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Estate planning is not just for the wealthy. Every adult should have an estate plan, yet surprisingly, most Americans do not. The perceived cost of creating one is among the most cited reasons for a lack of estate planning.

The consequences of not having an estate plan can become more costly in the event of death or incapacity than the upfront costs associated with creating estate planning documents like a will, power of attorney, and healthcare directive. At the same time, we recognize that many Americans are facing very real economic difficulties. 

Having somebody else pay for your estate plan can help with cost-related concerns. In most cases, it is perfectly fine for another person to do so. But as great as the gift of estate planning is, attorneys have certain ethical and professional obligations to their client—in this case, the person creating an estate plan—regardless of who is paying for it.

The Cost-of-Living Crisis Hits Estate Planning

In 2024, just 32 percent of Americans have a will, according to a survey from Caring.com.¹ This finding is counterintuitive when you consider that about two-thirds of Americans said that having a will in 2024 is “very important” or “somewhat important.”²

The percentage of Americans who say having a will is important has remained about the same in recent years, even though estate planning rates have declined. So, what gives? 

Procrastination and the (mistaken) belief that they do not have enough money and property are the top reasons people neglect to establish their estate plans. Sixteen percent of Americans told Caring.com that they don’t have an estate plan because it is “too expensive,” which ranked third on the list of estate planning barriers.³

Around one-third of US workers say they are living paycheck to paycheck and have almost no money for savings after paying their monthly expenses.⁴ Approximately 37 percent of Americans say they cannot afford an unexpected expense over $400, and 21 percent report having no savings at all.⁵ Nearly half of young adults (18 to 34 years old) say they received financial help from their parents in the past year.⁶

When a Third Party Pays for an Estate Plan: Setting Expectations 

The co-director of the Center for Retirement Income at The American College of Financial Services told CNBC that the perception of cost is “clearly one of the things” that keeps people from preparing a plan.⁷ 

Perceived costs associated with estate planning are often more of an issue than actual costs. However, estate planning cost concerns—real or imagined—remain a significant barrier to completing a plan. In any case, having an estate plan is better than not having one. 

It is sometimes said that estate planning is a gift that a person gives to themselves and their family, buying the peace of mind that comes with having a legacy plan in place. However, when an estate plan is a gift from one person to another, certain aspects must be made clear from the outset so that both the plan creator and the payor can enter the process with realistic expectations.

What to Expect from the Attorney

Attorneys are subject to professional codes of conduct. We must work in the client’s best interest. Our professional duties to clients include practicing with competence, maintaining confidentiality, and avoiding conflicts of interest. In the context discussed here—where one person is paying for another’s estate plan—the person creating the estate plan is the client; the payor is not. 

Generally, the duties we owe to clients do not extend to nonclients, even if the nonclient is footing the bill for the client. If one person pays for another’s estate plan, and a lawyer prioritizes the interests of the payor to the same degree as the plan recipient, this could constitute a conflict of interest, especially if the payor is also a beneficiary (i.e., they stand to inherit from the estate plan).

If the payor is in the room during an attorney-client discussion without the appropriate waivers and acknowledgments, this could further jeopardize client confidentiality and potentially breach our professional duty to the client. 

What to Expect from the Planning Process

The person paying for the estate plan is welcome to drop by our office and make payment. Beyond that, there is no requirement for them to be present at any stage of the estate planning process, but their presence might depend on the specific circumstances, such as your wishes or your level of comfort with accommodating their attendance at certain meetings. 

If you decide to allow the payor to attend our meetings, you must sign a waiver of attorney-client privilege allowing this. The payor must also sign a document acknowledging that they are not our client. 

Once these matters are settled, the planning process can begin. What exactly that process looks like depends on the estate planning strategies and tools that will best carry out your wishes. 

Assuming you create a will, you must choose who will receive your money and property when you die and who will oversee the winding up of your affairs, including giving your beneficiaries their inheritance and settling any outstanding debts. 

We also recommend that every client have a plan for their incapacity. This plan addresses who will make medical and financial decisions for them if they are alive but unable to communicate. 

Put Your Wishes in Writing

If someone has offered to pay for your estate plan, we encourage you to accept their generous offer. However, this arrangement may involve additional considerations and documentation. 

To reiterate, we represent the person getting an estate plan. We do not represent the person paying for the plan, and we cannot let their wishes or opinions interfere with our professional judgment or client’s wishes.

