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Minneapolis Estate Planning and Probate Lawyer Blog

Friday, July 29, 2011

Financial Friday: The Different Types of Life Insurance

The two basic types of life insurance are term life and permanent (cash value) life. Term policies provide life insurance protection for a specific period of time. If you die during the coverage period, your beneficiary receives the policy’s death benefit. If you live to the end of the term, the policy simply terminates, unless it automatically renews for a new period. Term policies are typically available for periods of 1 to 30 years and may, in some cases, be renewed until you reach age 95. With guaranteed level term insurance, a popular type, both the premium and the amount of coverage remain level for a specific period of time.

Permanent insurance policies offer protection for your entire life, regardless of your health, provided you pay the premium to keep the policy in force. As you pay your premiums, a portion of each payment is placed in the cash value account. During the early years of the policy, the cash value contribution is a large portion of each premium payment. As you get older, and the true cost of your insurance increases, the portion of your premium payment devoted to the cash value decreases. The cash value continues to grow–tax deferred–as long as the policy is in force.

You can borrow against the cash value, but unpaid policy loans will reduce the death benefit that your beneficiary will receive. If you surrender the policy before you die (i.e., cancel your coverage), you’ll be entitled to receive the cash value, minus any loans and surrender charges.

Many different types of cash value life insurance are available, including:

  • Whole life: You generally make level (equal) premium payments for life. The death benefit and cash value are predetermined and guaranteed (subject to the claims-paying ability of the issuing insurance company). Your only action after purchase of the policy is to pay the fixed premium.
  • Universal life: You may pay premiums at any time, in any amount (subject to certain limits), as long as the policy expenses and the cost of insurance coverage are met. The amount of insurance coverage can be changed, and the cash value will grow at a declared interest rate, which may vary over time.
  • Variable life: As with whole life, you pay a level premium for life. However, the death benefit and cash value fluctuate depending on the performance of investments in what are known as subaccounts. A subaccount is a pool of investor funds professionally managed to pursue a stated investment objective. You select the subaccounts in which the cash value should be invested.
  • Variable universal life: A combination of universal and variable life. You may pay premiums at any time, in any amount (subject to limits), as long as your life insurance needs will depend on a number of factors; including whether you’re married, the size of your family, the nature of your financial obligations, your career stage, and your goals.?Policy expenses and the cost of insurance coverage are met. The amount of insurance coverage can be changed, and the cash value goes up or down based on the performance of investments in the subaccounts.

With so many types of life insurance available, you’re sure to find a policy that meets your needs and your budget. With so many choices, understanding which policy meets your needs and your budget can be navigated with a trusted life insurance professional. The Dworsky Agency can find the right policy for your needs and budget without a fee for service.

 

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Monday, July 25, 2011

Life After Death, Part 2: Protecting the Lives of Loved Ones After your Death

In this second part of my two-part blog series, I’d like to talk about the documents I feel are the most necessary to provide your family with the protection it deserves in the event of your death.

Pulling Together the Necessary Documents

I believe that it goes without saying that everyone should have a will. What is true of most families is doubly so when it comes to members of unique families. A will is your last opportunity to direct the state of your affairs, allocate monies or items to those you wish, and to provide your desires regarding the guardianship of your underage children. Naturally, your first order of business after creating the will is to place the original will in a location where it will be easily obtainable and found—not a copy! Copies can prolong the probate proceedings and therefore prolong the length of time before your assets can be distributed to their intended receiver. As I’ve already stated, wills sometimes appoint the guardianship of your children, therefore it is extra important—especially for unique families to have original and appropriate paperwork designating the custody of children.

Finding a home for the original document depends, certainly, upon your financial situation. Not everyone can afford a safety deposit box.  I offer  inexpensive storage of your documents as part of my estate planning package, not all attorney’s do, however.  Still, depending upon the circumstances you are in there are safe storage methods for original documents, such as safe’s or lockboxes.  Any location will do as long as it can easily be found by the right people and is easily retrievable in the event of your death.  That means no burying it in the backyard like pirate’s treasure or putting it in the freezer (yes, this happens).

