Family members with special needs may require assistance throughout their lives. If you want to ensure that a loved one with a disability is taken care of after you are gone, you can help manage resources for them by using a third-party special needs trust (SNT).

Also known as a supplemental needs trust, a third-party SNT is funded with assets (money and property) that do not belong to the special needs beneficiary but are meant to be used for their benefit. Third-party SNTs allow the beneficiary to receive some benefit from the trust while preserving the beneficiary’s eligibility for means-tested public assistance programs such as Medicaid and Supplemental Security Income (SSI). When the beneficiary passes away, whatever funds remain in the third-party SNT can pass to other family members.

Choosing the right trustee to manage a third-party SNT is a crucial decision. The person selected for this role must understand their responsibilities and fulfill them in a way that does not jeopardize the beneficiary’s government benefits.

SNTs and Third-Party SNTs Explained

There are two main types of SNTs: first-party SNTs and third-party SNTs. Both are intended to ensure that a person with a disability or functional needs can receive financial support from the trust while preserving their government benefits. What differentiates these two types of trusts is the source of trust funding and the government’s entitlement to a portion of the trust’s funds.

• First-party SNTs are funded with first-party money (i.e., the beneficiary’s own assets). Typically, this type of SNT is set up by a person with special needs if they receive a windfall (e.g., a personal injury or medical malpractice settlement) or if they become disabled at a time when they have significant assets but need to qualify for means-based benefits.
• Third-party SNTs are established by a parent, grandparent, sibling, or other person and funded with their assets rather than the assets of the beneficiary—including money, life insurance policies, real estate, and investments—to benefit a family member with special needs. A third-party SNT can be created in two ways:
  • A standalone third-party SNT is created during the lifetime of the trustmaker, is effective immediately upon creation, and remains effective after the death of the trustmaker. It is eligible to receive assets from multiple sources during and after the trustmaker’s lifetime.
  • A testamentary third-party SNT is created as part of a person’s last will and testament and does not come into existence until the person who created the will passes away. At the time of death, designated estate assets are transferred to the trust and the individual with special needs becomes the beneficiary of the trust.

SNTs and Government Benefit Reimbursement

Whichever type of SNT is created, whether first-party or third-party, standalone or testamentary, the assets in the trust are legally owned by the trust—not the beneficiary. As a result, the special needs beneficiary is not disqualified from SSI or Medicaid, which have income and resource limits for enrollees.

There is an important difference, however, between first-party and third-party SNTs in terms of government benefit reimbursement:

• In a first-party SNT, when the beneficiary dies, the state Medicaid agency is entitled to reimbursement for the full amount paid on behalf of the beneficiary during their lifetime. This could mean fully exhausting the remaining trust funds to repay state Medicaid programs. Only after Medicaid reimbursement has been satisfied can the trust balance be distributed to other beneficiaries named in the trust by the trustmaker.
• This Medicaid repayment obligation does not apply to a third-party SNT because the assets it contains never belonged to the beneficiary. When the beneficiary of a third-party SNT dies, all remaining assets can pass to other named beneficiaries. Ultimately, the government will not get any portion of the trust funds.

Responsibilities of a Third-Party SNT Trustee

Once the decision is made to create a third-party SNT, the next, and equally important, decision is to select someone to serve as trustee.

The trustee is the person responsible for managing the SNT on behalf of the disabled beneficiary. They administer the trust and manage its assets according to the trust’s terms. More than one individual can serve as trustee. A trustee can also hire an attorney or other professional to help them meet their legal duties.

A trustee has a fiduciary duty to act in the best interests of the trust beneficiary. Broadly, in the SNT context, they are required to ensure the beneficiary remains eligible for government benefits by providing additional financial support from the trust for specific and limited purposes. For example, the trustee may use the trust funds to supplement the beneficiary’s government benefits—but not replace or duplicate them—by distributing funds to pay for things like education, recreation, and vacations.

 A trustee’s duties can include the following:

• Handling trust distributions to the beneficiary
• Overseeing investments of trust assets
• Maintaining trust records
• Filing the trust’s taxes
• Communicating with the beneficiary and other involved family members

Third-party SNT trustees have a big responsibility. Among other things, they must understand the rules and regulations surrounding government benefits and allowable distributions. Using an SNT to provide cash or cash equivalents to the beneficiary, or to pay for the beneficiary’s food or shelter, could disqualify a beneficiary from public benefits.

In all trust-related matters, the trustee must act to ensure the beneficiary maintains the highest quality of life possible. Failure to uphold their fiduciary duty could not only harm the beneficiary, but also lead to legal action against the trustee. A new trustee may have to be named. If estate planning documents do not name a successor trustee, the court may need to appoint somebody to serve as trustee.

Choosing a SNT Trustee

Special needs trusts have highly technical terms and administrative requirements, and the rules governing them are very complicated. A simple mistake on the part of the trustee could unintentionally hurt the beneficiary.

A layperson named as the trustee of an SNT can hire an attorney to provide guidance and assistance; they may need to do so to satisfy their fiduciary duty and make sure the disabled beneficiary receives appropriate support. Attorney fees can be paid out of the trust.

Alternatively, an SNT can designate a professional trustee to oversee the trust. Hiring a professional trustee can increase trust costs, but a trustee who has experience with SNTs may be better suited than a family member to fulfill the trustee’s many important responsibilities.

A special needs attorney from our office can assist family members with setting up an SNT. We also work with SNT trustees to meet their legal duties and maximize trust benefits. To discuss your goals and needs with a special needs planner, please contact us.

When developing your estate plan, it is nearly impossible to address every account or property you own. There are sure to be some things you unintentionally overlook. However, by including a residuary clause, you can intentionally disburse any remaining items inadvertently left over during the estate or trust administration process to a named beneficiary or group of beneficiaries. 

Ensuring That Everything You Own Goes to the Right People 

During the estate planning process, you may decide that you want to leave certain items to specific individuals. But what happens in the following situations?

• You forgot to include everything you own in your will or trust.
• You do not address personal property of little value, like clothing or your extra set of emergency batteries and hand tools in the basement.
• You acquired new accounts or property after your estate plan was completed but you did not update it accordingly.
• You have retirement accounts, bank accounts, or insurance policies but do not have completed beneficiary designations.
• You have not named backup beneficiaries if something happens to your first choice (e.g., they predecease you, are unable to receive their inheritance for some reason, or decide they do not want it). 

A residuary clause outlines what should happen to any property that has not been addressed in your documents or assigned to a beneficiary. 

Without a residuary clause, your loved ones may be subjected to complications in the probate or trust administration process. Any money or property that has not been specifically left to someone will be distributed according to state laws, potentially going to individuals you did not intend. 

The Challenge of Remembering Everything in Your Will or Trust

It can be difficult to meticulously catalog and address every single possession in your will or trust. That is why the residuary clause exists. Provisions can be made in your will or trust for each beneficiary and what they should receive. Then, to ensure that everything you own or that is part of your will or trust is accounted for, a clause similar to one of the following can be added to your will or trust:

“I wish to leave the remainder of my estate to _____.” 

