Category: Uncategorized

5 Things to Talk About with Your Family 

You intend to pass along your hard-earned money and property through your estate plan, but what about your wisdom? Ensuring that you successfully pass all of this along may call for a family meeting to discuss your finances, your legacy, and your core principles. 

Most families lead busy lives, with many relatives seeing one another face-to-face only at a handful of major holidays throughout the year. The estate planning process is a perfect opportunity to bring everyone together outside of those scheduled occasions—even if a child or grandchild has to attend via video chat. 

Working with your estate planning attorney in collaboration with any other advisors you have in your corner can make this legacy-enriching process seamless and even enjoyable. However, bringing your family into the conversation is better yet, as they will get to learn new things about you and share stories and memories of their own. Here are a few topics you may want to address during your family meeting:

1. Your Rich Life Story

You may think it has all been said before, but have you considered recording your personal life narrative? These recordings will be treasured by your loved ones while you are still here and long after you have passed away. To customize these recordings, have your family members ask you about your fondest memories and greatest challenges. You will be creating a sort of time capsule that contains the uniqueness of your personality and the experiences that shaped you into the person you are today. Perhaps most importantly, you will be able to share the valuable lessons you have learned. Your family will be better for it. 

2. How You Would Like Your Wishes Honored

Estate planning involves weighty decisions regarding your long-term care and who will be responsible for managing your financial and medical affairs in the event you cannot manage them for yourself, along with how your money and property should be passed on after your death. Although these are not the sunniest topics, letting your family know why you made your particular choices is important. It will allow your loved ones to understand firsthand the instructions included in your estate plan when the need to use it arises. 

3. Your Family Tree

Your loved ones may be curious about more than your life story. Take time to go over your family tree and answer questions the younger members of your family may have about your shared heritage. A who’s who on paper or in a digital format is an excellent gift to your loved ones that they will be able to reference and build upon in the years to come. 

4. Significant Heirlooms

Almost every family has heirlooms, each of which tells a story. It is common for estate plans to contain physical objects that matter dearly to their owners, such as antique furniture, garments, jewelry, hobby collections, and memorabilia. Keeping the story of an object alive and memorializing it in writing or through video may be more important than transferring its monetary value to the next generation. 

5. Your Core Values

Your estate plan can be customized to include specific language that incorporates your values while leaving room for your beneficiaries to grow and explore life on their own terms. Educational, incentive, and charitable trusts are a few tools you may use to express your values through your estate plan.

You are much more than the wealth you have accumulated in your life. Likewise, your estate plan is about more than your financial worth. After all, wisdom and life experiences passed down from generation to generation can amount to something far greater than numbers on paper.

We would love to help you build your estate plan to include a balanced representation of who you are and what you believe. We are here to coach you through the process of going over these topics with your family and weaving them into your estate planning tools. Call us today to set up a time, and we will get started right away.

If you are reading this, you need an estate plan. Why? The short answer is that everyone age 18 and older needs an estate plan. It does not matter whether you are old or young, have built up considerable wealth or are just entering adulthood—you need a written plan to control what happens to the things you own and to protect yourself and those you love.  

The Key Takeaways

• Every adult, regardless of their age or the amount of wealth they have accumulated, needs both a lifetime incapacity plan (a plan for if they are alive but are unable to manage their own affairs) and an after-death estate plan.
• Planning for incapacity keeps you in control of who will make decisions for you if you are unable to and allows your trusted loved ones to care for you without court interference—and without the potential loss of control over important decisions or expenditures for your benefit and the added expense of a guardianship or conservatorship proceeding.
• Every adult needs up-to-date healthcare directives to communicate their end-of-life wishes if they are unable to communicate them themselves.
• You need to leave written instructions to ensure that you maintain control over who is in charge of when and how your assets will be distributed.
• Every adult needs the counseling and assistance of an experienced estate planning attorney to ensure that they are implementing a legally enforceable and comprehensive plan for the future.

What Is an Estate Plan?

Planning for Death

Your estate consists of everything you own—including your car, home, bank accounts, investments, life insurance, furniture, and personal belongings. No matter the size of your estate, you cannot take it with you when you die, and you probably want certain people to receive certain things you own. 

To ensure that your wishes are carried out, you need to provide written instructions stating who will receive your assets and belongings, what you want them to receive, and when they are to receive it—that is the essence of an estate plan. If you have young children, you also need to name someone to raise them in your place and manage their inheritance in the event that both parents are unable to do so.

Lifetime Incapacity Planning

A properly prepared estate plan will also contain instructions regarding your care (and the management of your assets) if you become unable to manage your affairs (sometimes referred to as being incapacitated) even for a short time due to illness or injury. Without the proper tools in place, your family will have to ask the court to appoint someone to manage your finances and medical care and for permission to use your assets to care for you. When relying on the court to make these determinations, the process is outside of your and your loved ones’ control, takes time, and can incur significant legal fees and costs, making an already stressful situation even more difficult for your loved ones. Depending on your family dynamic, this process can also be contentious if your family disagrees about who should manage your affairs or what the proper course of action for your care should be. Not only does this infighting threaten family harmony, it may also become a matter of public record, as most documents related to these types of proceedings will be available to anyone who requests them and pays a fee.