Many estate planners such as myself advocate the use of a revocable living trust by families that are concerned that their wishes and desires could be overruled, or that their assets would be delayed distribution in probate. Living trusts are harder to dispute in a court of law because (you) are the first “trustee” and as such establish a precedent for how you wish the trust to be managed.  As with the will, the original document is absolutely 100% necessary for your beneficiaries and trustees to have on hand.

I cannot over-emphasize the importance of these two documents for any family, but especially for unique families.  I have witnessed some of the most heart-breaking atrocities happen after people pass on.  Children are taken away from the only living parent that they have ever known.  Partners who worked to help support a family have lost homes and possessions.  I don’t mean to scare anyone—well, maybe just a little—I honestly feel that in this rather uncertain political climate those of us with unique families must take those extra steps to provide for the people we love and cherish the most.  Having an original will and/or revocable living trust helps us do just that.


Friday, July 22, 2011

Financial Friday: Protect your Loved Ones With Life Insurance

I previously introduced you to Jay Dworsky, a guest blogger who will be covering financial topics for Unique Estate Law. We will be featuring Jay in our new Financial Friday series: each Friday we will be bring you Jay’s expertise on financial issue that affect your unique family. Jay continues his series on life insurance considerations for unique families with a post on questions to as in determining your life insurance needs.

How much life insurance do you need?

Your life insurance needs will depend on a number of factors, including the size of your family, the nature of your financial obligations, your career stage, and your goals. For example, when you’re young, you may not have a great need for life insurance. However, as you take on more responsibilities and your family grows, your need for life insurance increases.

Here are some questions that can help you start thinking about the amount of life insurance you need:

  • What immediate financial expenses (e.g., debt repayment, funeral expenses) would your family face upon your death?
  • How much of your salary is devoted to current expenses and future needs?
  •  How long would your dependents need support if you were to die tomorrow?
  • How much money would you want to leave for special situations upon your death, such as funding your children’s education, gifts to charities, or an inheritance for your children?
  • What other assets or insurance policies do you have?

These are just a few questions to get you started thinking about your life insurance needs.  My next few posts will discuss different types of life insurance and why it can be critical for non-traditional families.

Creative Commons License photo credit: amypalko


Thursday, July 21, 2011

Grantor Retained Income Trust: An Option for Unique Families

I’m asked quite often how I feel about the state-by-state recognition of same-sex marriage. On one hand, I’m delighted to see it happening at all, but the attorney in me can’t help but see all of the headaches come tax season.  There is no Federal recognition for same sex marriage.  That means doing tax returns 80 million different ways (I exaggerate), and it still means that when someone’s same-sex partner or spouse dies there will be tax and distribution issues when it comes to their combined estate.  I know, I know.  Always the voice of gloom in the middle of everyone’s victory dance.  Well, that’s how we lawyers are. 

One method of equalizing the Federal tax benefits extended to heterosexual, married couples is to create a Grantor Retained Income Trust (one of the few advantages that same-sex couples and other non-marrieds have over married traditional couples).  The US tax code prohibits “family members” from utilizing GRITs.  And since the federal government refuses to recognize same-sex couples – legally married or not – as “family members”, we are actually provided with a small benefit.

A Grantor Retained Income Trust (GRIT) is a tax-saving trust in which the grantor of the trust places assets or transfers property into an irrevovable trust. The terms of the trust requires all of the income to be paid to the grantor for a specified period of time. At the end of the term, the remaining property is transferred to the beneficiary as named in the trust. The benefit to this is that, at the end of the term, your partner will receive this property free of any gift or estate taxes on the appreciated value of the property.  However, should you die before the termination of the trust a proportionate share of the trust will be included back into the grantor’s estate.

A GRIT is a good strategy for someone who has not utilized his/her lifetime gift tax exemption (now tied to the Estate tax amount of $5 million).  It is also a valuable tool for someone who wishes to gift property to another while maintaining some control, continue to use the property or receive some income from the property.