“The deceased settlor’s remaining property will be administered as follows:”

When crafting the residuary clause, you can name a person or charity that you would like to have inherit what is left over after you provide instructions for specific items or property. You could also decide to have the remaining amount divided among multiple people, charities, or a combination of both. For more than one person or charity, it can be helpful to specify the percentage that each person or charity will get to eliminate any problems or confusion.

The residuary clause guarantees that everything you own ultimately finds its way to the individuals or charities you want.

Working with an Experienced Attorney

The last thing anyone wants is to leave their grieving family to deal with confusion and disappointment after they pass. When designed properly, wills and trusts can offer clear instructions for an executor, personal representative, or trustee to navigate a smooth administration process. Estate planning attorneys understand how to create comprehensive legal documents that leave no room for ambiguity and avoid complications during probate and trust administration. By working closely with an experienced attorney, you can be confident that every aspect of your estate is thoughtfully considered and that your legacy will be passed on according to your wishes. Call us to schedule an appointment to ensure that all of your hard-earned money and property are properly planned for.

When people think about estate planning, they usually focus on who will receive their money and property when they pass away and how it will be received. However, estate planning can also address your end-of-life wishes—the considerations and expenses involved when it is time to say goodbye to your loved ones. The following are important questions to ask yourself, as the answers are a critical part of creating a comprehensive estate plan.

How Do You Want Your Remains Handled at Death?

Addressing your final wishes for your body may be uncomfortable, but planning ahead can save your loved ones time and give them peace of mind, knowing that they are carrying out your wishes. There are many common options available, such as

• being buried in a casket, 
• being cremated, or 
• donating your body or organs. 

Alternatively, some people choose more unique ways to dispose of their remains, such as by having them turned into a diamond.

Depending on your state’s laws, these wishes may be included in your last will and testament, healthcare power of attorney, advance directive, or a separate document.

Do You Want a Service or Celebration?

When it comes to commemorating your passing, a variety of options are available to achieve your specific wishes.

Funeral

Some people prefer to plan a more traditional funeral at their place of worship, complete with music, scripture readings, and a meal afterward. A funeral can also include a gathering before the church service or a graveside service. The focus of the funeral is to allow your loved ones the opportunity to mourn your passing. 

Memorial Service

A memorial service can be like a funeral in terms of formality, but typically the deceased’s remains are not present at a memorial service; usually photos of the deceased are displayed instead. However, a memorial service can also be informal, similar to a celebration of life.

Celebration of Life

“Celebration of life” events are an increasingly popular way to celebrate your life experiences and accomplishments. Pictures and videos can be displayed during the event as your loved ones tell stories of you. The celebration can be tailored to reflect your personality and highlight what matters most to you.

Nothing

You may decide that you do not want a funeral, memorial service, or celebration. This could be for any number of reasons: you may not have many friends or family who could attend a local service, you prefer to avoid funeral expenses and would rather have your money pass directly to your loved ones, or you are a private person who does not want the details of your passing shared with the public.

It is important to note that documents with instructions for funerals, celebrations, or the disposition of your remains may not be legally binding in your state. Every state has different rules. However, by letting your loved ones know your wishes, they can use that information when making decisions for your final arrangements.

Do You Have a Final Message?

While you may focus on the official documents that address your money and property such as a last will and testament and a trust when creating your estate plan, you can also include documents with personal messages to help you say goodbye to your loved ones. 

Letter

If you love to write or find it easier to communicate through writing, leaving a letter to your loved ones can allow you to thoughtfully convey your wishes and last sentiments. You could write one letter addressed to all of your loved ones if the information you want to communicate is the same for each person. Alternatively, you could write a separate letter to each loved one if you have specific things to say to each person.

In these letters, you can talk about your relationship and valuable lessons that you have learned and provide advice and guidance to pass along to future generations. Not only will the information in the letter be meaningful to the recipient but it will also provide them with a tangible gift to help them through the mourning process that can be saved for years to come.

Video

Another way to speak from your heart is through video, which can allow you one last opportunity to speak to your loved ones. Just like writing a letter, you can address friends and family as a group in one video or address each person with individual videos. Videos can convey the same information as a letter and give the recipient the added joy of hearing you speak and seeing your face.

How Will You Pay for Your Final Expenses?

Depending on the extent of your end-of-life wishes and the anticipated cost, there are many ways to allocate money to cover these expenses.

Funeral Trust 

Although a funeral trust is uncommon in some jurisdictions, it may be an option. A funeral trust holds money for funeral costs until you pass away. Then, at your death, the trustee pays the beneficiary (typically the funeral home providing services) with the funds held in the trust. A funeral trust allows you to set aside money to cover the following expenses:

• casket or urn
• burial vault 
• cemetery plot 
• embalming or cremation 
• funeral service and accompanying gathering
• obituary
• death certificate

Final Expense or Burial Insurance 

Final expense or burial insurance is a special type of life insurance policy that is purchased to pay for funeral costs, medical bills, and other end-of-life expenses. It usually pays a small death benefit, such as $5,000 to $25,000, meant to cover funeral expenses rather than provide financial support for loved ones.

Separate Savings Account 

Finally, if you have enough financial resources, you could set aside money in a savings account to pay for your end-of-life expenses. The savings account would be in your own name and would have a trusted individual as the payable-on-death beneficiary, who would then use the funds to pay for your final expenses.

We understand that planning for death is not easy. Our attorneys can help ensure that your wishes are carried out and your legacy lives on. Give us a call to begin a thoughtful discussion about your end-of-life wishes and expenses.

Estate planning attorneys and probate and trust administration attorneys play crucial but distinct roles in the legal processes involving legacy planning, asset distribution, and wealth preservation. 

Estate planning attorneys focus on creating a plan to manage a person’s money, property, and affairs upon their death or if they are unable to manage it themselves. Probate and trust administration attorneys, on the other hand, deal with settling an estate or trust after the person has passed away. While there can be some overlap between these roles, not every attorney handles both. 

As part of the estate planning process, you should discuss with your attorney the role they will play during your lifetime and whether they can also assist your loved ones with estate and trust administration when you pass away. 

What Does an Estate Planning Attorney Do? 

An estate planning attorney can help you create an estate plan when you are alive and offer ongoing plan reviews and guidance throughout your lifetime. 

An estate plan provides answers to the most important questions about how your affairs should be settled, not only when you die but also if you become unable to manage your own affairs. These questions include the following: 

• Who gets my money or property when I am gone? 
• Who will take care of my minor children if I am unable to? 
• How can I pay less in taxes and keep more money for my loved ones? 
• Will people know where to find my important records (e.g., estate planning documents, account information, or life insurance policy information)? 
• Are the right beneficiaries listed on my accounts? 
• Does it make sense to put some of my accounts and property into a trust? 
• Is there somebody to act on my behalf if I am alive but unable to make or communicate decisions about my health or finances? 
• How do I document my end-of-life care preferences? 
• What are some ways to provide additional financial security for my loved ones?

