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Friday, September 30, 2011

Financial Friday: Children and Your Family's Financial Future

Today's Unique Estate Law brings you a Financial Friday post by Jay Dworsky on the topic of the emotional and financial cost of raising children and ways to ensure a better financial future for your family.

Our children often times can be our greatest pleasure and frustration all in the same minute. One thing for sure is they will always be our greatest responsibility and probably our most expensive commitment.
We are charged with divine responsibility from the minute of conception. Often parents (both new parents and veteran caregivers) cannot conceive of being in charge of the health and well being of another human until the baby arrives.

As our children travel this long and never-dull road from infancy to adulthood, we nurture them, worry about them, discipline them and, of course, love them. Most of all, we try to protect them. We want them to grow up in a stable world, one in which they are physically safe, emotionally nurtured and financially secure. We would do anything in their power for the sake of their children so they can receive the best life has to offer.

The cost of raising a child

According to Forfiled, “The United States Department of Agriculture estimates that the average nationwide cost of raising one child from cradle to college entrance at age 18 ranges from $205,960 to $475,680, depending on income. (Source: Expenditures on Children by Families, 2009) Then, when they turn 18, add in college expenses, and your financial outlay can get even worse. How much worse? According to the College Board, for the 2010/2011 school year, the average cost of one year at a four-year public college is $20,339 (for in-state students), while the average cost for one year at a four-year private college is $40,476. Even if those numbers don't go up (and they have increased each year for decades), that would come to $81,356 for a four-year degree at a public college, and $161,904 at a private university.”

Fortunately, as long as we remain alive we somehow find a way to provide for our children. We know from the real life stories, like the widows of 911 victims, the baby is on her way whether we are there or not. It may not be appropriate cocktail-party conversation but the fact is things happen and we need to plan for them. Remember we brought this child into the world and his or her life goes on whether ours does or not.

Review your life insurance coverage

Life insurance is one of the most effective ways to protect your family from the uncertainty of premature death. Life insurance can help assure that a preselected amount of money will be on hand to replace your income and help your family members--your children and your spouse—maintain their standard of living. With life insurance, you can select an amount that will help your family meet living expenses, pay the mortgage, and even provide a college fund for your children. Best of all, life insurance proceeds are generally not taxable as income.

 


Wednesday, September 28, 2011

The Probate Process, Part IV: Choosing the Proper Probate Process

As discussed in my prior post, the personal representative starts a probate proceeding by filing an application or petition with the probate court.  But, prior to commencing probate, the personal representative must make a decision on what type of probate process to pursue.  Minnesota provides several different types of probate proceedings to address the variety of issues and needs which might arise. The type of proceeding to pursue depends on such issues as determining the decedent’s heirs, the validity of a will, the types of assets in the estate and their value, the potential for disputed claims, and the desire to have a court oversee the personal representative’s actions. When more than one type of proceeding is permissible, it is important to select the one that best fits the specific needs of the decedent’s estate. There are five common types of probate proceedings in Minnesota.  This post will discuss three of them and the next post will address the remaining two.

Collection by Affidavit for Small Estates

There is a special procedure provided for small estate without any real estate holdings (currently at $50,000 or less). Under this procedure, known as Collection by Affidavit, a personal representative is not appointed but, instead, the person entitled to receive the property signs a legal form known as an affidavit.  In short, the affidavit states that the person signing the affidavit is legally entitled to receive the decedent’s assets. When the properly executed affidavit is presented to the person in possession of the property, that person is then authorized to deliver the property and be fully discharged of any further responsibility regarding the property. This process can be complicated by the existence of creditors’ claims and therefore should not be done without legal counsel. Please note that Collective by Affidavit is can’t be used to transfer real estate. So, if the estate contains real estate, please contact an attorney to properly transfer the property.

Determination of Descent

If a person died more than three years ago and no probate proceeding was ever started, a determination of descent proceeding is typically required in order to transfer the decedent’s probate property. No personal representative is appointed. Instead, an attorney files a Petition for Determination of Descent with the court who then issues a decree ordering the property to be transferred according to the decedent’s will or, if no will, by statutes. This procedure is commonly used where the decedent is still in title to real property long after his or her death and the property was never transferred to the appropriate individuals.