GRITS and GRATS (Grantor Retained Annuity Trust) – more on that later—are a few of the tricks we attorneys specializing in unique families have up our sleeves to help protect the rights and assets of unique families.  While I am encouraged by the mini-revolution occurring in the states when it comes to gay marriage I am still in watch mode to see how it all plays out against the background of DOMA.  Until such time that the Federal government recognizes same-sex marriage, unique and non-traditional families will have to take extra steps to protect their rights and the rights and happiness of their loved ones.


Monday, July 18, 2011

Life After Death Part 1: Protecting the Lives of Loved Ones After your Death

I was doing a little home office cleaning the other day when I happened to notice my “In Case of Emergency Break Glass” file.  This is a group of documents that I’ve collected, grouped, and stored away that will provide our unique family with legal legs should the worst (or inevitable) happens. It is important to not only have your estate plan(s), medical directive(s), and other end-of-life instructions established in as close to airtight legal guidelines as possible, but to make others aware of exactly where the documents are located should circumstances prove necessary. The last thing your loved ones need while they are grieving is a legal battle, which is why I’ve decided to create a four part blog series to cover this very important topic.

Without sounding alarmist, having this collection of emergency documents is essential to the future well-being of unique families.  The court system is not necessarily prepared for or fully supportive of those families that lay outside of the “traditional” majority.  Part of why I do what I do is because so many unique families like my own have had to wage long, uphill legal battles just to protect their families and property.  I am a lawyer and I cannot emphasize enough my own frustrations with how much documentation I had to create just to protect my own family should something happen to either myself or my partner.  And yet…regardless of my anger with the system, I have accepted that this is my current reality and have taken the appropriate steps needed to protect my family.

For those of you out there who are members of a unique family: GLBT families, single mothers, grandparents raising minor children… having your legal documents in a secure, easily obtainable place that is well-known by all vested parties is absolutely essential to your family’s future security and happiness.  Trust me, you do not want to have to fight for your children or the home you helped to pay for in a court of law.

It is my hope that this series of posts will help you create our own “emergency” legal repository so that when/if the worst should happen your loved ones are taken care of in the manner that you intended for them.

Creative Commons License photo credit: Tin Star Self Storage

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Monday, June 6, 2011

What's in a Name, Part 2: Introducing Unique Estate Law

You may have noticed a slight change in my firm name. Unique Family Law is now known as Unique Estate Law.

I have always focused on unique families and continue that passion. My new firm name better explains what I do for your unique family. I focus on estate planning, probate and adoption – building and protecting families.

I am proud to specialize in this important and ever-changing area and my new name reflects that focus.

I want to be sure that you, my clients, know where my expertise lies.

Welcome to Unique Estate Law.


Monday, May 30, 2011

What’s in a Name, Part 1: What is a Non-traditional Family?

My website and posts are geared to the so-called “nontraditional family” and nontraditional estate planning.  But just what does that mean? I use the term – for lack of anything better – to define any family that does not fall into the 1950s model of a family with one husband and one wife who are on their first marriage and who only have children born to both of them.

Is That Still a Valid Definition of a Traditional Family?

According to Webster’s dictionary the term traditional means “?cultural continuity in social attitudes, customs, and institutions.” But, with regard to family, there doesn’t seem to be any cultural continuity that “survived” from the 1950s to the present.

Do you even know a “traditional family?”  If that question causes you to stop and think or say “Ha! I do know one” then you know it’s no longer the “tradition” of our society to get married once to someone of the opposite sex and only have children with that person during the marriage.

Our society is in a state of flux with the rise of cohabitation, single parents, stepfamilies, gay families, transgender families, adopted families and multi-generational families. The changing times are reflected in the numerous studies recently released as they demonstrate a lack of cultural cohesion regarding social norms and families. This is true on both the national level and in states such as mine.

The Changing Definition of Family

According to data released from the 2010 US Census, only 48.8% of households in Minnesota’s major metropolitan area were married couples. A Pew Research Center survey released at the end of 2010 showed a similar decline in the population of married households.

The Pew results also revealed an ever-widening generation gap and marital status. In 1960 a whopping 60% of all people in their 20s were married. But in 2008 that number dropped to just 26%. The most recent census data shows a similar decline in the percentage of married households in the nation as the overall numbers dropped from 70% in 1950 to 54% 2010.