Generally, estate planning attorneys recommend that every adult establish an estate plan, especially if they have loved ones they want to provide for. This means at least having a last will and testament (also known as a will) that specifies how your money and property should be distributed and to whom, including items with financial value and those with strictly sentimental value. A will also does the following:

• Names a trusted decision-maker (also known as an executor or personal representative) to settle your affairs and manage the court-supervised probate process, which validates the will and oversees distribution of your money and property 
• Appoints a guardian (and backup guardians) for your minor children
• Directs the executor or personal representative on how to pay the costs of the estate, such as your outstanding debts, taxes, and probate fees
• Names your beneficiaries and states how your money and property should be distributed to them 

In addition to preparing a will and helping you decide whether you might need one or more trusts, an estate planning attorney can assist with the following tasks: 

• Selecting an executor and trustee
• Minimizing estate taxes
• Transferring accounts and property to a trust or naming a trust as a beneficiary 
• Helping you choose the right beneficiaries and structure their inheritances to meet their needs
• Choosing agents under financial and medical powers of attorney
• Creating medical directives

Effective estate planning can minimize the time and complexity of the probate process and give your loved ones faster access to your money and property. An estate plan may not be able to eliminate probate entirely; however, without an estate plan, your money and property will be distributed according to state law—which may not align with your wishes. 

The state may also have to get involved with choosing guardians for your children, authorizing others to act on your behalf, and deciding other important matters. The state’s decisions may be very different than what you would have chosen. In addition, a lengthy probate process can cause delays, increased expenses, and a loss of privacy. Having an up-to-date estate plan makes your wishes known and makes things easier for your loved ones. 

What Does a Probate and Trust Administration Attorney Do? 

A probate and trust administration attorney assists your loved ones with the estate or trust administration process after you pass away. They help your loved ones through the legal processes that your death sets in motion. 

Probate Attorney

A probate attorney can work on behalf of the representative (i.e., the executor or personal representative) who you name in your will, or the person appointed by the court if you die without a will, to settle your financial affairs and carry out your final wishes. A probate attorney can also represent your beneficiaries in the probate process. 

Some common duties that a probate attorney performs for clients include the following: 

• Collecting life insurance proceeds 
• Giving legal advice regarding the client’s responsibilities and rights
• Identifying and creating an inventory of what you owned at the time of your death 
• Locating your will 
• Managing the probate estate’s finances  
• Overseeing appraisals for your property
• Making sure the executor pays any estate and income taxes owed and any of your outstanding debts that must be paid
• Preparing and filling necessary court documents 
• Retitling accounts and property as necessary
• Transferring accounts and property to appropriate beneficiaries   

Trust Administration Attorney

A trust administration attorney guides a trustee through the administration of a trust. Trusts are not subject to the probate court process, allowing the trust’s accounts and property to be distributed quickly and privately. However, the trustee may need assistance fulfilling their legal obligations. Trust administration attorneys may provide services to beneficiaries as well. 

A trust attorney may be needed in the following situations: 

• Reviewing the trust document and state law to guide the trustee through the steps that must be taken to ensure they are performing all required legal duties, such as keeping records, filing taxes, making distributions, and fulfilling their fiduciary responsibilities to act in the best interests of the trust’s beneficiaries 
• Preparing legal documents necessary for the transfer of ownership of the trust’s accounts and property
• Identifying and resolving potential issues (e.g., conflicts of interest or improper beneficiary influence on the trustee)
• Helping a trust beneficiary assert their rights, including the right to be informed about the trust and its administration, the right to a trust accounting, the right to receive timely trust distributions, and the right to challenge how the trustee is administering the trust 

What Type of Attorney Do You Need? 

Some attorneys are qualified to perform estate planning as well as probate and trust administration services. 

At the Like Law Group, we handle both the estate planning work, as well as the probate and trust administration work but not all lawyers or firms do the same. If you or a loved one needs assistance with creating or updating an estate plan, handling the estate of a deceased loved one, or administering a trust, please give us a call.

Your mortgage, like the rest of your debt, does not simply disappear when you die. If you leave your home that has an outstanding loan to a beneficiary in your will or trust, your beneficiary will inherit not only the property but also the outstanding debt. They may have the right to take over the mortgage and keep the home, or they may choose to sell it and keep the proceeds. A few different scenarios can unfold, however, depending on the mortgage terms and the estate plan instructions. 

Ultimately, planning for the transfer of real estate upon your death can make the process much easier for your loved ones. 

American Housing Debt Exceeds $12 Trillion

The US homeownership rate stood at around 66 percent in 2022, according to the US Census Bureau.¹ The Federal Reserve Bank of New York reported at the end of September 2023 that Americans were carrying $12.14 trillion in mortgage balances.²

Housing debt makes up over 72 percent of all US consumer debt.³ A home is the largest purchase that most people will ever make, and many borrowers pass away before receiving the deed to their house free and clear. A survey from CreditCards.com found that 37 percent of Americans died with unpaid mortgages.⁴ 

The number of Americans who have received or expect to receive an inheritance has increased in recent years.⁵ At the same time, 73 percent of Americans are likely to die with debt, including unpaid mortgages.⁶ 

Unpaid Mortgages on Inherited Homes

A 2023 Charles Schwab survey revealed that more than 3/4 of parents intend to leave a home to their children in their estate plan. However, nearly 70 percent of those who expect to inherit a home from their parents say they will sell it due to increasing real estate costs.⁷ 

Deciding what to do with a family property that is passed down to the next generation can be an emotional as well as a financial decision. While the sentimental value of a home is typically a strong motivator for holding on to it, beneficiaries may move on from an inherited home because of financial considerations. 

If a couple co-signed a home loan together and one spouse predeceases the other, the surviving spouse must continue making mortgage payments. A surviving spouse may also be responsible for paying back a mortgage taken out by the deceased spouse alone if the couple lives in a community property state such as Arizona, California, Texas, or Washington.⁸ 

Outside of co-signers and community property spouses, the loved ones of a decedent are not typically personally responsible for making mortgage payments on the decedent’s home unless they receive ownership of the property, as in one of the following scenarios.

One beneficiary inherits the property through a will, trust, or deed.

A person can leave a house to a loved one after their death under the terms of a will or trust, or with the use of a transfer-on-death deed or Lady Bird deed (in those states that permit these forms of deeds to enable real property to avoid probate and pass automatically to a beneficiary). When the home transfers, a mortgage or loan secured by the home also transfers. The person who inherits the home must pay off the mortgage with other funds or sell the property and apply the proceeds to pay off the mortgage. In certain cases, they may be able to take over (or assume) the existing mortgage and have it transferred to them, with the beneficiary continuing to make the monthly mortgage payments. Additionally, some lenders might work with the new borrower to refinance the loan and change the terms. 

Multiple beneficiaries inherit the property through a will, trust, or deed.

Multiple beneficiaries who inherit a property through a will, trust, or the appropriate deed have the same options for an inherited mortgage as a single beneficiary: they may be able to assume the mortgage (as co-borrowers), use other funds to pay off the mortgage, or sell the property and use the sales proceeds to pay off the mortgage. Any option requires all beneficiaries to be on the same page. One or more beneficiaries can buy out the shares of the other beneficiaries, although higher home prices and mortgage rates could make it impractical for one or more beneficiaries to buy out the other beneficiaries. If a consensus cannot be reached, the court may order the sale of the property and a division of the proceeds. 

Heirs inherit the property through the probate process.