Summary Administration

Some probate assets are exempt from the claims of creditors. When all the probate assets of the estate are exempt from creditors and the value of the assets do not exceed certain limits specified by law, summary administration may be available. Summary administration avoids a lengthy administration as no one needs to give notice to creditors. The statutes authorizing summary administration are quite restrictive. Because of this, it is infrequently available for a decedent’s estate.


Monday, September 12, 2011

The Probate Process, Part III: Initiating Probate

 

When last I blogged, I spoke about “wills.”  In this next part of this series on probate, I will explain how to initiate the probate process.

Step 1: Locate a will

This step in the journey begins with locating a will as the will contains the decedent’s instructions on the persons to be involved in the probate process.  Specifically, the will should nominate a personal representative to carry out the deceased’s wishes and provide the names of those chosen to receive assets.

Please note that these steps are largely the same whether or not a will is located.  What’s different then?  The difference is in the outcome.  With a will, the deceased’s stated wishes rule the day.  Without a will, the Minnesota State Legislature’s wishes trump any unwritten desires the deceased may have had.

Step 2: Choose the type of probate proceeding that’s most appropriate.

Next, a decision must be made as to the type of probate needed to carry out the person’s last wishes.  The types of probate are formal versus informal and supervised versus unsupervised.  We will discuss each of the types of probate in a later post in this series, but just know that the type of probate process chosen largely depends on how much court oversight may be needed in carrying out the decedent’s wishes. 

Step 3: Filing with the court

Once the decision is made as to whether to proceed formally or informally, an interested person (i.e. one who has a tangible interest in the outcome of the process) must file a petition/application with the probate registrar/court together with the original will.  Most likely, the person nominated as personal representative in the will files these documents. 

The  probate court will then review will to verify that it meets the requirements to be a valid legal will.  If there is doubt about the signature on the will, those who witnessed its execution may be forced to appear in court. As explained in prior posts, this can be avoided with the use of a self-proving affidavit.

The probate court will also look to the will to determine the deceased person’s choice for personal representative.  If there is no will, then the courts will appoint a personal representative.  The court will then issue a Notice of Probate.

 Step 4: Provide Notice of Probate

Upon receipt of the Notice from the court, the personal representative must provide that Notice to all heirs, regardless of whether they are named in the will, and to all those listed – individuals and charities – to receive assets.

The personal representative must also publish notice of the probate for two weeks in an approved newspaper. It is through this announcement that creditors are informed of the deceased’s death.  They have four months to announce claims to the monies belonging to the deceased.   Proof of publication and notice must be filed with the court. A later post will discuss claims and challenges to an estate.

Step 5: The Court Appoints a Personal Representative

Once the court accepts all the filings and verifies compliance with other requirements (e.g. notice and publication), the personal representative will be appointed with proof being provided by a document called the Letters Testamentary.  This document provide authorization to the personal representative – and reliance by institutions -  to move forward in handling the deceased’s legal and financial matters.

The next post will address the various types of probate proceedings and the factors involved in determining the best way to proceed.

Related articles

Friday, September 9, 2011

Financial Friday: What is disability insurance and why do I need it?

Today Unique Estate Law brings you a post from Jay Dworsky explaining disability insurance.  Please also see Jay’s prior series on Life Insurance and non-traditional families.

Disability insurance by definition replaces lost income due to a sickness or injury where you are unable to work. Sometimes people are able to work through a partial disability at their current job, decrease hours or find other suitable work until their situation hopefully turns for the better. Nonetheless, people must pay their bills, keep a roof over their head and feed their families throughout the disability.

Some Facts

According to the May 2000 Norton Bankruptcy Adviser, 326,441 families that filed for bankruptcy protection in 1999 identified an illness or injury in their family as the major reason for the bankruptcy. That means 1 in 4 debtors in 1999 were attributed to a disability.

Still not concerned? According to the US Housing and Home Finance Agency only 3% of home mortgage foreclosures are due to a death of the breadwinner. 48% of all foreclosures are due to a disability.