The Pew Research Center conducted another interesting and relevant survey on stepfamilies at the beginning of 2011. According to the survey, more than four-in-10 American adults have at least one step relatives and their family. Of the two, 691 adults participating in the survey, 42% have at least one step relative, 33% have a step or half sibling, 18% have a living stepparent, and 13% have at least one stepchild.

Multi-statistics show that marriage has declined, cohabitation has become more widespread-doubling since 1980 Another notable statistic is that births to unmarried women has risen from just 5% in 1960 to 41% in 2008.

The pew research Center conducted another interesting and relevant survey on stepfamilies at the beginning of 2011. According to the survey, more than four-in-10 American adults have at least one step relatives and their family. Of the two, 691 adults participating in the survey, 42% have at least one step relative, 33% have a step or half sibling, 18% have a living stepparent, and 13% have at least one stepchild.

While these studies show that the general make-up of families are changing, what about popular views on the definition of family?  My next post will discuss how current studies show that those too are changing.

UPDATE

When I first drafted this post the Census Bureau had only released state-specific data on marital status.  The Bureau has now released data for the country as a whole.  This newly released data shows that, for the first time, married couples now constitute less than half of all households in the United States. According to the data, married couples represented just 48% of American households in 2010 versus 78% in 1950.

Further, only one fifth of households fell into the oft-used definition of traditional families – married with children – as opposed to 43% in 1950. So, is it still appropriate to use the term “traditional” to represent a mere 20% of the population? But it will take time for society to accept the term non-traditional to refer to an opposite sex married couple with no prior marriages or children.

I look forward to a time where clients no longer find me by searching “non-traditional family” but instead simply look for “family.”


Tuesday, May 24, 2011

Health Care Directive, Part 2: How to Create One

You realize that you need to get a health care directive. But how do you create a valid one? A health care directive is a written document that informs other of your wishes about your health care by allowing you to name a person (“agent”) to make medical decisions for you if you are unable to make them.

How Do You Make a Health Care Directive?

Your health care directive must meet the following requirementsto be legal:

  • Be in writing and dated.
  • State your name.
  • Be signed by you or someone you authorize to sign for you, when you can understand and communicate your health care wishes.
  • Have your signature verified by a notary public or two witnesses.
  • Include the appointment of an agent to make health care decisions for you and/or instructions about the health care choices you wish to make.

What Can You Put in a Health Care Directive?

You have many choices of what to put in your health care directive. For example, you may include:

  • The person you trust as your agent to make health care decisions for you. You can name alternative agents in case the first agent is unavailable, or joint agents.
  • Your goals, values and preferences about health care.
  • The types of medical treatment you would want (or not want).
  • How you want your agent or agents to decide.
  • Where you want to receive care.
  • Instructions about artificial nutrition and hydration.
  • Mental health treatments that use electroshock therapy or neuroleptic medications.
  • Instructions if you are pregnant.
  • Donation of organs, tissues and eyes.
  • Funeral arrangements.
  • Who you would like as your guardian or conservator if there is a court action.

You may be as specific or as general as you wish. You can choose which issues or treatments to deal with in your health care directive.

Is there Anything You Can’t Put In a Health Care Directive?

There are some limits about what you can put in your health care directive. For instance:

  • You cannot request health care treatment that is outside of reasonable medical practice.
  • You cannot request assisted suicide.
  • You can’t appoint anyone under the age of 18 as your agent.

Creating a legal health care directive can be emotional but it’s not technically difficult.  Please see a lawyer and get one now to avoid causing your family more time and expense later.

Creative Commons License photo credit: Official U.S. Navy Imagery


Friday, May 20, 2011

Health Care Directive, Part 1: Get One Now

When I had surgery a couple years ago I was lucky enough to live in a city where my relationship with my former partner was respected by the hospital staff.   The hospital employees didn’t bat an eyelash when my partner accompanied me through all phases of the experience, except the surgery itself. Further, the doctor came and found her in the waiting room to provide her with an update after the surgery was complete.  Of course, it only takes one hospital employee to destroy that respect no matter where you live.