Gifting a home to a beneficiary or beneficiaries assumes that the original homeowner had a will or trust as part of an estate plan. This is an unreliable assumption, though, since roughly 2/3 of Americans do not have an estate plan.⁹ 

Dying without a will or trust means that the court will appoint an executor or personal representative to distribute the decedent’s money and property and settle their debts. Because the home is part of the unsettled probate estate, the mortgage on the home becomes part of the probate estate as well. The executor may use other money and property from the probate estate to make mortgage payments until the home is sold or transferred to the rightful heir. If the mortgage is not paid off during the probate process, the heir will take ownership of the home subject to the mortgage, and the options discussed in the two scenarios above will apply.

Make a Plan to Pass on Your Home

A parents’ home is often a place of cherished family memories. Leaving a home to children is a common way to keep a family legacy alive and transfer wealth. However, rising costs and evolving preferences are contributing to declining interest among children in keeping their parents’ homes. 

A home with a mortgage presents additional challenges that should be accounted for in an estate plan. For example, your plan can contain provisions that dedicate funds to help loved ones pay for an inherited home or provide additional instructions about how to distribute home sale proceeds among beneficiaries. As part of your estate plan, you can even refinance your mortgage now to secure more favorable terms for your beneficiaries after your passing. 

An estate planning attorney can offer advice that aligns with your legacy goals and family situation. To make the transfer of a home as seamless and efficient as possible, contact our attorneys to schedule an appointment. 

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Footnotes

1. Robert R. Callis, Rate of Homeownership Higher Than Before Pandemic in All Regions, US Census Bureau: America Counts: Stories (July 25, 2023), https://www.census.gov/library/stories/2023/07/younger-householders-drove-rebound-in-homeownership.html.
2. Fed. Res. Bank of N.Y., Ctr. for Microeconomic Data, Q3 2023, https://www.newyorkfed.org/microeconomics/hhdc.html (last visited Jan. 29, 2024).
3. Id.
4. Bill Fay, What Happens When People Die with Debt: Who Pays?, Debt.org (May 16, 2023), https://www.debt.org/family/people-are-dying-in-debt/.
5. Mary Ellen Cagnassola, More Americans Are Leaving Inheritances — and It’s Not Just Wealthy People, Money (Apr. 12, 2023), https://money.com/more-americans-leaving-inheritances/.
6. Bill Fay, What Happens When People Die with Debt: Who Pays?, Debt.org (May 16, 2023), https://www.debt.org/family/people-are-dying-in-debt/.
7. Veronica Dagher, The New Math on Inheriting Your Parents’ House, Mansion Global (June 1, 2023), https://www.mansionglobal.com/articles/the-new-math-on-inheriting-your-parents-house-6fd575cf.
8. Rebecca Lake, What Are the Community Property States?, SmartAsset (Aug. 25, 2023), https://smartasset.com/financial-advisor/community-property-states.
9. D.A. Davidson Survey Finds That Two-Thirds of Americans Do Not Have an Estate Plan, D.A. Davidson: Perspectives, https://dadavidson.com/News/Perspectives/ArticleID/3646/D-A-Davidson-Survey-Finds-That-Two-Thirds-of-Americans-Do-Not-Have-an-Estate-Plan#:~:text=Return-,D.A.%20Davidson%20%26%20Co.,compared%20to%2059%25%20of%20men (last visited Jan. 29, 2024).

Creating or revising an estate plan can feel overwhelming, causing many people to procrastinate. But the longer you put it off, the more potential there is to be caught unprepared in an emergency. So how can you motivate yourself and your loved ones to begin the process? Here are some strategies to help you overcome some of the negative feelings associated with this process and meet the challenge head on.

Reward Yourself for Your Accomplishments

While the benefits associated with updating or creating a new estate plan are a reward in and of themselves, we can all use an extra push. Sometimes the promise of a small indulgence as a reward can change your frame of mind when initiating the process. However, your idea of a reward may be more substantial and might involve a more significant gift for the entire family to enjoy. What other projects have required extra motivation in the past? How much easier might they have been to complete if you rewarded yourself or your family for their completion? Get inspired with a few meaningful ideas that could serve as a reward:

• Plan a well-deserved vacation
• Make a reservation at your favorite restaurant
• Book a family photo session
• Buy the new phone, laptop, or computer you have been eyeing

The key to an effective reward is personalization. Choose something that resonates with you and can serve as a reminder of the importance and the effort you put into completing the estate planning process, which is essential to protecting your family’s future.

Break Your Estate Planning Project Down into Smaller Steps

Estate planning can be a complex process and facing it as a whole may seem impossible. To make it more manageable, break the process down into smaller, more achievable steps.

Identify the first three steps you need to take using these suggestions: 

1. Learn more about estate planning tools and how they work. Find out what is typically included in a comprehensive estate plan, such as wills, trusts, powers of attorney, and advance directives. 
2. Collect financial information. Gather and organize your financial information, including a detailed inventory of your money, property, debts, and sources of income. List bank accounts, investments, real estate, insurance policies, personal belongings, and more. 
3. Set specific goals for your estate plan. Establish clear goals based on the following factors: 

• Family structure
• Business and personal financial objectives
• Intentions for protecting and supporting your loved ones after your passing
• Desired lifestyle in retirement
• Wishes for how you would like to be cared for as you age
• End-of-life wishes

4. Choose your beneficiaries, personal representatives, trustees, and agents. Determine the beneficiaries you want to inherit your money and property and the individuals you want to be responsible for managing and distributing these accounts and property after your death. Think about the people you would trust as guardians for your minor children and whom you feel comfortable choosing to make financial and medical decisions for you if you become unable to make those decisions for yourself. 
5. Ask for the help you need. Throughout this first phase of preparing your estate plan, identify estate planning attorneys as well as tax and financial professionals in your area. Schedule consultations to discuss your needs and assemble a reliable team.
6. Review and update an existing plan. If you already have estate planning documents in place, review them for accuracy and relevance. Life circumstances such as marriages, divorces, or births, as well as changes in financial status, usually require updates. Ensure that beneficiary designations on accounts and insurance policies are current. 

By following these initial steps, you will lay a solid foundation for participating in the estate planning process. Each step keeps you on track and moves you toward the larger goal of completing your estate plan.

Tell Someone about Your Plan 

Accountability can be a powerful motivator. Share your intention to create or update your estate plan with a trusted friend or family member. This person can offer support and encouragement. They can also check in on your progress so you will be more likely to follow through on your commitment. For some people, simply saying the words out loud or putting them on a calendar also makes the project a priority. Choose the best way to hold yourself accountable.

Use Positive Affirmations 

Still feeling reluctant to engage in estate planning? This may stem from deeper concerns or anxieties about the future and your mortality. Counteract negative thoughts and shift your mindset by using positive affirmations to focus on why you may not want to proceed with preparing an estate plan. The following affirmations may help you take the worry or fear out of estate planning by focusing on the positive benefits. You may even want to write out one or two and post them in a place where you commonly look.

• I am taking proactive steps to protect the future of my loved ones if something happens to me.
• Planning my estate is an expression of love and support for my family.
• I value the peace of mind that comes with having a detailed and thoughtful estate plan.
• My estate plan provides critical information and instructions that my spouse and children may need in emergencies.
• I recognize the importance of making decisions now to ease the burden on my loved ones later.
• My estate plan reflects my commitment to responsible financial planning and is a tangible expression of love and protection.
• Taking control of my financial and healthcare decisions throughout life is empowering.
• I approach estate planning with confidence, knowing it is a positive and necessary step for a happy and healthy family.