As long as this is clear to all parties involved, we can start the planning process immediately, although some extra paperwork might be required if the payor attends our meetings. 

No matter who pays for an estate plan, we are here to make sure your wishes are put in writing and carried out. And since updating an existing estate plan is typically much less expensive than creating one from scratch, you may be able to pay for any future changes out of your pocket. Call us today to get started with creating or updating your estate plan.

1. 2024 Wills and Estate Planning Study, Caring.com, https://www.caring.com/caregivers/estate-planning/wills-survey/ (last visited Aug. 26, 2024). ↩︎
2. Id. ↩︎
3. Id. ↩︎
4. Sarah Foster, Penny-pinching nation: More than a third of workers say they’re living paycheck to paycheck, Bankrate (Jul. 15, 2024), https://www.bankrate.com/banking/living-paycheck-to-paycheck-survey/. ↩︎
5. 37% of Americans can’t afford an emergency expense over $400, according to Empower research, Empower, https://www.empower.com/press-center/37-americans-cant-afford-emergency-expense-over-400-according-empower-research#:~:text=Greenwood%20Village%2C%20COLO%20%E2%80%93%20July%202,according%20to%20new%20Empower%20research (last visited Aug. 26, 2024). ↩︎
6. Rachel Minkin et al., 2. Financial help and independence in young adulthood, Pew Rsch. Ctr. (Jan. 25, 2024), https://www.pewresearch.org/social-trends/2024/01/25/financial-help-and-independence-in-young-adulthood/. ↩︎
7. Michelle Fox, Can’t afford an estate plan? Here’s what you can do without spending a fortune, CNBC (Jan. 3, 2021), https://www.cnbc.com/2021/01/03/cant-afford-an-estate-plan-what-to-do-without-spending-a-fortune-.html. ↩︎

You may think creating a simple estate plan should be easy and something you can do independently. Unfortunately, this is not the case. Estate planning laws vary greatly from state to state, can sometimes be complicated, and constantly change. An experienced estate planning attorney stays informed about these nuances and changes, so you do not have to. 

One wrong word, one missing signature, or one procedure not followed to the letter of the law can potentially render a last will and testament, revocable living trust, medical power of attorney, living will, or financial power of attorney ineffective. Also, certain planning tools are not available in all states. An experienced attorney can ensure that you are implementing the right tools correctly.

Though having an estate plan prepared by an experienced attorney may seem expensive, the value of the service and protections provided are worth the investment. With this investment, you are taking action to ensure that your wishes will be legally enforceable and followed so that your loved ones are taken care of in the way you want and that their inheritance is not left to the mercy of the courts or state law, or vulnerable to creditors, divorcing spouses, or lawsuits. 

All that being said, here are three simple things you can do to help manage the cost of setting up and maintaining your estate plan: 

1. Come prepared. Before you meet with your estate planning attorney, do your homework. Understand what you own, what you owe, whom you would like to inherit your money and property, and who should manage your affairs if you cannot do so while still living (also known as being incapacitated) and after you die. If subsequent changes need to be made to your estate plan to realign it with your evolving goals and needs, make a detailed list of possible changes so that you and your attorney can be on the same page and address your specific concerns.

2. Keep it as simple as you need. We want to ensure your estate plan legally expresses your wishes and is easy for your loved ones to carry out. Usually, the simpler your estate plan is (for example, your loved ones get their inheritances outright in one lump sum without any protections in place), the easier and more straightforward it will be for your attorney to draft and maintain. Generally, a more complicated estate plan (for example, a plan that includes continuing trusts, tax planning, or asset protection planning) will cost more, as it requires more time to prepare and a more experienced attorney. We caution you, however, from creating an estate plan that is overly simplistic and does not fully align with your goals just to save money on legal fees. A good estate planning attorney can recommend the “just right” estate plan to fit your needs without overcomplicating things and charging unnecessary fees for tools and features you do not need. 

3. Join your attorney’s estate plan maintenance program or sign up for their email newsletter. Some estate planning attorneys offer a periodic estate plan tune-up for their clients, sometimes called a maintenance program or client care program. These programs provide benefits to clients at a lower fee than if the client were to pay for these benefits individually. Alternatively, some firms offer email newsletters where you can learn more about estate planning, current developments in the law, and related topics. Being a part of a maintenance program or email list reminds you to think about your estate plan regularly (once a year or every few years depending on the terms of the attorney’s maintenance program, or on a more frequent basis depending on the firm’s email newsletter distribution calendar). Maintenance programs and email newsletters help you keep your estate plan current with changes in the law and your personal situation. Remember: an estate plan will only work to the extent that it continues to reflect your ever-changing wishes and needs. 