It might surprise you, but having a plan in place can often have a more significant impact on and benefit for families with modest means because they may be unable to afford the court costs and legal fees associated with the court process known as probate. Here is an example:

Sam and Meg had two young children together. Sam died in a car accident. Because he had no estate plan, the laws in his state divided his estate into thirds: one-third to Meg and one-third to each of their children. His estate included his one-half interest in their home, an inheritance he received from his grandfather (he was using this money to help support the family while looking for a higher-paying job), and a life insurance policy (but he failed to complete the beneficiary designation). Meg, a stay-at-home mom, was forced to go back to work after Sam’s death. The court set up conservatorships (in some states called a guardianship or guardianship of the estate) for each child to manage their inheritances, which required ongoing court costs, including accounting, guardianship, and attorney’s fees. When the children turned 18, they each received what was left of their inheritances in one lump sum, and there was not enough to cover their first year of college tuition. 

What You Need to Know

Do not try to create an estate plan without the assistance of a professional. An experienced estate planning attorney who is familiar with the laws in your state can guide you in making difficult decisions such as who will raise your children and manage your affairs if you cannot. An experienced attorney will also know how to craft the appropriate estate planning tools so that your wishes are carried out.

We Are Here to Help

If you are ready to take control of your life and the legacy you leave behind for your loved ones, call or email our office now to schedule an estate planning consultation appointment. We make tough topics manageable to discuss. We can also craft a plan that addresses what you value most and protects you and those you care about.

Many believe that once they set up and fund a revocable living trust, property held in the trust will completely avoid federal estate taxes after they die. In reality, a living trust does not provide any unique estate tax avoidance strategies. 

The primary mechanisms for reducing estate taxes—the unlimited marital deduction and the charitable deduction—apply whether money or property (sometimes referred to generally as assets) are held in a trust or held directly by an individual. The unlimited marital deduction allows the transfer of assets to a US citizen surviving spouse free from estate tax, while the charitable deduction permits tax-free transfers to qualifying charitable organizations. These deductions are not exclusive to living trusts but can be incorporated into a trust-based estate plan to ensure that assets are distributed tax-efficiently.

Before delving into estate tax planning, it is important to understand that estate taxes come into play only when someone gifts assets during their lifetime and at their death that combine to exceed a certain threshold value. This threshold is called the federal lifetime exclusion amount and is currently $13.99 million for 2025. Unless the trustmaker and the trustmaker’s revocable living trust have combined assets exceeding this amount, there will likely be no federal estate tax due at a trustmaker’s death. However, for purposes of this article, we will assume that the trustmaker’s assets owned individually and in the revocable trust are valued at more than the lifetime exclusion amount.

Caution: If you live in a state with a state estate tax, you need to work with an experienced estate planning attorney to ensure that these concerns are addressed appropriately, as state estate tax thresholds are often lower than the federal threshold and may require additional planning.

Single Trustmakers and Estate Taxes

Of the two planning strategies mentioned above—the unlimited marital deduction and the charitable deduction—only the charitable deduction tool is available to single individuals. With this tool, all assets in a person’s trust left to qualifying charitable organizations will be removed from the trustmaker’s taxable estate. On the other hand, the assets left to noncharitable beneficiaries will likely be exposed to federal estate tax liability if the remaining assets exceed the current federal exemption amount. In other words, if your beneficiaries are your children, your brothers and sisters, your nieces and nephews, your best friend, another trust, or even a for-profit business, then the property they inherit through the trust could be subject to federal estate tax depending on the size of your remaining estate. Otherwise, any property distributed to qualifying charitable organizations through the trust passes free from federal estate tax.

Married Trustmakers and Estate Taxes

Married couples have both the charitable and unlimited marital deductions available to them. The charitable deduction functions the same way as described above for the single individual. With the unlimited marital deduction, all qualifying transfers of assets held in your trust that pass to your US citizen spouse after your death will likely not be subject to estate taxes due to the unlimited marital deduction. However, to be deemed a qualifying transfer, the assets must either pass to the spouse outright or be held and administered in a special type of trust for your spouse’s benefit.

On the other hand, if you are married and you create and fund a revocable living trust and name both your spouse and your children as current beneficiaries after you die, the portion of the trust passing to your spouse (utilizing the unlimited marital deduction) will likely not be subject to federal estate tax, and the portion passing to your children may be subject to estate tax (depending on the value of the assets and the federal lifetime exclusion amount available to you when you pass). If you include one or more qualifying charitable organizations as beneficiaries, the portion passing to the charities will likely not be subject to estate tax.

Do You Need a Revocable Living Trust?

If a revocable living trust does nothing to reduce your federal estate tax bill that cannot be done by holding the assets in your own name, why should you consider setting one up? There are at least three good reasons:

1. To avoid probate. Assets held in your revocable living trust at the time of your death will avoid the court proceeding known as probate. Depending on your state of residence at the time of your death, this could save a great deal of time and thousands of dollars in legal fees and court costs.
2. To plan for mental incapacity. If you become unable to manage your affairs while you are still alive, the successor trustee you name in your revocable living trust will be able to manage trust assets for your benefit without the need for court involvement. Like the benefit of avoiding probate discussed above, removing the need for a court-supervised guardianship or conservatorship could save time and thousands of dollars in legal fees and court costs, depending on your state of residence.
3. To keep your final wishes private. A revocable living trust is a private agreement that remains private after you die. In most cases, the only people who will need to know the terms of the trust and what will occur during administration are the trustee and your named beneficiaries. Usually, this document is not required to be filed with the court, which will prevent strangers from knowing what you own and how you want what you own to be distributed and managed.

Final Thoughts on Revocable Living Trusts and Estate Taxes

For many people, a revocable living trust is the ideal way to organize their final affairs. While the estate tax avoidance tools used by a living trust are not exclusive to such trusts, they can be incorporated into a trust-based estate plan to capture the general benefits that living trusts offer and provide equally important additional benefits unrelated to tax savings.