Repeating these affirmations regularly can help cultivate a positive mental attitude to get you through the estate planning process. And by combining these strategies, you can develop the motivation for establishing or revising your estate plan. 

Making an appointment with an estate planner is often the first step. Contact us to get started.

Michael Oher has had a remarkable life so far. Born to a single mother struggling with addiction and growing up in and out of foster care, Oher went on to star as a University of Mississippi football player and was selected in the first round of the 2009 NFL draft. He played eight seasons in the NFL, won a Super Bowl in 2016, and is the subject of a book that inspired an Oscar-winning movie, The Blind Side. 

Sean and Leigh Anne Tuohy, the Tennessee couple that took Oher into their home when he was in high school and were appointed as conservators of his estate, are featured prominently in The Blind Side. But Oher has recently alleged that, contrary to the movie’s portrayal of events, the Tuohys never actually adopted him. Oher alleges that the Tuohy’s instead tricked him into agreeing to the conservatorship and unjustly profited from his trust in them.

While the accusations will play out in court, they raise questions about conservatorships, when they are necessary, and how they affect estate planning. 

What Is a Conservatorship? 

A conservatorship is a court-ordered arrangement that gives one person (or multiple people), called a conservator, legal authority to manage the affairs of another person, known as a conservatee or ward. 

Most jurisdictions—including Tennessee, where the Michael Oher conservatorship was created—recognize two types of conservatorships: 

• A conservatorship of the person authorizes a conservator to manage the personal affairs of the conservatee, including their healthcare and living arrangements. 
• A conservatorship of the estate grants the conservator the authority necessary to supervise the conservatee’s financial affairs, such as managing their money, paying their bills, and in some instances, setting up an estate plan for them. 

Conservatees are often children, but they can also be adults who are incapacitated, have developmental or age-related disabilities, or are otherwise deemed by the court to be unable to handle their own financial or personal affairs. A famous example of this is the Britney Spears conservatorship that was set up following her pattern of erratic behavior and placement in a psychiatric hospital for observation. In Spears’s case, her conservatorship was split into two parts—one for her estate and finances and one for her as a person.¹ 

A conservatorship may be established following a court petition by a friend or relative asking for the appointment of a conservator. The petition must explain the basis for establishing the proposed conservatorship. In many cases involving adult conservatorship, the petition must indicate that the conservatee is at risk of either injury to their person due to their inability to manage their daily needs or make medical decisions, or that they are at risk of financial exploitation or involuntary depletion of their assets. Following an investigation and a hearing, the court decides whether a conservatorship is warranted.

If a conservatorship is granted, a conservator is named, and their specific powers are set out in a court order. Typically, the court requires that conservators file annual financial accountings or plans for the care of the person, depending on the type of conservatorship.

Michael Oher’s Conservatorship

In 2004, shortly after Oher turned 18 and about two months before he signed on to play football at Ole Miss, a Tennessee judge entered an order establishing a conservatorship over Oher with the Tuohys as conservators. At the time, the conservatorship was established with the permission of Oher as well as his biological mother. According to the conservatorship filing, a judge declared that the Tuohys “should have all powers of attorney to act on his behalf and further that Oher shall not be allowed to enter into any contracts or bind himself without the direct approval of his conservators.”²  

Legal experts say the 2004 filing for a conservatorship of the person is unusual because Oher had “no known physical or psychological disabilities.” The petition notes that he was a good student and made the dean’s list his sophomore year. 

In an August 14 petition to terminate the conservatorship, which was allegedly scheduled to end when Oher was 25 years old, Oher claimed that the Tuohys deceived him and did not act in his best interest as conservators.³ His petition stated that he did not understand that he was giving up his right to contract for himself, the Tuohys misrepresented the conservatorship as an adoption, and that “the lie of adoption” enabled the Tuohys to enrich themselves at the expense of Oher, including from film royalties. 

In addition to seeking to sever the conservatorship, the lawsuit filed by Oher sought a full accounting of assets; an injunction prohibiting the Tuohys from using his name, image and likeness; compensatory and punitive damages; and costs and attorney’s fees. 

Adoption versus Conservatorship

Adopting Oher would have made him a member of the Tuohy family, no different in the eyes of the law than the Tuohys’ two birth children. Adoption would also have allowed Oher to retain power over his own financial affairs—a power that he surrendered under the conservatorship. 

The Tuohys say they are blindsided by Oher’s accusations that they profited from the conservatorship. Their version of events portrays the conservatorship as necessary to help Oher with a driver’s license, health insurance, and the college admissions process.⁴ Sean Tuohy said he was advised by lawyers at the time that adoption was not an option because Oher was 18 and a legal adult. 

Many states, including Tennessee, however, allow adult adoption. Adoption laws in Tennessee permit a person to be adopted at any age. When the adoptee is over the age of 18, consent from birth parents is not needed—only the consent of the adopted adult. This law is apparently not new. As part of a fact check about adult adoptions in the state, a Tennessee adoption attorney told Fox 13 Memphis that they have been doing them for decades.⁵ 

Conservatorships and Estate Planning

The Tennessee judge overseeing the case has signed an order ending the conservatorship.⁶ However, Oher’s accusations against the Tuohys will still have to play out in court. Among the legal questions to be answered are whether the Tuohys filed an annual report with an accounting of Oher’s finances with the probate court and if they have received money on Oher’s behalf and properly disbursed it to him. 

Conservatorships, illustrated by the Michael Oher and Britney Spears cases, can sometimes lead to family feuds about the intentions of a conservator toward a ward. Taking away somebody’s legal rights to make decisions—and giving those rights to somebody else—is often reserved only for extreme situations, such as when somebody is brain injured, suffers a stroke, is in a coma, or develops dementia. 

In such cases where the court declares that a person is unable to manage their own affairs, a conservator may be appointed. One of the rights the court may give to the conservator is the right to make an estate plan for the conservatee. Depending on the situation and specific authority granted to the conservator, however, a person subject to a conservatorship may still have the capacity to set up their own estate plan. The ward may also later revoke or amend a conservator-drafted estate plan if they can show that they possess testamentary capacity or their rights delegated by the court are restored. 

Given the restrictive nature of a conservatorship and the lengthy court process to establish it, families may want to avoid conservatorship except when there is an imminent need that cannot be addressed through less restrictive means. If estate planning documents like powers of attorney for finances and healthcare are already in place, the family can avoid conservatorship and step in to manage finances or make important decisions the second it becomes necessary. 

Plan Early and Often to Avoid Difficult Choices Later

Failure to plan for all possibilities—even those we would rather not think about—can have unintended consequences. If you neglect estate planning considerations now, you could limit your future options around issues like conservatorships, probate, and inheritance. 

Maybe there is an adult member of the family whom you never legally adopted but would like to adopt now for estate planning purposes. There might be lingering questions about what would happen to you, your spouse, your adult children, or your aging parents if disability or incapacity suddenly struck. Alternatively, it could be the case that a loved one is already showing signs of dementia and may not have the capacity to execute estate planning documents. 

Our estate planning attorneys are in the business of addressing these sensitive questions in a professional and legal manner and creating a plan that leaves nothing to chance. To start planning today, contact our office and schedule a meeting.

