review your software provider’s policies on what happens if your company needs to name a new point of contact, pay bills differently, or be transferred to a different company, in case the unexpected happens.
Security and redundancy. A company’s success requires owners and employees to keep proprietary information and client information secure. However, the concern for safety must be balanced with redundancy that considers which people will have access to digital assets and an understanding of what to do with them, if the owner or main management team is unable to tend to business as usual.
Add digital assets in legal documents. Include an inventory of digital assets in your buy-sell agreement or estate plan. Be specific about who should get access to digital assets.
Creating a detailed plan as to who should have access to your business’s digital assets in case of your incapacitation or death, is an important part of succession planning.
“These documents could save money but can lay estate planning traps.”
An estate planning attorney would much rather not see a family undergoing unnecessary stress and expenses. Do-it-yourself wills and on-line wills very often create problems for families, as reported in Next Avenue’s aptly-named article “The Problems With Do-It-Yourself Online Wills.”
The article reports that one DIY estate planning service had three different “packages” that consisted of the same document, just with different names. Those packages were also missing a key estate planning document that the average person would not know to ask about. Even attorneys who do not practice estate planning law, know to work with an estate planning attorney for their wills.
For those with complex financial and personal lives, a DIY service may not be able to address the estate planning issues. If you have over a certain level of assets, do you want to risk making a costly blunder that would easily be prevented by working with a skilled professional?
Think of it this way: there are some people who can have their taxes done online, because they receive simple tax forms from their employer. If there’s a mistake, the IRS sends a letter and they may have to pay a penalty or pay the taxes that were not paid properly. Simple, right?
If your estate plan doesn’t work, you’ll never know. However, your loved ones will, and they’ll be the ones to have to make things right.
Good estate planning is all about expressing our wishes. The documents that are prepared and the process of decisions about our wishes accomplish a number of tasks:
Avoids court intervention in your family’s life,
Reduces administrative confusion, and
Reduces or eliminates unnecessary fees and delays.
The four basic planning documents are: a will, power of attorney for financial matters, an advance health care directive and if needed, a trust. If you expect to use any of these through a DIY website, expect to use a “fill in the blank” approach. Remember that every state has its own laws governing probate. Are you sure that the forms you are filling out are acceptable in your state?
Other DIY sites have some documents, but only if you purchase a high-end package. Others offer attorney consultations, but some consider an attorney consultation to be a series of questions and answers through an online app with pre-written responses, and not a real attorney.
The problem with DIY wills, is that we don’t know what we don’t know. We may know who we would like to receive our assets, but not what our state law requires to make that happen. Case law about estate distribution and probate is not something an average person knows. That’s why it makes more sense to speak with an experienced estate planning attorney. They will be able to create an estate plan based on knowledge and skills, that come about only after practicing in this area of law.
“The trust has a no-contest clause and a lawyer my brother consulted with said that the risk is too great for the return.”
It’s impossible to know what is in the heart and mind of the deceased, except to consult their last will and testament. However, when there is a suspicion that the last will and testament has been changed through undue influence, the care that went into the will might be undone cautions the Santa Cruz Sentinel in “No-contest clause throws kink into trust plan.”
The example given is of a woman whose mother was in the care of her niece, who was also the trustee of her mother’s trust. The mother modified the trust to give the niece her home, which is estimated to be worth about a fifth of the total estate value. The daughter notes that at the time these changes were made to the will, her mother was in hospice care and being given morphine. It does sound as if it could be influence because changes made to a will during a critical illness, especially in the presence of strong pain medication, are questionable.
Since the trust included a no-contest clause, the daughter wonders if it’s worth challenging the will for one-fifth of the estate to charge the niece with undue influence?
An undue influence claim needs to have three points:
A confidential relationship — that between the grandmother and the grandchild;
Active procurement — the granddaughter got her grandmother to amend the trust;
Unjust enrichment — the granddaughter’s inheritance was increased to more than she would have otherwise received.
If all three elements are met, then the burden of proof shifts to the niece to show that she was not doing anything wrong.
There may also be a lack of capacity claim, based on the medication. It may be that the grandmother was too medicated to understand what she was doing.
