Beneficiary Designations

This continues my series on lessons I learned in handling the estates of my parents who both passed away last year. This post will discuss reasons why you should plan things now - do not wait!

I am an estate planning attorney with the knowledge and experience to handle complex issues but found myself running around at the last minute to take care of things for my own father. It turns out that my father had never signed a financial power of attorney.  What does that mean? It means that his wife was unable to handle simple financial transactions on his behalf while he was in the hospital and unable to do things like go to the bank. But they're married you say. For many financial matters, even a spouse does not have the right to act on your behalf. For instance, a spouse may not deal with anything listed solely in your name. This generally includes such things as your retirmenet plan, stocks or bank accounts. 

So, on a Thursday afternoon I was in my office (instead of the hospital) drafting a power of attorney for him to sign so that his wife could take care of some financial matters he thought were crucial in his last few days of life. Then I ran it to the hospital and got it signed and notarized.

You could look at this and note that we were lucky as he was awake, competent and alert enough to know what he wanted done and still capable of signing the Power of Attorney - even one day later and that would not have been the case. Many people simply put it off unti it's too late and the family has to fight to get a conservatorship to be allowed to make decisions they know the loved one would have wanted.

Please plan now so no one is running around trying to get these things done during such a difficult time.

Borrowing from your retirement accounts: Issues to consider

So you have credit card debt, overdue mortgage payments, or suddenly need to buy a new car. We’ve all been there. You need money now, and your retirement accounts continue to climb. Fortunately, many employers allow you to take out loans on these accounts, but should you really begin spending that money before you retire?

On one hand, there are benefits to borrowing from your retirement accounts. You are essentially borrowing your own money, so the payments you make, plus interest, go back into your account. Since it’s your own money, these payments do not affect your credit score, and most 401(k) loans have relatively low interest rates.

However, there are many risks associated with taking money from accounts like your 401(k). It is recommended that you see a financial advisor before making this decision to address the cost and potential ramifications of the loan.

First consider the reason for taking out a loan, and the multiple options that you face. A dire emergency is the only recommended cause for borrowing from these accounts; some plans even require it. If you’re looking to spend the money on something more frivolous, like a family vacation or a new entertainment system, however, you should consider alternate financing options.

The downside to these loans comes in handling the repayment plan. Interest paid to your own account sounds easy enough, but these payments are subject to taxes. Furthermore, once money is borrowed from your retirement account, it is no longer eligible for tax-deferred growth. Payments you make on the loan come from after-tax assets, so the money you repay into your account can end up getting taxed for a second time once you withdraw after retirement.  

A standard 401(k) loan allows you to borrow up to half of your balance, with a maximum of $50,000. Normally, you have up to five years to repay the loan. Failure to do so within the five-year period means your loan will be deemed an early withdrawal, and will be subject to taxes as well as a 10% early withdrawal penalty.

If you are looking to borrow money from your retirement accounts, carefully consider your repayment plan in advance. It’s especially important to make certainthat you are secure in your employment; if you leave or lose your job, your loan payments will be due within 90 days. Consider borrowing only if interest on a loan from your retirement plan would be less than that of another loan alternative. A final tip: Continue contributing to your 401(k) while you pay off the loan to lessen the impact on your savings.

An Estate Planning Attorney Provides a Personal Review of 2012

The state of the firm

For Unique Estate Law 2012 was a fantastic year. The firm beat projections and I was able to assist more clients than ever before. I had referrals from a wide range of sources and a constant stream of clients coming through my website. I’ve done well enough to start advertising on a local radio station and in a local magazine. I have met many wonderful people and have given them guidance and peace of mind when facing an uncertain future.

Two major losses

But, for Chris Tymchuck, it was the worst year of my life.

Why was it such a bad year personally? In November both my Dad and Mom died within a week of each other. They were 66 and 64 respectively so it hadn’t occurred to the family that they might be gone so soon. While my father had battled cancer for 11 years he was in no worse shape in the end than in prior battles. And my Mom had never been sick a day in her life.

Why am I writing about this?

Why do I share such personal information on a law firm website? Because, it is a cautionary tale of what happens in a blended family when little or no preparation is done.

I was recently sharing my story with two clients and they said, “I can’t believe this is happening to you who spend your time making sure that people like us are ok and covered. You have to share your story with people so they understand that this can, and does, happen.” And they’re right.