If you are interested in learning more about a revocable living trust and its benefits for you and your loved ones, call us.

Americans often prefer to stay busy. When we are not working, many of us turn to hobbies to keep us engaged and productive. We spend hours each day on our hobbies and leisure activities. Over the course of a lifetime, this time adds up to a significant investment. 

Our hobbies, passion projects, and pursuits may also represent large investments of money, resources, and emotions. Therefore, they should often be included in an estate plan. 

Whether you are a collector of classic cars or comic books, an artist or craftsperson with a studio full of valuable equipment, a musician who owns prized instruments, or someone who never outgrew their vintage toys and board games, estate planning helps to preserve your cherished items and make them part of your legacy. 

Hobbies Growing in Importance to Americans

We define ourselves largely by how we spend our time. For many Americans, wasted time amounts to wasted potential. 

According to the US Bureau of Labor Statistics 2023 Time Use Survey, Americans spend about five hours a day on leisure activities and hobbies.¹ Another survey of Americans taken during the COVID-19 pandemic found that 6 in 10 had adopted a new hobby as they were left with more spare time and nowhere to go.² Common new hobbies ranged from baking or cooking to reading, arts and crafts, and photography. 

While some of our pandemic pastimes have already fallen by the wayside, others are likely to persist because there is an inherent payoff when we gain new knowledge or learn a new skill and continue to improve at it.

That payoff may be more than just the personal satisfaction of mastering a skill. Nearly half of those who took up a new pandemic hobby turned it into a side hustle that earned them extra money.³ And an additional one-quarter of those with new hobbies said they hoped to turn their new hobby into a form of income in the future.⁴ 

When Passion Turns Profitable 

Happiness may be priceless, but many of the things that make us happy have a price tag attached to them. 

Maybe you did not start a hobby or collection to make money. Tales abound about boyhood baseball card collections and antiquing finds that turned out to be worth millions of dollars. Coins, comic books, stamps, books, toys, action figures, records, cars, dolls, furniture, and even vintage bakeware have commanded impressive prices that, in some cases, belie their appearance and original purpose. 

Other hobbyists and collectors approach their passion with pecuniary interests squarely in mind. Collecting sports memorabilia, for example, has exploded into a billion-dollar industry akin to the fine-art market. In 2023, the collectibles market as a whole, driven by online marketplaces and digital auctions, was estimated at nearly $500 billion and growing.⁵ 

For others, a private passion can turn into a life’s work, like it did for Jim Irsay, the NFL’s Indianapolis Colts owner, or Joel Platt, a renowned sports memorabilia collector. These men have gone to great lengths to preserve their collections for posterity. Irsay takes his diverse collections of historic artifacts, featuring items from sports, pop culture, literature, and American history, on the road and shows them off for free.⁶ Platt’s collection is currently housed in a showcase museum in Boca Raton, Florida.⁷ 

Like collectors, many of the most famous artists started out pursuing a passion they never expected to get rich from, only to have their works later sold for a small fortune. 

While he was alive, Vincent van Gogh sold a single painting in 1890 for a meager 400 francs,⁸ or about $2,670 in today’s US dollars. In 1990, one of his paintings sold for $83 million at auction.⁹ 

Then there’s fashion icon Coco Chanel, whose inspiration to design clothes for women out of practical necessity launched one of the world’s best-known clothing brands. Her first fashion success came from a dress she made from an old jersey.¹⁰ Today, the Chanel brand is valued at around $20 billion.¹¹ 

Protecting and Preserving Your Passion

Most of us may not reach the heights of Van Gogh, Irsay, Platt, or Chanel in our hobbyist or artistic pursuits. However, that does not mean our passions are without value and that we should not take steps to ensure our sweat equity is an investment in our legacy. 

Estate planning is essential not only for financial and family considerations but also for those with serious, lifelong projects. The things that define you in life can continue to define you in death when you plan ahead properly. Here are some steps you can take now so that your loved ones know exactly what to do with the things that matter most to you. 

• Inventory and document. Start by creating a detailed inventory of the items in your collection or related to your hobby. The inventory should include descriptions, photographs, certificates of authenticity, provenance (ownership history), conditions, insurance information, care instructions, and other documentation that can help an estate executor or trustee manage and distribute them. Have physical and digital copies of your inventory and related documents stored in safe locations (e.g., a safe deposit box or encrypted cloud storage) that you have ensured key loved ones can access after your passing. Review and update your inventory regularly. A good time to do so is when you update your estate plan every few years or when significant changes occur in your or your family’s life, or to your financial situation or your collection. 
• Get a professional appraisal. Obtain professional appraisals to find out the current market value of what you own, including the final product and the equipment and raw materials used to make it. For example, if you have a shop where you make furniture, get the furniture and the woodworking machinery appraised. Hobbyists might have vintage or rare supplies and materials, such as reclaimed wood, which can also be valuable. 
• Talk to your family. A common estate planning mistake is to put everything in writing but never discuss your plans with the people who will be affected by them. For example, your loved ones might be aware that you wrote in your spare time or have a large book collection, but do they appreciate how much these works mean to you? Do they know what inspired your love of the written word, your personal journey with it, and how it helped to define you? Unless you share these details with others, the things that were the most personally meaningful to you might be regarded by your loved ones as just more stuff they must go through when you die. 
• Decide how to distribute. Do you want to give what you have in its entirety to a single person, divide it among multiple loved ones, donate it to charity, or sell it, or do you prefer some combination of these options? Your decision will be based on the items themselves and whether there is anybody who might want them. A family member or friend with the same interests might be a good fit. A loved one who does not want them might end up selling them anyway, so you can sell them now, make plans for your estate or a dealer to sell them and distribute the proceeds following your death, or make a lifetime gift (or series of gifts). 
• Put your wishes in an estate plan. All your conversations, preparations, and evaluations could be for naught if you do not clearly and legally describe your wishes in an estate plan. Suppose that you have your treasured comic book collection professionally appraised and documented. You have this information stored in a locked box, and you regularly update it. There is only one problem: you never formally documented your plan for your collection in a will or trust. You may have casually discussed your plans with family, but absent a formal estate plan, there is no guarantee it will come to fruition. 