The no-contest clause does present a problem. If the will is challenged, the daughter is disinherited — but only if she loses. If she wins, that no-contest amendment is invalid, and the trust returns to what it was before the changes were made.
At one point, no contest clauses were so powerful that there was consideration given to not allowing them to be used in wills. In California, as of Jan. 1, 2010, a person may file a contest and if the judge determines that they had probable cause, they are not automatically disinherited.
In this case, if the facts would lead a reasonable person to conclude that there was undue influence, it’s likely that the daughter in this example would win. It would be up to the court to determine whether she should be disinherited. No-contest clauses are strictly construed by the courts, so unless the no-contest clause says that it applies to amendments, she may be okay.
There is one fact that she needs to ascertain, before moving forward. If the estate planning attorney met with the mother and prepared the amendment, then the attorney will be a neutral witness who will be able to testify to her mother’s mental capacity and her wishes.
It is not uncommon for people to change their wills to favor the person who spends their last weeks or days with them, as they prepare to die. One must wonder in this case, as to why the niece and not the daughter was with the grandmother at this time. Perhaps the two were very close, or perhaps the granddaughter was manipulating her grandmother. However, no one will ever truly know, except for the granddaughter and the deceased.
“Wicked stepmothers are the stuff of Grimm’s fairy tales. Widowed stepmothers are the root of real-life inheritance wars.”
The biggest issues in inheritance battles stem from Alzheimer’s disease, widowed stepmothers and estate crime. Certain issues, like signs of dementia, questionable asset transfers and sudden changes in investment risk profiles are sure signals that something is going on, reports Think Advisor in the article “What the Nastiest Celebrity Estate Battles Can Teach Advisors.”
If regular family fights feel like civil wars, then celebrity battles elevate the conflicts into global meltdowns. Showbiz legends like Tony Curtis, Mickey Rooney and Jerry Lee Lewis serve as perfect examples.
Rock and roll legend Jerry Lee Lewis’s seventh wife (yes, seventh) and his third wife’s daughter have been in court for nearly two years. The wife has charged her stepdaughter with financial and physically abusing the singer, who is now 83. The daughter countersued, alleging that her stepmother was drugging her father into an incoherent state. Lewis recently had a stroke, and he was admitted to a rehab facility.
What can families do about elder abuse, which the American Bar Association has called the “crime of the 21st century?”
Pay attention. Over the next 30 years, as much as $30 trillion in Baby Boomer assets will be transferred to the next generation. The number of people getting older is taking a huge leap and so will the number of people who suffer from cognitive-related diseases.
Know what an “estate crime” is. This is the term to describe the unauthorized, unlawful taking of someone’s assets, while they are alive. It’s what happens when a personal representative, such as a trustee, suppresses assets and takes them. It’s more likely to occur when an entrepreneur or business owner keeps a lot of cash in the safe. That money mysteriously vanishes at their death. Therefore, if anyone has a lot of cash around, they need to be able to prove it and give that documentation to someone they trust.
What happens when a person’s family is involved in litigation and they are incapacitated? Attorneys will look for transfers that occurred just prior to the time the person became incapacitated. Would they be the result of undue influence or pressure? What about their estate documents — were they changed near the time the person became seriously ill or when they were near to death? Medical records and doctors’ reports become important in these cases.
What happened to Tony Curtis, romantic and comic leading man? A year before he died, Tony Curtis wrote a new will and revised his trust. He disinherited his five surviving children and left his entire estate worth $46 million to his sixth wife. The children, who include actress Jamie Lee Curtis, filed a suit claiming that their father was mentally impaired, but the case was dropped. It’s possible that the suit was settled confidentially. Any time there’s such a big change before death, expect litigation.
Why do so many famous people seem to die without a will? People don’t like to think about death, so they procrastinate. It’s that way for celebrities and for regular people. However, we read more about celebrities. Estate planning attorneys are the ones who see what happens, every day, when people don’t have wills and the family is faced with estate battles.
What’s the solution? It’s not that complicated. Find an estate planning attorney that you are comfortable with and draw up an estate plan. Make sure you have a will, power of attorney and health care power of attorney. Talk with your family about your intentions for distribution of your property and make sure that every few years, when events occur in your life or when laws change, you update your estate plan. That would save many people, famous and otherwise, from devoting time and money to cleaning up after their loved ones.