I write this blog to assist clients and colleagues with things to consider when drafting estate plans for all types of families – both traditional and non-traditional – and the blog has paid off for me. I feel that, in keeping with the spirit in which I write I must use the lessons of 2012 to further education clients and colleagues through this medium. In short, to give back as the blog has given me so much.

Is it relevant to Unique Estate Law?

Why is my story relevant to this site? Because part of the reason that I specialize in non-traditional families is because I grew up in one – or several – and know the complications that come with being raised with in a complex web of interrelated (and sometimes not) people.

My parents divorced and each remarried and had kids with a subsequent spouse. In addition, my Mom remarried a third time and became a stepparent herself. So, that means I have a stepdad, stepmom, 3 half-brothers, a half-sister, a step brother and a step sister. That, of course, doesn’t include the “traditional” family members such as aunts, uncles and still-living grandparents. There are a lot of people to factor into planning, mourning and administering for someone.

I’ve spent the last couple of months grieving and assisting my family with working through the health care decisions, then memorials, estates and other issues associated with facing the illness and then death of parent. I plan to spend the next few posts discussing some of the lessons I’ve learned by being on the other side – education to practice so to speak – as my hope is to assist others to avoid some of the pitfalls we now face.

I can’t say that anything good has really come out of the losses I suffered this year but I will say that it confirmed my choice of profession. First, because I found relief in returning to work and assisting my clients and second because I feel that I use my law degree in the best possible way – to assist others to prepare for, and perhaps face, the worst times in their lives. For that I am grateful.

Preparing to Meet With an Estate Planning Attorney

A thorough and complete estate plan must take into account a significant amount of information about your assets, your family, your property, and your wishes during and after your life.  When you make your first appointment with an estate planning attorney, ask the attorney or the paralegal if they can provide a written list of important information and documents that you should bring to the meeting.  

Generally speaking, you should gather the following information before your first appointment with your estate planning lawyer.

Family Information
List the names, birth dates, death dates, and ages of all immediate family members, specifically current and former spouses, all children and stepchildren, and all grandchildren.

If you have any young or adult children with special needs, gather all information you have about their lifetime financial needs.

Property Information
For all real property you own or can reasonably expect to acquire, gather the property description, your ownership interest information, the address, market value, any outstanding mortgage balance, and the most recent tax assessment.

For any personal property of value (such as vehicles, jewelry, coins, antiques, stamps, and art), compile a list that includes a description, the physical location of each item, your ownership interest information, the market value, and any liens against the property.

Business Information
If you have an ownership interest in a business, make sure you have documents showing your ownership interest in the business, the business location, the names and contact information of other owners, and 2-3 years of past profit and loss statements.

Financial Information
Compile a list of all your financial accounts, including: checking accounts, savings accounts, investment accounts, stocks and bonds, and U.S. Treasury notes.  If any of these accounts currently have designated beneficiaries, bring that information as well.

Gather all retirement savings information, including 401(k) plans, 403(b) plans, IRAs, life insurance policies, Social Security statements, and pension information.  Make sure you have the account names, account numbers, current balances, outstanding loan balances, and currently named beneficiaries.

If any family members owe you debts, compile that information.

Questions to Think About
The following are some of the first questions your estate planning attorney will ask.  You are not required to have answers ready for all these questions, but because some of them are complex, it is a good idea to think through these issues before your appointment.

• Who will be beneficiaries of your property?
• Do you want to bequeath any specific items of property to specific individuals?
• Is there anyone you do not want to be a beneficiary of any of your property?
• Do you plan to make any bequests to any nonprofit organizations – university, church, charity, or other organization?
• Do you know who you want to act as executor of your will?
• Do you know who you want to act as trustee of any trusts you establish?
• If you have minor children, who do you want to appoint as guardian?
• Do you want to make arrangements for your health and financial well-being in the event you become unable to make decisions for yourself?
• Do you have specific wishes for your funeral?
• Are you a registered organ donor?

During your initial consultation, your estate planning attorney will review your family and financial situation, discuss your wishes, answer your questions and suggest strategies to protect your family, wealth and legacy.  It is my practice at this point to also provide you with a flat-fee quote for the best plan to fit the needs of your family.  This fee includes all of the listed documents and any communications/meetings with me.  It is important to me that you know the exact fee for your custom-drafted plan up front so there are no surprises later!
 