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Footnotes

1. Britney Spears: Singer’s Conservatorship Case Explained, BBC (Nov. 12, 2021), https://www.bbc.com/news/world-us-canada-53494405.
2. Sean Neumann, Attorneys Explain What’s “Puzzling” about Michael Oher’s Conservatorship Filing—and What’s Next, People (Aug. 21, 2023), https://people.com/attorneys-explain-what-is-puzzling-about-michael-oher-s-conservatorship-filing-and-what-is-next-7706819.
3. In re Michael Jerome Williams, Jr. a/k/a Michael Jerome Oher, No. C-010333 (Prob. Ct. of Shelby Cnty. Tenn. Aug. 14, 2023), https://www.wkrn.com/wp-content/uploads/sites/73/2023/08/Michael-Oher-Lawsuit.pdf.
4. Adrian Sainz & Teresa M. Walker, Devastated Tuohys Ready to End Conservatorship for Michael Oher, Lawyers Say, AP (Aug. 16, 2023), https://apnews.com/article/nfl-michael-oher-tuohys-blind-side-movie-1bebe2ba9ee2ba60ac806dabab4f6d4c.
5. Katrina Morgan, Yes, It Is Legal to Adopt Someone Over the Age of 18 in Tennessee, 13NewsNow (Aug. 17, 2023), https://www.13newsnow.com/article/news/verify/national-verify/yes-it-is-legal-to-adopt-someone-over-the-age-of-18-in-tennessee/536-2b3ffb4f-c80d-4ea4-9d46-e0db4d914d71.
6. Brynn Gingras & Emma Tucker, Judge Terminates Tuohy Family Conservatorship over Former NFL Player Michael Oher, Depicted in The Blind Side, CNN (Sept. 30, 2023), https://www.cnn.com/2023/09/29/us/michael-oher-tuohy-conservatorship-termination/index.html.

Lifetime gifts are a popular way to reduce estate and inheritance taxes. Currently, only estates worth $12.92 million or more are subject to the federal estate tax. Twelve states and the District of Columbia levy an additional estate or inheritance tax. 

To lower their taxable estate at death, an individual may consider giving gifts to friends and family members. The timing and form of gifts have important estate planning implications, however, as a recent opinion from the United States Court of Appeals for the Third Circuit demonstrates. In that case, the failure to complete gifts in the form of checks prior to the donor’s death cost his estate—and ultimately, his heirs—a significant sum of money. 

Today’s historically high lifetime estate and gift tax provisions are set to expire at the end of 2025, making now a good time to consider gifts. 

Case Summary

William DeMuth, Jr. of Pennsylvania executed a power of attorney (POA) in January 2007, appointing his son Donald DeMuth as his agent. In this capacity, Donald made annual monetary gifts to family members from 2007 to 2014. 

On September 6, 2015, shortly after William was diagnosed with an end-stage medical condition, Donald signed and delivered seven checks to family members worth $464,000. William passed away on September 11, 2015. At the time of his death, just one of the eleven checks had been paid from his account. Ten of the eleven checks, totaling $436,000, had not been paid before William’s death, although three of them were deposited on the day of his death. 

Donald, the executor of William’s estate, excluded the value of all eleven checks from William’s account when reporting the gross estate. The Internal Revenue Service (IRS), however, concluded that the value of the account had been underreported by the $436,000 value of the ten checks and issued a notice of estate tax deficiency in the amount of $179,130. 

Donald filed an appeal with the Tax Court, where the IRS agreed to exclude the three checks deposited on the day William died. This reduced the tax deficiency to $131,774; but the Tax Court held that the funds from the remaining seven checks were part of William’s estate because, under Pennsylvania law, they were not completed gifts prior to his death. 

The estate appealed to the Third Circuit, arguing that the gifts were completed gifts in contemplation of William’s death, and as a result were completed gifts in “causa mortis.” In Pennsylvania, gifts causa mortis differ from gifts inter vivos (i.e., a gift or transfer made during someone’s lifetime). A gift by check deemed to be a gift causa mortis is complete when the check is delivered to the recipient—not when the recipient deposits the check. 

Donald lost the appeal, with the court ruling that the estate did not show William wrote the checks as gifts in causa mortis. “Thus, the value of the seven remaining checks was improperly excluded from the gross estate,” the court concluded.¹ 

Estate Planning Takeaways

The outcome of the seven checks being included in William’s estate is that the estate tax increased by more than $130,000. Then, there were the estate’s legal and court fees paid to litigate the case in a losing effort, on top of nearly eight years of dealing with the courts and the IRS. 

With better planning, the money paid in taxes and court costs could have been passed on to Donald and other heirs. The federal estate tax amount was also likely in addition to taxes owed in Pennsylvania, which imposes an inheritance tax that ranges from 4.5 to 15 percent on eligible transfers.²

Other estate planning takeaways from DeMuth v. Commissioner include the following: 

• If the deathbed gifts made by Donald DeMuth on behalf of his father had been made by a bank check or wire—rather than a personal check—they could have been excluded from the taxable estate because a bank check or wire represents funds already withdrawn from the payer’s account. 
• US Code and Treasury Regulations were relevant to DeMuth v. Commissioner, but state law dictates that property law rules. Relevant to this case, the distinction in Pennsylvania law between gifts inter vivos and gifts causa mortis was critical. 
• Knowing that his father was in poor health, Donald should have ensured that the gift checks were received and deposited before William died. 
• A similar mistake is made when checks are written at the end of the year for the purpose of taking advantage of the annual gift exclusion amount ($17,000 per person in 2023). If the check is not cashed or deposited by the year’s end, it is not considered complete until the following year and therefore is not a gift made in the year the check is written. This could result in a doubling up on gifts, the required filing of a gift tax return, and a reduction in the lifetime exemption amount. 
• State tax laws should also be accounted for in the timing of gifts. Pennsylvania, for example, does not have a gift tax, but all gifts greater than $3,000 made within 12 months of the decedent’s date of death are pulled back into the estate and subject to Pennsylvania inheritance taxes.³ 

Putting Off Estate Planning Can Have Unintended Consequences

DeMuth v. Commissioners is a lesson in what can happen when estate planning is put off to the last minute. Gifting can be an effective strategy for reducing estate and inheritance taxes and leaving more money for heirs—but to maximize the unified estate and gift tax exclusions, gifting should be a long-term strategy. 

Today’s all-time high exclusion levels are set to be cut in half in 2026. With this drastic change on the horizon, families may want to revisit their estate plan now and consider actions such as creating a family trust. An estate plan should also account for expected asset appreciation that could put an estate over the exemption amount come 2026. 

Even if you do not think upcoming changes in the tax law will affect your estate plan, it is still important to review your plan every few years. Changes in your life and the lives of loved ones can make it necessary to modify your will or trust terms or reconsider trustees and executors. Like William DeMuth, you could also face a terminal medical condition that forces you to accelerate certain aspects of your plan. 

Whatever your plan is, do not delay taking the necessary steps to make it official. Putting off estate planning can affect your estate, your heirs, and your legacy. When your plans change, our attorneys are here to help. Call or contact us to schedule an appointment. 