The corporate employee with benefits

A group disability policy at your average corporate employer will many times will pay up to 66% (pre-tax) benefit for a long-term disability, if you are determined medically unable to work your current job according to the definition in the policy. Many times the employer pays the employee’s premium as part of their total benefits package (in lieu of paying a higher salary). At the end of the day, receiving a 66% (pre-tax) benefit you would experience living on half your normal income while laid up at home. Is that enough? Many times corporate employees buy supplemental disability insurance because living on half their income for any length of time would be devastating.

The small business owner/employee/entrepreneur without benefits

Where do I buy disability insurance (or income protection)? Your local insurance advisor can help you attain a policy that will cover the amount of income you need in the event of a partial or total disability. This type of policy pays an after-tax benefit. These policies have options to increase benefits for keeping up with cost of living.


Tuesday, September 6, 2011

Update: California’s High Court Hears Prop 8 Arguments Today!

Today is the day that the California Supreme Court hears arguments on whether or not Proposition 8 backers are entitled to appeal the Federal ruling that overturned the 2008 “Proposition 8″ ban on gay marriage.

In the words of the LA Times:

The court’s ruling, due 90 days after argument, will determine whether all initiative sponsors in California are legally entitled to defend their measures in state court when the governor and the attorney general refuse.

If the court rules against the initiative backers, then a federal appeals court is more likely to rule that ProtectMarriage.com, the sponsor of Proposition 8, also lacks standing under federal law and “Proposition 8 dies because no one will defend it,” said Vikram Amar, UC Davis constitutional law professor.

This is a very tricky case for gay marriage supporters in California, and the entire US, truthfully.  The outcomes of this case could lead to an eventual Supreme Court ruling.  In different times, perhaps, that might be a good thing.  The Supreme Court was a strong advocate for the Civil Rights movement during the late 1950′s and 1960′s.  That Court and its progressive, sympathetic members no longer exist today. Today’s Court swings conservative, and it is very possible that taking an initiative to the US Supreme Court could result in a loss of potential marriage rights instead of making any permanent gains towards equal rights.

Stay tuned for more developments.


Friday, September 2, 2011

The Probate Process, Part II:The Will

 

Last week I covered the definition of “probate.”  Probate is simply the process in which the court oversees the distribution of your assets as directed by your will (if you have one) and handles claims against assets.  This week I will explain how legal wills are “tested” by probate court and how to prevent having your estate tied up in legal Hell indefinitely.  The goal of all estate planning is to get our family the protections they deserve, not have them sucked into long, drawn out legal battles.

Of course, in order for the probate court to test your will, you actually need to execute one.  As discussed in a prior post, the process for creating a valid Minnesota will is not difficult.  The will needs to be in writing, signed by you in front of two witnesses and notarized.  You should also execute a self-proving affidavit, which prevents anyone from challenging the validity of your signature on the will.

Anyone can create a legal will, but having an estate planning lawyer work with you to create your will is especially important for unique families.  “Out of the box” will forms are not made to address unmarried couples, stepchildren, pre-adoption children, second marriages or any other situation outside the narrow vision of the state legislature’s definition of family.

In order to avoid challenges during the probate process, a will must be clear, specific, and valid.  There must be no doubt about how you want to distribute your assets. A lawyer can make sure that the probate court has no cause for doubt or question with regard to your wishes.

Keep in mind that even if you don’t execute a will, the probate court will still determine how to distribute your assets.  But, instead of following written instructions set forth by you in a will, the court will follow the written instructions set forth by the Minnesota legislature.  For most non-traditional families, there is a slim chance that the Minnesota legislature “got it right” in determining where you want your assets to end up.  Working with a lawyer will keep these decisions in your hands – not the government’s.

Part III of this series will explain what exactly happens when a will is filed.  

Related articles

Monday, August 22, 2011

Follow Up: Colorado Judge Halts Deportation

Last week I posted on an ongoing deportation case involving Mexican national Sujey Pando, the legally married wife of Violeta Pando. I brought attention to it as a way of explaining the differences that arise when someone is married in a state’s eyes only versus having the Federal protections of marriage. Recent developments in this case are both heartening and at the same time still remarkably insufficient.