Call now to set up  your initial consultation.

A Minnesota Estate Planning Attorney Discusses Complex Estate Planning Techniques

If you have a child who is addicted to drugs or alcohol, or who is financially irresponsible, you already know the heartbreak associated with trying to help that child make healthy decisions.  Perhaps your other adult children are living independent lives, but this child still turns to you to bail him out – either figuratively or literally – of trouble.

If these are your circumstances, you are probably already worrying about how to continue to help your child once you are gone.  You predict that your child will misuse any lump sum of money left to him or her via your will.  You don’t want to completely cut this child out of your estate plan, but at the same time, you don’t want to enable destructive behavior or throw good money after bad.

Trusts are an estate planning tool you can use to provide an inheritance to a worrisome heir while maintaining control over how, when, where, and why the heir accesses the funds.  This type of trust is sometimes called a spendthrift trust.  

As with all trusts, you designate a trustee who controls the funds that will be left to the heir.  This trustee can be an independent third party (there are companies that specialize in this type of work) or a member of the family.  It is often wise to opt for a third party as a trustee, to prevent accusations among family members about favoritism.

The trust can specify the exact circumstances under which money will be disbursed to the heir.  Or, more simply, the trust can specify that the trustee has complete and sole discretion to disburse funds when the heir applies for money.  Most parents in these circumstances discover that they wish to impose their own incentives and restrictions, rather than rely on the judgment of an unknown third party.

The types of conditions or incentives that can be used with a trust include:

• Drug or alcohol testing before funds are released
• Payments directly to landlords, colleges, etc., rather than payment to the heir
• Disbursement of a specified lump sum if the heir graduates from university or keeps the same job for a certain time period
• Payment only to a drug or alcohol rehab center if the child is in an active period of addiction
• Disbursement of a lump sum if the child remains drug free
• Payments that match the child’s earned income

If you are considering writing this type of complex trust, it is advisable to seek assistance from a qualified and experienced estate planning attorney who can help you devise a plan that best accomplishes your wishes with respect to your child.
 

 

In this series of posts, we've been discussing transferring a home via a transfer on death deed.  You own property in your name alone and want to be sure that it goes to the beneficiary of your choice without the expense and delay of probate.  So, after reading these informative blog posts, you decide to use a Transfer on Death Deed (“TODD”) to achieve this purpose.

But what happens if you change your mind after you have executed and filed the deed with the county?  Can you cancel or change the TODD?

Yes. The Deed does not do anything to your rights over the property during your lifetime.  It only takes affect upon your death.  Therefore, nothing is set in stone until after death.  You may, at any time, change the beneficiary or cancel the deed altogether. But, you MUST file the transfer on death deed revocation prior to your death.

Twin Cities Estate Planning Attorney Explains the Steps Necessary to Use a Minnesota Transfer on Death Deed

If you are a property owner and wish to use a transfer on death deed (“TODD”) to transfer that property without the hassle of probate, you must

1. Choose a beneficiary or beneficiaries
2. Execute a valid deed that expressly states that it is effective only upon your death
3. Record the deed in the county in which the property is located prior to your death.
4. Pay the filing fee.

A few things to note.  If the property is jointly owned then all owners must sign the deed.  And as #3 above states, it is not enough to execute the deed - you must also record it with the proper county before your death.

We've been discussing the benefits of using a Minnesota Transfer on Death Deed to transfer your home to another person at your death. You own property in your name alone and want to be sure that it goes to the beneficiary of your choice without the expense and delay of probate.  So, you decide to use a Transfer on Death Deed (“TODD”) to achieve this purpose.

Can you cancel a Minnesota Transfer on Death Deed?

Yes. The Deed does not do anything to your rights over the property during your lifetime.  It only takes affect upon your death.  Therefore, nothing is set in stone until after death.  You may, at any time, change the beneficiary or cancel the deed altogether.

A Minneapolis Estate Planning Attorney Examines the Importance of Estate Planning for Unmarried Couples

Estate planning is important for everyone. We simply don’t know when something tragic could happen such as sudden death or an accident that could leave us incapacitated. With proper planning, families who are dealing with the unexpected experience fewer headaches and less expense associated with managing affairs after incapacity or administering an estate after death.