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Footnotes

1. DeMuth v. Comm’r, No. 22-3032 (3d Cir. Jul 10. 2023), https://law.justia.com/cases/federal/appellate-courts/ca3/22-3032/22-3032-2023-07-12.html.
2. Pa. Dep’t of Revenue, Inheritance Tax, https://www.revenue.pa.gov/TaxTypes/InheritanceTax/Pages/default.aspx (last visited Oct. 27, 2023).
3. Inheritance Tax, Art. XXI § 2107(c)(3), https://www.legis.state.pa.us/cfdocs/legis/LI/uconsCheck.cfm?txtType=HTM&yr=1971&sessInd=0&smthLwInd=0&act=002&chpt=21.

Starting on January 1, 2024, under a new law called the Corporate Transparency Act (CTA), owners of certain business entities must file a report with the federal government including details regarding the ownership of their entity. The CTA was enacted to help combat money laundering, financing of terrorism, tax fraud, and other illegal acts. If you have an entity (corporation, limited liability company, family limited partnership, etc.) as part of your existing estate plan, this is important information you will need to know to ensure that you comply with the new law.

What is the Corporate Transparency Act?

The CTA is a law that requires business entities it identifies as reporting companies to disclose certain information about the company and its owners to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Under the CTA, a reporting company is defined as a corporation, limited liability company (LLC), or other similar entity (i) created by filing a document with the secretary of state or a similar office under the laws of a state or Indian tribe or (ii) formed under the laws of a foreign country and registered to do business in the United States.¹ The following information about the reporting company must be included in the report²:

• company’s legal name and any trade names or doing business as (d/b/a) name
• street address of the principal place of business
• jurisdiction where the business was formed
• tax identification number

Additionally, the reporting company must provide the following information to FinCEN about its beneficial owners, defined as persons who hold significant equity (25 percent or more ownership interest) in the reporting company or who exercise substantial control over the reporting company³:

• full legal name 
• date of birth
• current address
• unique identification number from an acceptable identification document 

For reporting companies created on or after January 1, 2024, the same information must be provided about the company’s applicant, who is the person that files the creation documents for the reporting entity. 

Note: Although a trust is not considered to be a reporting company under the CTA, if your trust owns an interest in a reporting company, such as an LLC, certain information about your trust may also have to be disclosed under the CTA because it may be deemed to be a beneficial owner.

Does the CTA impact you?

Many business regulations apply only to large businesses, but the CTA specifically targets smaller entities. If you own a small business, you may be subject to this act unless your business falls under one of the stated exemptions, which primarily apply to industries that are already heavily regulated and have their own reporting requirements. Your business may also be exempt from the reporting requirements if it employs more than 20 full-time employees, filed a return showing more than $5 million in gross receipts or sales, and has a physical office located within the United States.⁴

Complying with the requirements of the CTA is of the utmost importance if you own a business entity or have one as part of your estate plan. You may own a business that might qualify as reporting companies. These include LLCs and family limited partnerships.

Limited Liability Companies

An LLC is a business structure that can own many types of accounts and property. These entities can be used to provide asset protection and probate avoidance.

Asset Protection

Because an LLC is a separate legal entity from its members, the LLC’s creditors can typically recover only business debts from the LLC’s money and property, not the member’s personal accounts or property. Also, if the proper formalities are in place, the member’s personal creditors may not be able to reach the LLC’s accounts and property to satisfy the member’s personal debts. 

Note: In some states, a single-member LLC does not enjoy the same protection from the member’s personal creditors. The rationale of these laws is that your creditors should be able to recover your personal debts through your LLC interests to satisfy their claims because there are no other members that will be negatively impacted by the seizure of money and property owned by the LLC.

Probate Avoidance

Anything that is owned by the LLC—retitled into the name of the LLC during your lifetime, bought by the LLC, or transferred by operation of law at your death—will not go through the

public, costly, and time-consuming probate process. The probate process only transfers

accounts and property that you owned at your death. By using an LLC to own accounts and property, the LLC—not you—owns them. However, if you own the membership interest in your own name, the transfer of the membership interest at your death may still need to go through the probate process.

Family Limited Partnerships

A family limited partnership (FLP) is an entity owned by two or more family members, created to hold the accounts, properties, or businesses that were contributed by one or more of the family members. An FLP has at least one general partner who is responsible for the management of the partnership, has unlimited liability, and is compensated by the partnership for their work according to the partnership agreement. An FLP also has one or more limited partners who are permitted to vote on the partnership agreement but are not authorized to manage the partnership. The limited partners receive the income and profits of the partnership but have no personal liability for the partnership’s debts or obligations. 

Asset Protection

This estate planning strategy is useful because an FLP can help protect accounts, properties, and businesses held by the entity from your and your family’s creditors, because those items are not owned by you and your family as individuals but instead are owned by the entity. If a creditor obtains a judgment against you or your family for a claim not related to the FLP, it is more difficult for the creditor to access anything that the FLP owns to satisfy that claim. 

Tax Planning

Also, because of its lack of control and restrictions on selling a partnership interest, the value

of a limited partnership interest that you give to a family member can be discounted, allowing you to maximize your annual gift tax exclusion and lifetime estate and gift tax exemptions.

What do you have to do to comply with the CTA?

In order to comply with the act, you should gather the required information for all reporting companies you own and all other beneficial owners. For entities created before January 1, 2024, submit the initial reports for each reporting company by January 1, 2025. The current requirement for reporting companies that are created after January 1, 2024, is that the initial report is due within 30 days of the entity’s creation. Please note, however, that a new rule has recently been proposed that would temporarily extend this deadline from 30 to 90 days for business entities formed during 2024. If implemented, this rule would allow additional time to understand and comply with the new requirements.

Having a business entity as part of your estate plan can be an excellent tool depending on your unique situation. If you currently have one of these entities or are considering forming one, you will need to understand if this new law applies to you. Please reach out to us if you have questions.

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Footnotes

1. 31 U.S.C. § 5336(a)(11).
2. 31 C.F.R. § 1010.380(b)(1)(i).
3. 31 U.S.C. § 5336(b)(2)(A).
4. Id. § 5336(a)(11)(B)(xxi).

With the increased coverage of artificial intelligence (AI) and all of the applications it can have in our everyday lives, some people may wonder whether an AI program can create an estate plan for them. While AI may be able to generate basic estate planning documents, including wills and trusts, there is no guarantee that they will be valid and enforceable. Providing accurate information and executing the documents in compliance with your state’s laws is critical. Otherwise, your documents will not work as intended. Most people do not have the legal knowledge necessary to determine what clauses and language should be included in a will or trust to accomplish estate planning goals. They also are not familiar with state laws or how to comply with them. This is why people rely on experienced attorneys to prepare the necessary documents to carry out their wishes.

Some state laws are complex and hard to understand, and you may not know enough specifics to offer the correct information about your situation or verify that AI has properly generated or created your will or trust. Additionally, your final documents may contain wording, formatting, and grammatical errors that make them unenforceable. To review them carefully, you have to know what to look for, which often requires that you possess a certain level of legal education and knowledge. The AI program does not understand your situation and will not help you solve a complex legal issue unless you can provide additional information. Even then, you should be cautious and ask yourself the following questions:

• How well do I understand my options for protecting my money, property, family, or business if I have a medical emergency and after death?
• Do I have a complex financial situation with large amounts of property, income, or debt?
• Is my family structure complicated (family dynamics leading to questions about property or disinheritance)?
• Am I undecided about my wishes (how to divide my money and property or what to include in an advance directive)?