“Having a loved one with dementia can be scary. However, if you add in a firearm, it can also get dangerous.”
Here’s a worrisome statistic: 45% of all adults age 65 or older, either own a firearm or live with someone who owns a gun. That’s a lot of people and a lot of guns. Firearms are the most common method of suicide for people with dementia, says the article “Guns and Dementia: Dealing With a Loved One’s Firearms” from J.D. Supra.
A person who has a gun and suffers from dementia can put family members or caregivers in grave danger, if the person suffers from confusion and doesn’t recognize the people around them. An investigation conducted by Kaiser Health in 2018 looked at news reports, court documents, hospital records and public death records since 2012. They found more than 100 cases, in which people with dementia used firearms to kill or injure themselves or someone else.
What is the best thing to do? Talk about the guns before they become a dangerous issue, like the moment someone is diagnosed with dementia. This is not that far from the conversation that must take place about driving and dementia, or for that matter, driving and aging.
Frame the issue as one about safety for the person and their loved ones. This is also the time to discuss guns and estate planning. Have a conversation with an elder lawyer that addresses an enforceable agreement about who has access to the guns, where the guns should be stored and what factors will determine when it is time for the guns to be taken out of the home. The gun owner may not remember the agreement, when it is necessary for it to be enforced. However, having the agreement in place will give the family member or other trusted individual clear directions about what steps to take.
What should you do with the guns themselves? You can start by separating the guns from the ammunition. If possible, have the weapons completely removed from the house. Local and state laws about the possession and transfer of firearms vary. Therefore, the family should consult an estate planning attorney, who is experienced in the relevant laws. It may be necessary for a gun trust to be created, and for family members to undergo training and licensing, if the firearms are going to be maintained or transferred to them.
“Owning a business can allow control over financial success, expanded creative freedom and an ability for growth that may be stifled in large corporations.”
When the business owner retires, what happens to employees, clients and family members all depends on what the business owner has planned, asks an article from Florida Today titled “Estate planning for business owners: What happens to your business when you leave?” One task that no business owner should neglect, is planning for what will happen when they are no longer able to run their business, for a variety of reasons.
The challenge is, with no succession plan, the laws of the state will determine what happens next. If you started your own business to have more control over your destiny, then you don’t want to let the laws of your state determine what happens, once you are incapacitated, retired or dead.
Think of your business succession plan as an estate plan for your business. It will determine what happens to your property, who will be in charge of the transition and who will make decisions about whether to keep the business going or to sell it.
Your estate planning attorney will need to review these issues with you:
Control and decision-making. If you are the sole owner, who will make critical decisions in your absence? If there are multiple owners, how will decisions be made? Discuss in advance your vision for the company’s future, and make sure that it’s in writing, executed properly with an attorney’s help.
What about your family and employees? If members of your family are involved in the business, work out who you want to take the leadership reins. Be as objective as possible about your family members. If the business is to be sold, will key employees be given an option of buying out the family interest? You’ll also need a plan to ensure that the business continues in the period between your ownership and the new owner, in order to retain its value.
Plan for changing dynamics. Maybe family members and employees tolerated each other while you are in charge, but if that relationship is not great, make sure plans are enacted so the business will continue to operate, even if years of resentment come spilling out after you die. Your employees may be counting on you to protect them from family members, or your family may be depending upon you to protect them from disgruntled employees or managers. Either way, do what you can in advance to keep everyone moving forward. If the business falls apart the minute you are gone, there won’t be anything to sell or for the next generation to carry on.
How your business is structured, will have an impact on your succession plan. If there are significant liability elements to your business, risk management should also be built into your future plans.
To make your succession plan work, you will need to integrate it with your personal estate plan. If you have a Last Will and Testament in a Florida-based business, the probate judge will appoint someone to run the business, and then the probate court will have administrative control over the business, until it’s sold. That probably isn’t what you had in mind, after your years of working to build a business. Speak with an estate planning attorney to find out what structures will work best, so your business succession plan and your estate plan will work seamlessly without you.