If a person fails to do any planning and becomes involved in a debilitating accident or passes away, each state has laws that govern who will inherit assets, become guardians of minor children, make medical decisions for an incapacitated person, dispose of a person’s remains, visit the person in the hospital, and more. In some states, the spouse and any children are given top priority for inheritance rights. In the case of incapacity, spouses are normally granted guardianship over incapacitated spouse, though this requires a lengthy and expensive guardianship proceeding.

In today’s world, increasing numbers of couples are choosing to spend their lives together but aren’t getting married, either because they aren’t allowed to under the laws of their state, such as in the case of gay and lesbian couples, or simply because they choose not to. However, most states don’t recognize unmarried partners as spouses. In order to be given legal rights that married couples receive automatically, unmarried couples need to do special planning in order to protect each other.

In general, unmarried individuals need three basic documents to ensure their rights are protected:

1. A Will – A will tells who should inherit your property when you pass away, who you want your executor to be, and who will become guardians of any minor children. These issues are all especially important for unmarried individuals. In most states, an unmarried partner does not have inheritance rights, so any property owned by his or her deceased partner would go to other family members. Also, in the case of many gay and lesbian couples, the living partner is not necessarily the biological or adoptive parent of any minor children, which could lead to custody disputes in an already very difficult time.  Therefore, it’s critical to nominate guardians for minor children.
    
2. A power of attorney – A power of attorney (for financial matters) dictates who is authorized to manage your financial affairs in the event you become incapacitated. Otherwise, it can be very difficult or impossible for the non-disabled partner to manage the disabled partner’s affairs without going through a lengthy guardianship or conservatorship proceeding.
    
3. Advance healthcare directives – A power of attorney for healthcare, informs caregivers as to who is responsible for making healthcare decisions for someone in the event that a person cannot make them for himself, such as in the event of a serious accident or a condition like dementia. Another related document is a HIPAA waiver, which allows the persons named to discuss your care with a doctor BUT not to make decisions.

A fourth document to consider is the use of a revocable living trust.  A trust document is nothing more than a set of instructions you leave to instruct your trustee on how, when and to whom to distribute your assets.  There are numerous advantages to a trust that are especially appliable to unmarried couples:

• Avoids probate
• It's private unlike a will at probate
• You can determine where any remaining assets may go at your partner's death
• Avoids court intervention if you're incapacitated

Beyond these documents, it is also critical that you check your beneficiary designations to ensure that the proceeds of your life insurance, retirement accounds, CDs, moneymarket or bank accounts go to your loved one. While your partner may still be able to inherit even without those designations, it will take time and effort to prove to a court that he/she is entitled to the benefits.

Estate planning is undoubtedly more important for unmarried couples than those who are married, since there aren’t built-in protections in the law to protect them and their loved ones.  It’s imperative that unmarried couples establish proper planning to avoid undue hardship, expense and aggravation.

 

 

This series of posts examines the unique case brought before the Hennepin County Probate Court in which a same sex spouse sought inheritance rights over $250,000 worth of assets from his deceased spouse's estate. Recall that Mr. Morrison and Mr. Proehl were legally married during the brief window in California and later returned to Minnesota - a state that has a statue prohibiting the recognition of same-sex marriage - where Mr. Proehl died suddenly of a heart attack.  In question were approximately $250,000 worth of life insurance proceeds and in a solo bank account in which Mr. Morrison was not named a beneficiary.

After unsuccessfully fighting to have the insurance company and bank issue the money to him, Mr. Morrison filed suit in Hennepin County Probate Court arguing that he was entitled to Mr. Proehl's estate because they were legally married in California. In a unique - and surprising - decision, the court agreed and ordered the $250,000 paid to Mr. Morrison.

As noted in my prior post, I am thrilled with this outcome for Mr. Morrison but caution that it may also cause some unintended consequences. A few issues that come to mind.

What if you break up?

 I know many couples who traveled to a state (Iowa, Massachusetts or New York) or country (Canada) to get married in a jurisdiction in which same-sex marriage is legal and some of those couples are no longer together.  But, because the marriage is not valid in Minnesota and due to the residency requirements (of 6 months or more) in most states, the couples never divorced.  What happens if one member of that “broken relationship” dies? Will the “ex”, but still-legal-spouse-in-another-state, be able to inherit from the deceased?