Remember that you can get creative with your estate plan. Although you may never get to display your artwork at a museum, for instance, you could arrange to have a private viewing of your art or collectibles for friends and family in addition to, or instead of, a traditional funeral or celebration of life arrangement. 

Celebrate your life’s work however you want—just make sure to plan ahead and get everything in writing.

A Serious Passion Deserves Serious Planning

The things we create and collect form a core part of our identity. They mark our existence long after we are gone. You cannot take it with you. However, you can make it a part of your legacy with an estate plan. 

Only a written estate plan makes your wishes legally binding. Do not be the person whose family finds a valuable collection in a dusty corner of the attic and does not know what to do with it, fights over who should receive what, or overlooks its importance and throws it away or donates it. 

You put serious time into your hobby or collection. Keep the passion alive and inspire the next generation with an estate plan that gives your life’s work the treatment it deserves. Talk to one of our estate planning attorneys today. 

1. American Time Use Survey News Release, U.S. Bureau of Labor Statistics (June 27, 2024), https://www.bls.gov/news.release/atus.htm#:~:text=Leisure%20and%20Sports%20Activities%20in,%2C%20compared%20with%204.8%20hours. ↩︎
2. Matt Schulz, 53% Who Took on a Pandemic Hobby Went Into Credit Card Debt as a Result, LendingTree (April 6, 2021), https://www.lendingtree.com/credit-cards/study/quarantine-hobbies-credit-card-debt. ↩︎
3. Id. ↩︎
4. Id. ↩︎
5. Collectibles Market in 2024 was estimated at $492.6 Billion, Annual Growth 9.2%: Research by Market Decipher, Yahoo!Finance (May 9, 2024), https://finance.yahoo.com/news/collectibles-market-2024-estimated-492-103200953.html. ↩︎
6. Stephen Holder, Why Colts owner Jim Irsay refused over $1B for his collection, ESPN (July 14, 2023), https://www.espn.com/nfl/story/_/id/37969744/why-colts-owner-jim-irsay-refused-1b-collection. ↩︎
7. Ana Veciana-Suarez, Joel Platt and his Dream Collection, Intelligent Collector, https://intelligentcollector.com/joel-platt-and-his-dream-collection (last visited Dec. 18, 2024). ↩︎
8. Brian Boucher, Art Bites: The Only Known Painting Van Gogh Sold During His Lifetime, Artnet (Feb. 13, 2024), https://news.artnet.com/art-world/story-only-known-painting-van-gogh-sold-2432275#:~:text=Belgian%20painter%20Anna%20Boch%2C%20a,either%20350%20or%20400%20francs. ↩︎
9. Martin Bailey, The ten most expensive Vincent van Gogh paintings, The Art Newspaper (April 29, 2022), https://www.theartnewspaper.com/2022/04/29/the-ten-most-expensive-van-gogh-paintings. ↩︎
10. Coco Chanel, Biography (Dec. 10, 2021), https://www.biography.com/history-culture/coco-chanel. ↩︎
11. Tugba Sabanoglu, Brand value of Chanel worldwide from 2017 to 2023 (in million U.S. dollars), Statista (Feb. 22, 2024), https://www.statista.com/statistics/1010860/chanel-brand-value-worldwide/#:~:text=In%202023%2C%20Chanel’s%20worldwide%20brand,the%20most%20recently%20reported%20period. ↩︎

Americans are, quite literally, getting buried in debt, with nearly half expecting to pass away with outstanding debts.¹ 

As a general rule, a person’s debts do not go away when they die. Some types of debt, such as federal student loans, are typically forgiven upon the debtor’s death, but private loans and cosigned accounts may still be owed after the debtor has passed away. State laws also play a factor in the postdeath debt settlement process. 

While nearly half of Americans think they will pass on their debts when they die, you can take proactive steps now to protect your loved ones from inheriting or becoming responsible for your debts. If you are an estate’s executor/personal representative or have been contacted by a debt collector about a deceased family member’s debt, you should understand your rights and obligations. 

One Nation, Under Debt

Debt is as old as civilization itself. Lending at interest can be traced back to ancient Mesopotamia and the use of promissory notes to facilitate trade. The United States has carried debt since its inception, borrowing money from domestic investors and the French government to fund the Revolutionary War.² 

Total consumer debt eclipsed $17 trillion in 2023, up from $15 trillion in 2021, according to credit reporting agency Experian.³ The largest and most common debts include 

• mortgages ($11.5 trillion in 2023),
• auto loans ($1.51 trillion),
• student loans ($1.47 trillion),
• credit cards ($1.07 trillion), and
• personal loans ($571 billion).⁴

The total average individual debt balance in 2023 was $104,215, up from $101,915 in 2022 and $96,371 in 2021.⁵ 

According to Debt.org, 73 percent of Americans die owing money.⁶ The average amount of debt they die with is nearly $62,000.⁷ 

What Happens to Your Debt when You Die

You are probably familiar with the expression “buried in debt.” It might hit close to home if you are like most Americans struggling to pay off existing loan balances. However, do you know what happens to your debt when you die? 