Ease and Convenience versus Legal Expertise

Online estate planning programs that use artificial intelligence are designed to streamline or automate the process, making it more accessible and cost-effective for those on a tight budget. While they may provide convenience and accessibility, they provide limited guidance, and they do not offer the same level of customization, legal expertise, and personalization that an experienced estate planning attorney can provide.

You must carefully consider your needs and circumstances before choosing a reputable online estate planning program, such as one of the following:

• Quicken WillMaker & Trust
• Trust & Will
• LegalZoom
• Rocket Lawyer
• U.S. Legal Wills

Each program requires you to answer a series of questions in an attempt to tailor various legal documents, such as wills, trusts, advance directives, powers of attorney, and other estate planning documents, based on the information you provide. You may have trouble providing accurate and specific answers for several reasons: 

• Legal knowledge. Crafting precise answers to estate planning questions requires familiarity with legal terms, their context, and how they should be structured in a legal document.
• Clear intentions. Vague or ambiguous answers can lead to inaccurate, incorrect, or inadequate documents for your situation.
• Complex legal requirements. Legal documents must adhere to specific formatting, contain specific language, and comply with legal requirements that vary by state and are not always straightforward.
• Legal consequences. Certain instructions or clauses within a document require predicting and avoiding potential legal issues; being unaware of the risks has adverse legal consequences.
• Omission and oversight. You may overlook critical details or legal considerations necessary to achieve your estate planning goals, resulting in incomplete or ineffective documents. 

If you do not understand which estate planning strategies should be implemented to address your unique situation, how can you ensure that the software is creating the appropriate documents for your needs? Legal professionals have the necessary expertise and training to ensure that your concerns are addressed and can implement an adequate estate plan so that your wishes can be legally carried out.

Situations Requiring More Than a Basic Will

While a basic online will may be a viable option for some, an experienced attorney will be invaluable in the following circumstances.

Blended Families

If you have remarried and have children from a previous relationship, you must create a will or trust that ensures that your money and property are distributed in a way that considers both your new spouse and children from the prior relationship. You may have to make some complex decisions, which may be difficult to evaluate without legal advice.

Special Needs Planning

If you are a family with a dependent child or an adult with special needs, you may want to establish a special needs trust to provide for the ongoing care and financial support of your loved one while still maintaining their eligibility for government assistance programs. This requires a custom strategy to consider your options and ensure that your trust is legally compliant in your state to accomplish your goals.

Estate Tax Planning

If you are an individual with a large estate potentially subject to estate taxes, you will want to understand the latest tax-saving strategies, such as gifting, trusts, or other legal tools to minimize estate tax liabilities and preserve a greater legacy for heirs.

Business Succession

If you are a business owner looking to pass your business on to the next generation or sell it upon retirement, you will need a comprehensive plan that effectively addresses the shift in ownership, management, and business property for a smooth and successful transition.

Multistate or International Property and Heirs

If you have real property in different states, heirs may be subject to estate administration processes across multiple jurisdictions, which will require consideration of different state laws and potential tax implications. Having property and heirs in other countries creates even more complexity.

Asset Protection

If you have concerns about potential creditors coming after your hard-earned money while you are alive or creditors or ex-spouses taking the inheritance of your beneficiaries (spouse, children, loved ones, etc.) after your death, you will need an estate plan that has been specifically crafted to protect your life savings from potential creditor claims and legal challenges. This plan will need to contain specialized provisions and must be created in a manner that complies with the law to ensure that it is legally valid and not a fraudulent transfer. A well versed lawyer can also guide you on how to set up lifetime asset protected trusts for your loved ones that will protect their inheritance from creditors and divorce, while still allowing use and access to the inherited assets.

Charitable Planning

If you want to include charitable giving as part of your estate plan, it may require establishing charitable trusts, foundations, or other organizations to support specific philanthropic causes while maximizing tax benefits. Each organization will have rules regarding gifts that you must follow to avoid negative consequences.

An estate planning attorney can address the unique needs and goals of you and your family. They will educate you about your situation and allow you to make informed decisions.

Errors That Make Online Documents Unenforceable 

Estate planning attorneys help you avoid the following common mistakes in online documents that could make them unenforceable, require a court to interpret them, or lead to fighting among your loved ones:

• Ambiguity in wording. Ambiguity can lead to disputes and legal battles among potential heirs. Example: a will stating “I leave my property to my children” without specifying which children by name
• Improper use of legal terms. Misusing legal terms like property, beneficiary, or per stirpes can lead to confusion or incorrect interpretation of your intent.
• Incorrect names or identities. Misspelling the full name of a beneficiary or heir or using a previous name after a legal name change makes it challenging to identify the intended recipient.
• Inconsistent terminology. Using different terms to refer to the same asset (e.g., house, residence, property) may create confusion about what is being inherited.
• Improper witnessing and notarization. Failing to properly witness or notarize a will and other legal documents according to state laws can render them invalid and unenforceable.
• Lack of clarity in distribution. Vague instructions regarding who will receive your accounts and property or how they will receive them, such as “divide my estate fairly among my children,” may cause disputes if there is no clear definition of terms like fairly.
• Failure to address contingencies. Not accounting for contingencies, such as what to do if a beneficiary predeceases you, can leave money and property without designated recipients, subjecting it to your state law.
• Inadequate powers of attorney. Failing to grant adequate powers of attorney, such as financial or medical decision-making authority, creates complications in managing affairs during incapacity and with advance directives at the end of your life. This could require your loved ones to get a court involved, which is what the powers of attorney were meant to avoid. Also, most basic powers of attorney fail to cover the ability of your agent to engage in Medicaid asset protection planning if you need long-term care in a nursing facility.
• Conflicting instructions. Providing contradictory instructions within a single document or across several documents leads to uncertainty about your intentions.

A Cheap Insta-Will May Defeat the Point of Having a Will

Preparing a Will and other estate planning documents is a complicated, emotional, and time-consuming process. The ultimate point of a proper Will and estate plan is to protect you, your loved ones, and your assets, and reduce stress. If an AI generated Will is deemed unenforceable it will cause stress, unneeded expenses, and almost guarantee your wishes will NOT be carried out. Relying on a shortcut like AI may make things easier and cheaper for you, but if you (or the AI) make a mistake it is your loved ones who may pay the price.

There are many considerations and potential scenarios that should be included in your estate plan. Online legal programs cannot adequately address unique situations or additional estate planning details, exposing you to unnecessary risks.

Experienced estate planning attorneys play a vital role in designing and reviewing state-specific forms that address your family’s needs as well as ensuring that your wishes are met while preventing disputes in the estate administration process.

If you wish to use artificial intelligence estate planning programs, they can be used as an outline to begin the process. Take this information to an estate planning attorney to review and address the many situations you may not have considered regarding your unique family dynamics and financial circumstances. Legal experience and expertise offer valuable guidance and education. If you are ready to create a legally enforceable, customized estate plan, give our office a call to schedule an appointment.