Do you have to be "same-sex married" in a jurisdiction where it's legal?

Another question: Would this only work for couples who got legally married in another state?  My partner and I have been together for almost 7 years and we have a 5-year-old daughter together. and are registered domestic partners in Minneapolis.  If my partner dies without a will, am I currently entitled to the same inheritance rights as Mr. Morrison or do we need to travel to Iowa (actually, I would choose New York) to get married so it’s legal somewhere? And what if we go to Illinois and get a civil union? Does that count?

Will gay couples rely on this decision?

As an estate planning attorney in Minnesota - a state increasingly restrictive of the right of gay couples to marry - I worry that potential clients will hear about this and interpret it to mean that they don't need to properly plan for an emergency. I want to be sure to point out that the judge in this case clearly stated that this was "unlike any that has come before Minnesota's probate court." When I hear that language, I think that it's a "one-off" decisions and may not be repeated. Further, this is not a binding case as it's only at the district court level. Another thing to note is that Mr. Morrison did still have to spend time and money in court fighting for what should have - easily - been his. If Mr. Proehl had named Mr. Morrison as a beneficiary OR in a valid will, those $250,000 worth of assets would have been in Mr. Morrison's hands within a couple of months without legal intervention. Please don't rely on a court to save you, but call my firm and get a plan in place now! If you mention this blog post, I will waive my initial consultation fee because it's that important to me to help this community (and so I know someone reads this).

What if other heirs dispute the partner/spouse's inheritance rights?

What if other family members object to the surviving partner/spouse's inheritance? It doesn't appear there will be any opposition to the Proehl decision as it was clear that Mr. Proehl's surviving family members all believed that Mr. Morrision was his husband and therefore entitled to the proceeds. But, will the outcome be the same if someone is there to dispute it?

While the decision does raise further questions (as complex legal questions often do), let me be clear that I am thrilled for the LGBT community and applaud Referee Borer and Judge Quam for what is clearly the right choice in this situation.

 

 

A Minneapolis Lawyer Discusses the Recent Hennepin County Probate Decision on Inheritance Rights for Same Sex Couples

As a lawyer who specializes in the field of non-traditional families, I have to admit that this is an outcome that I would never have predicted.

Two of my prior posts discussed the inheritance issue facing James Morrison of Hennepin County, Minnesota.  Briefly, Mr. Morrison legally married Thomas Proehl in California during the brief window in which same sex marriage was permitted in that state.  Upon their return to Minnesota Mr. Proehl died of a heart attack and Mr. Morrison subsequently learned that there was $250,000 in life insurance benefits and in a solo bank account for which Mr. Proehl had not named a beneficiary.  Further, Mr. Proehl did not have a will specifying where his estate should go in the event of his death.

After failing to make his case with the insurance and retirement companies, Mr. Morrison argued to the Hennepin County Probate Court that, because they were legally married in California, he was entitled to inherit the $250,000 from Mr. Proehl's estate.  In a surprising ruling yesterday, the Hennepin County Probate judge agreed and granted Mr. Morrison the right to inherit the $250,000.

Referee George Borer held that Minnesota’s Defense of Marriage Act (MN DOMA) does not deny a same-sex partner the right to inherit the other’s assets.  His opinion noted that the MN DOMA bill as initially drafted included language prohibiting “the benefits of marriage” to same-sex couples but that language was removed prior to passage into law. Referee Borer stated that the removal of “benefits of marriage” language appeared to be an “intentional legislative compromise that allowed the passage of this bill.”  Hennepin County Probate Judge Jay Quam signed off on the referee’s order stating that the Legislature’s rejection of the “benefits” language was not accidental and acknowledged that this case was “unlike any that has come before Minnesota’s probate court.”

The judge also noted that what made Mr. Proehl and Mr. Morrison different was “that they were a married, same-sex couple in a state where that status is legally unwelcome.”

This is a great outcome for Mr. Morrison and I hope he can put this all behind him now as I must have been emotionally wrenching to have this drag on for so long.

I certainly feel this is the right decision for this couple, but I fear it may lead to some unintended consequences.  I will discuss these possible issues in the next post in this series.