The answer depends on factors that include the type of debt and the state where you live. In most cases and most states, your loved ones are not stuck with your unpaid bills because creditors are paid only from the assets (e.g., a home, car, bank accounts, investment accounts) that are (i) part of your probate estate and go through a probate court or (ii) in your revocable living trust. 

If you do not leave behind enough assets in your probate estate and living trust to fully cover the debts owed, creditors may have to settle for what is available. There are some exceptions to the idea that surviving family members and other heirs are not on the hook for the debt, including 

• a person who cosigns on a loan;
• the spouse of a deceased person who lives in a state with community property laws (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin); and
• the spouse of a deceased person who lives in a state that requires a surviving spouse to pay certain healthcare expenses and other kinds of debt.

The rules governing when a surviving spouse is responsible for paying unpaid medical bills are complex and vary by state. It is important to work with an experienced estate or trust administration attorney to ensure that your affairs are wound up correctly.

Surviving spouses and adult children are frequently contacted by debt collectors attempting to collect on bills for the medical care of their deceased loved one, according to the Consumer Financial Protection Bureau. However, unless the survivor also agrees to the medical debt or is responsible under state law, they are generally not liable for the debt. 

Not All Debts Go Away at Death

Debts not inherited by a specific individual under the exceptions described above do not just disappear, except for debts that are dischargeable by death. 

For example, federal student loans, including Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Consolidation Loans, Federal Family Education Loans, and Federal Perkins Loans, are usually discharged when the borrower dies, as long as the loan servicer receives proof of death.⁸ 

Private student loans are a different story. Some lenders of private (i.e., nonfederal) student loans offer a death discharge, although it is not the norm. They may come after the loan’s cosigner (if there is one) or the estate for repayment of the outstanding balance on the loan. 

Secured versus Unsecured Debt

Determining how and when to pay a debt after the debtor has passed away and who or what may owe the debt can depend on whether the debt is secured or unsecured. 

• Secured debt is backed by collateral (a tangible asset the lender can repossess or sell if the borrower does not pay back the debt). Common examples of secured debt are mortgages (secured by the real property) and car loans (secured by the vehicle). Secured debts are typically paid off before unsecured debts when a probate estate is settled during the probate process. If estate assets are insufficient to cover the secured debt, the lender can seize the collateral to recoup their losses. 

In rare cases and under select jurisdictions, legal protections may be available for surviving spouses who wish to remain in a primary residence subject to a creditor’s claim. These protections may delay or prevent foreclosure if the spouse cannot pay off the mortgage in full.

• Unsecured debt is not backed by collateral (that is, there is no specific asset backing the debt). Unsecured debt includes credit card debt and personal loans. 

Unsecured creditors have lower priority than secured creditors in probate. If the probate estate has enough funds, unsecured debts are paid off before any inheritance is distributed. However, if the estate lacks sufficient funds to satisfy all its debts, unsecured creditors are typically last in line for repayment and may not receive the full amount they are owed.

Funeral expenses also take priority over some creditor claims. Any state and federal taxes that the decedent owes, as well as probate estate administration expenses incurred during probate (e.g., legal and accounting fees), may also supersede creditors. 

Knowing which debts have priority over others in probate is the responsibility of the estate’s executor/personal representative. If the individual assigned this role in an estate plan does not follow state probate laws, they could be personally responsible for debts that should have been paid but were not because the executor did not pay creditors in the correct order.

How to Plan for Debt and Leave More Money for Your Loved Ones

“You can’t take it with you” applies to what you owe every bit as much as what you own. 

Your outstanding debt could create potential complications for loved ones. Your family may not personally get stuck with your unpaid bills; however, if you do not pay off your debts before you pass away, they may be forced to deal with debt collectors harassing or contacting them. Worse still, there may not be any money or property left to distribute to your loved ones in probate court or through the trust after everything has been liquidated to pay creditors. Here are some protections that your loved ones are afforded:

• State and federal law limits whom debt collectors are authorized to contact—and how they can contact them—to discuss outstanding debts. Spouses and other survivors should not automatically assume that they have to pay and should delay any conversation regarding payments of outstanding debts until they have discussed the specific circumstances with a lawyer. Collectors who go too far or provide misleading information can face potential consequences.
• When a beneficiary inherits a home, they also take possession of the home subject to any outstanding mortgage and are ultimately responsible for that debt. Anyone inheriting a home or other significant asset, such as a vehicle, with an outstanding loan balance must know their obligations to the lender. They may have to sell the house to pay off the mortgage or apply to transfer the mortgage to their name. In addition, individuals have the right to refuse a gift from an estate if they do not want or cannot afford it. In some cases, federal law will allow a decedent’s heirs to assume the mortgage on a property without triggering a due-on-sale clause, ensuring that the loan remains in place after the owner’s death.
• Every state has different laws and procedures surrounding debt repayment. Things can quickly get complicated, so it is best to work with a local estate or trust administration lawyer if there are any concerns about how unresolved debts could affect the surviving family.

Estate planning is about the legacy that you leave behind. If that legacy includes debt, an estate planning attorney can offer advice for getting it under control during your lifetime or help your family deal with the consequences of your debts after death. Call us if you need assistance planning for your debt or winding up a loved one’s affairs.