The judge in this case, Judge Mimi Tsankov, halted the deportation using her authority to “set aside” the original purpose of the hearing (deportation proceedings) in order to consider the procedural posture of the case. In the end the judge cited the recent statements by the Obama administration on “prosecutorial discretion” as reason to halt the proceedings until more definitive instruction could be utilized.

Many people–most importantly the Pandos– were excited by this recent development and choose to see it as evidence of growing acceptance of gay and lesbian families. I do, too, but I also see it as still being too uncertain and ad hoc for my liking. Yes, I know I am a glass is half-empty kind of attorney. Repeal of DOMA is needed to help support unique and non-traditional families or else cases such as these will continue to go before the courts creating a confusing patchwork of quasi-marriage rights.

Gay and lesbian families are still forced to do “double duty” in protecting their families. They must still tackle additional estate planning hurdles and seek other legal protections to keep their families intact. You need an attorney that understands the unique aspects of "gay estate planning."  Contact Unique Estate Law now to protect your family.


Thursday, August 18, 2011

Business Succession Planning Part II: What Goes Into the Plan

Sorry folks that this one is a little late.

Part I of this series on Business Succession Planning dealt with whether or not you need to create a business succession plan.  A quick recap: a business succession plan is needed by anyone who owns and operates their own business, whether you want to keep it in the family or not.  My reasons/justification is this: what happens if you should be injured and unable to run things?  Who keeps it going while you are incapacitated?  How do they know what to do?  Who is legally able to open, pay, or dispute bills in your absence?

Now, it is time to talk about what going into a Business Succession Plan.

A Business Success Plan should be able to articulate the following in such a manner that there is no equivocation:

  1. The ultimate goals for the business with respect to the owner(s) and the company.
  2. The transition of ownership (when transition occurs and to whom)
  3. Facilitation measures (who will assist (if anyone) the successor(s), funds transfer, etc)
  4. Relinquishment of owner(s) (acknowledgement and instructions)

The plan should outline what the original owner(s) intended for the business, who has a claim to ownership (this includes if there are partners to the business), roles and responsibilities of successor and partners, is there “life insurance” or other funds set aside to provide transition funds should the owner die (versus become incapacitated), transition triggers, acknowledgement of plan by business owners and successors.  A business succession plan should include any “Cross Purchase Agreement” between owner/partners and a how the price should be determined.  Lastly, for companies that are being handed down or will be entrusted to family members (as opposed to sold) a business success plan should include those steps required to educate the new owner/operator in business operations and any consultants or temporary managers that will assist during the transition process.

They aren’t particularly complicated documents to produce, but they must be thorough.  The best business succession plans are those that establish some transition measure prior to the owner’s death OR provide for the taxes and other expenditures that will arise.

I work with families to put together and file the appropriate legal documents required to ensure the legality of the business success plan.  I do recommend that businesses work with financial consultants to ensure that the appropriate funds and management support are available to make the plan a reality.

Next month I will post a Business Succession Planning eGuide that should clarify the content of this very important blog series in more detail.


Tuesday, August 16, 2011

Another Deportation, Another Reason for Unique Families to Stay Cautious

I don’t usually cover purely political stories on my Unique Estate Law blog, but stories like these are hitting the news far too often to ignore.  Today, I’d like to blog about gay marriage and immigration.

In four days, Violeta and Sujey Pando will see their Iowa marriage disintegrate as Sujey is deported by US immigration officials back to Mexico.  Even though they were married in a state that considers gay marriage legal because of DOMA, a federal marriage act, their marriage does not carry any weight at a national/international level.  Had this been a straight couple, as opposed to a unique family, Sujey would still continue to live in the United States as a married, permanent resident.  There have been other cases much like theirs, (one even successfully stalled!!) wherein married couples are asked to separate by US immigration because their marriage was recognized at a state level only. Stop the Deportations covers these cases very thoroughly, in case you desire more information or want to make a donation to their case.

When I first came out, so to speak, against state marriage, I had a lot of people tell me that I  should lighten up and not think like a lawyer (even from other lawyers).  However, when I read the news it’s very hard to be all that excited about it.  The potential loss of domestic partnership benefits, the Byzantine tax laws that will have to be navigated, the fact that I still would have to establish all of the same unique family/non-traditional family documents for business succession planning, estate rollover, and potentially (if married to a foreign national) lose my wife to immigration laws doesn’t exactly make state marriage feel like a real marriage to me.