In the past, an employee could refuse your partner access to you during your hospital stay. Fortunately, that is no longer the case for any hospital accepting federal funds. The Centers for Medicare and Medicaid Services department (CMS), at Pres. Obama’s urging, issued new rules effective January 23, 2011, that grant you the right to choose your visitors.

The new CMS rules require hospitals to explain that you have the right to choose who may visit you without regard to whether the visitor is a family member, spouse or domestic partner. Beware: while many people with whom I’ve spoken believe that these new rules ensure access by their chosen loved one, it is only effective if you are conscious enough to name your visitor. So, what happens if you are unconscious? How will you be able to let the hospital no which of your loved ones should have access to you?

In addition, these rules only allow your partner access to you. They do not allow your partner to make medical decisions on your behalf. The only ways in which another may make medical decisions on your behalf is either through court appointment or healthcare directive. In the former, your partner will be forced to go to court and obtain the court’s approval before the hospital will follow her wishes. But, if you have a valid health care directive appointing another person to act as your agent, the agent has the right to step into your shoes and speak on your behalf.

The next few posts will discuss the particulars on drafting a valid medical directive.

So, whether you live in a city that respects your relationship, you must still execute a valid health care directive now!


Thursday, May 5, 2011

Understanding the Perils of Adding Another Person to Your Bank Account

I recently met with a client who informed me that her daughter had financial power over her matters.  ”You mean she has a power of attorney?” I inquired.

She responded that “No.  She has signing authority on my accounts.”

After several more questions I discovered that her daughter was a joint account holder on her mother’s checking and savings accounts.  My client explained that she added her daughter to the accounts to ensure that someone could handle her financial matters in the event of incapacitation.  She further explained that her desire was the daughter could use these accounts while Mom was alive and then at death the assets would go into her estate and be evenly divided among her 4 children.

Unfortunately, that is not how joint bank accounts work.

Joint bank accounts have become a common way for those caught in the sandwich generation to ensure their ability to handle the financial matters of a loved one.   They are also  the method of choice for many unmarried couples to attempt to mirror the financial rights of their married counterparts.  For instance, when one half of a married couple dies, the surviving spouse will be granted the right to any money remaining in a bank account held only in the name of the deceased spouse.  The same happens upon the death of a joint bank account holder.

While joint bank accounts are an answer to problems associated with lack of access to another’s bank account, they may not be the best answer.

Problems with Joint Bank Accounts

The following is a list of problems associated with adding someone to your account.

That person now has all of the same rights to that money as you.  They can write checks, withdraw money and use it for any purpose without your permission or ability to get it back.

Upon your death the money in that account will go directly to the joint account holder.  You may not change this by using a will as joint title holder with always trump your will.  Remember that a will is only used for those assets that are titled only in your name or where the court needs to assist in determining the rightful owner.

Creditors may come after the bank account for any debt owed by anyone on the account. So, if you open an account with your daughter or partner, and she defaults on a loan, the creditor may come after this account regardless of whether you had anything to do with that loan.

The Solutions

A Power of Attorney. Simply adding someone to your bank account may seem the simplest action to take – right now – but it can lead to the above-listed problems.  A simple way for my client to grant someone access to her financial matters is to execute a valid Power of Attorney. Mom may then be assured that someone has the ability to handle her bank accounts, bills and government benefits but without the drawbacks listed.  As noted in my earlier series on Powers of Attorney, the POA ends at death.  So, upon Mom’s death the money in those two bank accounts will be included in her estate and may be evenly spit among her children.

A Trust. I explained that a trust will take care of the majority of these issues with only a bit more hassle.  Mom may set it up so that she is the trustee of her trust until incapacity or death at which time her daughter takes over as trustee.  This allows for a seemless transition whereby the daughter has the ability to handle Mom’s financial needs and manage any assets within the trust.  If Mom recovers, she will again become the trustee over her own trust.  If not, the sucessor trustee takes over after death.


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From within Hennepin County Unique Estate Law represents clients throughout Minnesota, including Minneapolis, Edina, Bloomington, St. Louis Park, Minnetonka, Plymouth, Wayzata, Maple Grove, St. Paul, and Brooklyn Park.



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