1. Myles Ma, SPFC, 46% of Americans expect to pass on debt to their loved ones when they die, Policygenius (Jan. 9, 2024), https://www.policygenius.com/life-insurance/2024-financial-planning-survey-passing-on-debt-after-death. ↩︎
2. FiscalData, https://fiscaldata.treasury.gov/americas-finance-guide/national-debt. ↩︎
3. Chris Horymski, Experian Study: Average U.S. Consumer Debt and Statistics, Experian (Feb. 14, 2024), https://www.experian.com/blogs/ask-experian/research/consumer-debt-study/#s3. ↩︎
4. Id. ↩︎
5. Id. ↩︎
6. Bill Fay, What Happens When People Die with Debt: Who Pays? (May 16, 2023), https://www.debt.org/family/people-are-dying-in-debt. ↩︎
7. Id. ↩︎
8. FederalStudentAid, https://studentaid.gov/manage-loans/forgiveness-cancellation/death. ↩︎

If you recently married or have been married for a while and have acquired additional money or property (or plan to), you have options regarding how your assets can be owned. Although joint ownership seems easy and convenient, it may not always work as well as you think it should, depending on the circumstances.

What Is Joint Ownership?

After getting married, some couples may choose to add each other to their existing bank accounts, brokerage accounts, and real estate (collectively called assets) as joint tenants with rights of survivorship (JTWROS). An asset owned as JTWROS is owned by at least two people, with each person having an equal right to the account or property. When one owner dies, the remaining owners automatically receive the deceased owner’s share. Going to probate court is not required for this transfer; it happens after a death certificate has been furnished to the appropriate party or recorded. For example, if a married couple owns a bank account as JTWROS and one spouse dies, the surviving spouse automatically becomes the sole owner of the account once the appropriate documentation has been provided. Although this scenario may seem like an easy solution to owning your assets and avoiding probate, there can be some pitfalls. 

Issues with Joint Ownership

When two people jointly own an asset, problems can arise, especially when a relationship is unstable, because neither person can unilaterally sell, lease, gift, or encumber (which includes refinancing a loan, among other things) the property without the other person’s consent or, possibly, without judicial intervention. Depending on state law, there may also be additional concerns when dealing with bank accounts; since both people usually have unrestricted access to the account, either person could potentially go to the bank and drain the account without the other’s consent. 

There are also issues with attempting to use JTWROS to avoid probate. When one spouse passes, the surviving spouse assumes sole control over the asset and can use or gift the asset during their life or gift it upon their death in any way they desire and may choose not to follow the deceased spouse’s wishes. This result is particularly risky when it comes to inherited or separate (nonmarital) property, such as a farm or ranch, that has been passed down through generations in the deceased’s spouse’s family. The deceased spouse may want the asset to be gifted to their own descendants after the survivor passes away, but the survivor can and may redirect the asset to someone else.

In a blended family, JTWROS may lead to the unintended consequence of a client disinheriting their children from a prior relationship. If everything is owned jointly by the couple, then when the first spouse dies, their children from a prior relationship will have no right to the jointly owned accounts and property because ownership automatically goes to the surviving spouse under the survivorship rights. 

A comprehensive estate plan that uses a trust to hold your assets can better control and protect such items. Whether due to creditor issues, incapacity, or death, the right estate plan will ensure that you and your spouse will be able to continue enjoying your assets as intended while minimizing potential taxes and court costs. 

Bottom Line

For all these reasons, it is important to consult with an estate planning professional to understand your options regarding the best approach to owning your assets. If you recently got married or are acquiring additional assets with your spouse, contact us right away to learn about your options.

Your wedding day was absolutely perfect. You and your spouse went on your honeymoon and had the time of your lives. Now you are back and can breathe a sigh of relief as the years ahead unfold before your eyes. Well, not so fast. With your honeymoon over, there are several things you should be mindful of to ensure that the legal and financial parts of your life properly reflect your newly married status.

What to Do After the Honeymoon

As you start living happily ever after, make sure to take care of these post-honeymoon to-dos during the first few weeks (or even days) after your wedding. This will help give you peace of mind so you can enjoy the memories of your wedding and honeymoon for years to come. The following checklist can serve as a reminder of some of the tasks to which you should give your immediate attention:

• Meet with a knowledgeable estate planning attorney to discuss creating a will or trust or updating your current one from before you got married.
• Read over and update your existing financial power of attorney or have one drafted.
• Review and update your medical directive documents (medical power of attorney, advance directive or living will, and HIPAA authorization form) and provide copies to the necessary doctors’ offices.
• Check and update beneficiary designations on any life insurance policies, 401(k)s, individual retirement accounts (IRAs), annuities, and other investment accounts.
• Seek advice from your tax preparer about whether you should adjust your withholdings to reflect your new marital status.
• If you do not already have coverage, obtain life insurance and designate a beneficiary and a contingent beneficiary.
• If you have moved or are planning to, update your address with your auto insurer, banks, employer, and anyone else who needs it.
• If desired, add your spouse to your group health and dental insurance policy.
• If you so choose, change ownership of real estate to reflect your marital status or add your new spouse as a joint owner.

In addition to the above, if you decide to legally change your name, notify the following institutions:

• schools
• employers
• department of motor vehicles or secretary of state
• creditors (including credit card companies) and debtors
• Social Security Administration
• passport office
• insurance agencies
• state taxing authorities
• telephone and utility companies
• banks and financial institutions
• government benefits offices

Contact an Experienced Estate Planning Attorney

We are here to guide you through the estate planning process and ensure that the financial and legal aspects of your life align with your new marital status. Contact us today to learn about how we can help you enjoy your wedded bliss with financial and legal security.