As long as DOMA is in effect,  unique families face will continue to have “second class” marriages even if those marriages are recognized by the states.  I urge anyone who cares about this issue to push for a repeal of DOMA and I also urge gay, or any other so-called nontraditional, families to take precautionary, legal, financial measure to protect their partners and family regardless of whether their marriage is recognized by the state they reside in.


Friday, August 12, 2011

Financial Friday: Why I Don't Want to Buy Life Insurance

 

If you’re like most people, it’s not that you don’t appreciate the value of life insurance. In fact, most everybody I come across believes they need more coverage. You probably wouldn’t mind owning additional life insurance. It’s just that you don’t want to buy, the thought of paying for it literally immobilizes you from inquiring about it.

Thinking, talking, listening, and reviewing whether to buy life insurance makes many people feel uncomfortable. Below are many of the reasons why you might be putting off buying life insurance you need and eventually come to want.

I was told life insurance was only for married couples with young children

Life Insurance is owned by all people of all ages (0-100), married couples and non-married partners, business partners, and the like. Although each situation is unique, they all share in common a need and desire to own life insurance.

I don’t have enough time

You’ll get around to buying life insurance, just not today. You have a lot of things to do before you can get to it; buying life insurance often becomes relegated to a low priority—just another thing you ought to do. Not to mention, the whole idea of discussing life insurance isn’t a whole lot of fun. Who wouldn’t rather go on a bike ride, go shopping, and chat with a close friend?

Nonetheless, buying life insurance is really an important task that should be addressed. Life insurance can help ensure that your family or partner will have enough money to meet their financial obligations in the event of your death.

The subject scares me

If you really don’t like to think about death, you’re not alone. Death is an unpleasant subject, and life insurance raises issues of our own mortality.

It doesn’t have to be that way. People who do act on their life insurance needs tend to focus on the positive aspects: meeting their responsibilities and understanding their big picture planning. They also recognize that life insurance is for the living, it’s a love product.

I wouldn’t know where to begin

I don’t have a clue about what type of policy, how much life insurance I need, etc. Actually, few understand life insurance: why we need it, how much, what type of policy is best for your situation, how benefits are paid, how it should be coordinated with all your other assets, how and when it’s paid, tax questions, etc.

That’s okay. It’s not your job to understand everything about life insurance, that’s the job of an insurance and planning professional to be able to show you what you need and want and how it fits into your budget.

Bottom Line

It’s easy to understand why people tend to put off purchasing the life insurance they know they need. Take the first step and make it a priority to look into it, find an experienced professional to meet with that is willing to have an open-ended discussion, and make that appointment. What could be better knowing you have peace of mind that your loved ones are protected, even if you’re no longer around to provide and for them.

 

 

 

 

Related articles

Thursday, August 11, 2011

What Does Gay Marriage Mean for Domestic Partnership Benefits?

I had intended to complete the second half of my business succession planning series when I happened to read an interesting article about what state by state recognition of gay marriage will mean to domestic partnership benefits. As you know, I’ve never been entirely thrilled with state-only recognition of gay marriage because I feel that it creates a mess of legal problems for unique families like my own. Because there are no Federal laws that support gay marriage, gay and lesbian families must continue to file taxes separately regardless of whether or not they live in a state that recognizes gay marriage, gay and lesbian couples continue to be denied many of the federal tax incentives present for straight married couples in everything from insurance, business and estate planning. Now, while gay and lesbian families who enough live in “gay marriage states” may see their domestic partnership benefits dry up unless they chose to become married in their state.

I don’t want to always be the voice of Doom, but it is possible that we could see companies slowly withdraw domestic partnership benefits across the board in anticipation of state recognition. Hopefully, this will not happen, but at a time when businesses are struggling to stay afloat you cannot always expect them to choose an ethical approach over one that saves them money.

State-by-state gay marriage amendments certainly boost morale and have the power to create a social awakening, but unfortunately they do very little to provide financial and legal equality for gay and lesbian families.


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