Getting married is a special time in your life; you may have a beautiful wedding, a fun reception (with a delicious cake and special gifts), and a romantic honeymoon. It is also the right time for you and your new spouse to plan for your future—for richer or for poorer, in sickness and in health.

Why You and Your New Spouse Need to Plan Your Estates

Why should you and your new spouse care about estate planning? Because everyone—young or old, married or single—deserves the peace of mind that comes from protecting themselves and their loved ones against life’s unexpected challenges. Unfortunately, many couples spend more time planning their honeymoon than they do planning the best way to protect and provide for each other through estate planning.

What Happens Without an Estate Plan?

Without an estate plan, if you become unable to manage your affairs due to illness or injury or you pass away, your new spouse could face unnecessary challenges and costs in administering your estate during an already difficult time. Estate planning is a powerful way to protect them from heartache and difficulty and make their journey forward easier. 

If you are alive but can no longer manage your own affairs (in other words, you become incapacitated) and do not have an estate plan:

• You will leave your spouse and the rest of your family in the dark. They will not know whom you would like to make decisions for you or how you would like your property and accounts (your assets) to be managed during your incapacity. This situation can lead to family conflict and damaged relationships as your loved ones each champion what they think you would have wanted regardless of whether they are correct.
• Your loved ones will face the burden of making tough decisions about what you would want for medical interventions, life-sustaining care, and the withdrawal of life support.
• The court and state law, not you, will decide who makes healthcare decisions for you if you are unable to make or communicate those decisions yourself.
• If you are your minor children’s only legal parent and you cannot take care of them because of your incapacity, a judge, not you, will decide who will take your place.
• In certain circumstances, the court may lock down access to your money and property so that even your spouse must get court permission before making financial moves or necessary expenditures.

If you pass away without an estate plan:

• Again, you will leave your spouse and loved ones in the dark—this time regarding whom you would want to wind down your affairs and whom you would like to inherit your assets.
• If you have not prepared a will to nominate a guardian for your minor children and you are their only legal parent, the court will be left to appoint a legal guardian based on state law and what the court deems is in the best interests of the child with no input from you.
• Assets that your loved ones receive at your death may be exposed to divorcing spouses, bankruptcy creditors, medical crisis creditors, predators, and frivolous lawsuits.
• Depending on state law, your spouse, children, and other family members may all be entitled to share in receiving your assets.
• Your beloved pet could end up in a shelter or euthanized if alternate arrangements cannot be made for their care.

What Should You Do?

We invite you and your new spouse to call our office to set up a meeting. We will walk you through how to protect each other, those you love, your beloved pets, and your hard-earned money and property so that things are easier for you and your families. We look forward to hearing from you.

Most people understand that having an estate plan benefits them and their loved ones. However, many individuals do not initiate the estate planning process because they do not fully understand the nuances of foundational estate planning tools such as a will and a trust and the full implications of dying without either in place. 

Here are three scenarios illustrating what will generally happen when you die, whether you pass away intestate (without a will or trust), with a will, or with a revocable living trust (sometimes referred to simply as a trust). For this discussion, let’s assume you have two children, but no spouse:

1. Intestate. If you die intestate, your accounts and property will go through a court process known as probate. The entire probate process is reflected in court records, so anyone can access information about what you owned, what you owed, and who will receive your money and property. However, because you have not legally specified who will receive your money and property, the probate court makes that determination using your state’s laws. Intestacy laws vary by state, but generally speaking, money and property go first to a surviving spouse, then to descendants (children or grandchildren), and then to parents, siblings, and siblings’ children, in that order, depending on who survives you.

Once the probate has been opened by an interested person (usually a family member, but maybe a creditor) and debts, taxes, and expenses have been taken care of, the court applies state law to determine where your remaining assets will go. 

• If your only heirs are your two children, state law will typically mandate dividing your money and property equally between your children.
• If your children are adults (at least 18 or 21 years old, depending on state law), they will receive their inheritance immediately with no strings or protections attached. 
• If your children are minors, the court will appoint a guardian or conservator (depending on the term used in your state for a person who manages money on behalf of a minor) to manage the money for your minor children until they become adults. When the children reach adulthood, they will receive their inheritance immediately with no strings or protections attached. The judge will also use state law to determine whom to appoint as guardian or conservator. This could be your ex-spouse or another closely related family member. 
• The court-supervised guardianship or conservatorship process can be time-consuming and costly. Most expenditures for the benefit of the children require a formal process that includes court filings and, ultimately, authorization by the court prior to acting. In most states, guardians or conservators and the attorney representing these parties can charge for their time, which can be substantial. 
• The court, not you, will decide who raises your minor children. The court will look to state law to see who has priority to be appointed as the guardian. This may be a person you would never have wanted raising your child. Because you do not have a will or other official document nominating a guardian, the judge will be able to assess the situation only according to the information they have at their disposal, which may be insufficient. However, if your children’s other legal parent is still living, they will most likely obtain sole custody of the children. 

The bottom line? Dying intestate results in state law and the court making many important decisions on your behalf—regardless of what your wishes might have been. In addition, public disclosure of the intimate details of your life (finances, debts, and who will receive your money and property) is guaranteed.

2. Will. If you die with a valid will, accounts and property in your sole name at your death will still go through the probate process. However, after creditors have been paid, the remaining accounts and property will go to whom you have named in your will, in whatever way you have directed, rather than in accordance with state law.

• If you want to leave your money and property to your children, you can name a trusted decision-maker to manage the funds and provide them to your children when needed or at stated ages. In many cases, this means creating a testamentary trust in your will and naming someone as trustee to manage the funds, allowing you to put restrictions in place to ensure that the money and property are used in a way that meets your wishes. Because these terms are in a legally enforceable will, the court will abide by your wishes.
• The same considerations hold true if you specify that you want to give money to a charity, your Aunt Betty, or your neighbor.
• Your will is also where you can nominate a guardian to raise your minor children. Note that the court will still need to approve the nomination, but this is your way to ensure that your wishes are considered when the court appoints a guardian. 

The bottom line? While a court oversees the process, having a will allows you to tell the court exactly how you want your affairs to be handled. However, a public probate process is still guaranteed.

3. Trust. For a trust to work properly, you need to change the title or beneficiary designation of all of your accounts and property to the trust’s name. Accounts and property owned by the trust are not subject to the probate process. One of the most important benefits of a trust is that the details and process of transferring accounts and property to the intended individuals are private. 

When the trust is initially created, you serve in a variety of roles. First, you are the trustmaker who creates the trust and transfers your accounts and property to it so that the trust becomes the new owner. You are also the trustee of the trust, which means that you are in charge of managing the trust’s accounts and property, making investment decisions, and distributing money to the beneficiaries. You are also a beneficiary. Although the trust is now the technical owner of the accounts and property, you are still able to benefit from them as you did when they were in your name. Because there may come a time when you are unable to manage the trust and the property it owns, whether because you are mentally unable or have passed away, you will name a trusted individual to step in as trustee when you can no longer act. This person is sometimes referred to as the successor trustee. They will then be responsible for managing the trust’s accounts and property and will be required to use the money and property for your (if you are still alive) and the other named beneficiaries’ benefit according to the terms you have provided in the trust agreement.

• One word of caution—to bypass probate, a trust must be properly funded. If you die owning any accounts or property in your sole name without a beneficiary designation, those items may have to go through the probate process to get to their appropriate new owner. 
• Funding a trust means that ownership of your accounts and property has been changed from your individual name to your trust’s name. It may also mean naming your trust as the beneficiary if you cannot change the ownership of the account or property, as with a retirement account.
• Think of your trust as a basket. Like putting apples into a basket, you must put your accounts and property into the trust for either to have real value or control.

Even if you have a trust, you should still have a will to ensure that any accounts or property inadvertently or intentionally left out of your trust are retitled (funded) in the name of the trust after your death. This special type of will, referred to as a pour-over will, directs that anything going through probate is to be given to the successor trustee of your trust, who will then manage the account or property as part of the trust. The pour-over will also allows you to name guardians for your minor children.

The bottom line? A trust allows you to maintain control of your accounts and property through your chosen trustee, avoid probate, and leave specific instructions so that your children are cared for—without receiving a lump sum of money at an age where they are more likely to squander it or have it seized from them by potential creditors or predators.

Do not let the will-versus-trust controversy slow you down. Having any plan in place is often better than the one the state has created for you. Call our office today; we will put together an estate plan that works for you and your loved ones—whether it be a will, a trust, or both.

The Federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) was enacted to provide guidelines to the healthcare industry for protecting patient information and preserving privacy. This is usually a nonissue for minors because parents, as legal guardians, generally have access to their children’s medical information, make most of their medical decisions, and pay the expenses.

However, once an individual turns 18, they are no longer a minor but a legal adult. Hospitals and doctors’ offices must safeguard the young adult’s information from everyone, including their parents or legal guardians, to comply with HIPAA law. While it makes sense that a legal adult would be in charge of their own medical information, this can pose some problems for young adults. Many 18-year-olds are still in high school, live at home, and have their expenses paid for by their parents. Although they are considered legal adults, their day-to-day lives look more like those of a child.

Young adults should consider executing the required documentation to ensure their parents or other trusted individuals can access their medical records and discuss their medical care with their healthcare providers. This is accomplished through a HIPAA authorization form. With this form, the young adult can designate any individual(s) as an authorized recipient of their medical information. Executing this document can be incredibly helpful if there is a question about the young adult’s care, especially while the parent is paying the corresponding medical bill. It is important to note that although someone may be listed as an authorized recipient of the medical information, this form does not give the named individual the authority to make medical decisions on the young adult’s behalf.

A properly executed HIPAA authorization form can also be beneficial if the young adult ends up in the hospital. Because hospitals do not want to be fined for violating HIPAA, most will err on the side of caution and refrain from disclosing any information to family members without properly executed documentation. Without access to their child’s medical information and the ability to talk with medical personnel, parents can feel out of the loop, and doctors may miss important family medical information.

Because the young adult is now in charge of their information, they get to choose whom they name as an authorized recipient. While it may make sense for them to include their parents, the young adult is not required to name them.

As a companion to the HIPAA authorization form, it is also important for the young adult to consider having a medical power of attorney prepared so that someone will have the authority to make medical decisions on the young adult’s behalf if they are unable to make their own medical decisions or communicate their medical wishes. Without this tool, the family may need to go to court to have someone appointed to make crucial medical decisions. The appointee will be based on the state’s law, not the young adult’s wishes. Depending on family dynamics, this court appointment could create conflict between family members. Also, this process takes time, costs money, and could potentially divulge the young adult’s medical information to anyone who is in the courtroom or wants to look up the court records.

If you or someone you know has recently turned 18 or needs a HIPAA authorization form, please give us a call. We are here to protect you and your family through all the major milestones in life.