We understand that creating an estate plan can be a large financial investment in your future. We are committed to working with you to create the best possible plan to meet your personal and financial needs. Give us a call to learn more about the types of tools we can put in place to care for you and your loved ones.

Few US adults have an estate plan. Even fewer have included a pet in their plan. Perhaps you have an estate plan that addresses who will take your pet when you die. But does it address the possibility of your incapacity and the need for a temporary pet caretaker?

Formally incorporating your pet into an estate plan can ensure that, no matter what happens to you, your animal companion will be cared for like any other family member.

Americans Love Their Pets

The US pet ownership rate is among the highest in the world and has grown over the past few decades. However, calling them “pets” (generally considered property under the law) does not do justice to how much we value our furry, feathered, or scaly best friends. 

A 2023 Gallup poll shows that 62 percent of Americans own a pet, and more than one-third (35 percent) have multiple pets.¹ Ninety-seven percent of pet owners say that their pets are part of their family, including 51 percent who say they are as much a part of the family as a human member.²

Pet spending per household has also increased and is now around $600 to $800 per year.³ In keeping with the changing cultural mindset that pets are members of the family, owners are spending money on toys, treats, clothing, travel, daycare, pet sitting and boarding services, pet-specific insurance policies, and premium, healthy pet food.

The Need for Pet Estate Planning 

Spending more on pets reflects owners’ recognition that animals have complex physical and emotional needs that are not very different from ours. The law is also slowly starting to catch up with the idea that animals are living, feeling beings who deserve legal protection.

While US law has historically classified animals as chattel (i.e., property), this began to change in the 1800s with the introduction of animal cruelty statutes. Today, animal rights have advanced to the point where some states consider a pet’s well-being or best interest after their owners’ divorce.

Estate planning is another area in which legal decision-making increasingly reflects the deep and meaningful bonds we share with our pets. Every state now recognizes pet trusts, and more people are including pets in their estate plans to ensure their beloved companions are provided for if they die or suffer incapacity. 

The pandemic was a wake-up call for many to get their estate plans in order. COVID also showed that when a pet owner gets sick and can no longer care for their animal companion, the pet could end up in a shelter. Of the approximately 6.3 million pets entering US animal shelters each year, nearly 1 million are euthanized.⁴ 

Not having an estate plan can leave big questions unanswered, such as who will care for a minor child after a parent’s death or health emergency. Without an estate plan, the same questions apply to pets. 

This does not mean pet owners should go to the extremes Leona Helmsley did when she left $12 million in her will for her dog. However, there are good reasons why pet parents should formally include pets in their estate plan and not rely solely on an informal verbal agreement with a caretaker. 

Estate Plan Documents for Pet Caregiving 

Best Friends Animal Society, a nonprofit animal welfare organization, recommends that owners arrange to have emergency and permanent caretakers for their pet.⁵ 

According to Best Friends, pet owners should:⁶ 

• Arrange for multiple caretakers.
• Decide whether multiple pets should stay together or be placed with different caretakers. 
• Talk to potential caretakers about their pets’ needs, provide them with feeding and care instructions and veterinarian contact information, and give them a key to the house.
• Let friends and family know who the available caretakers are and how to reach them. 

Best Friends also recommends incorporating emergency and long-term pet care in a formal estate plan, such as a will or trust. 

Pets and Wills

Because pets are viewed as property under the law, they become part of a person’s estate when they pass away. As a result, a pet owner can leave their pet as a gift to someone else, the same way they would any other property. The beneficiary of the pet would be known as the pet guardian. 

However, there are shortcomings to planning for a pet’s care in a will. 

First, the person named as pet guardian could decline the gift of a pet, as there is no legal requirement for a beneficiary to accept any gift from a will. Your will can provide for a backup pet guardian or even multiple levels of backup pet guardians. But what happens if all of them decline the gift? You may think it would be a good idea to name an animal welfare organization as a beneficiary as a backstop, but Best Friends cautions that these organizations typically cannot offer the type of long-term care a pet needs. So, what happens if everyone you named as a pet guardian declines or cannot care for your pet?

Second, a will only takes effect upon death. Its terms do not apply when the pet owner is alive but incapacitated and can no longer care for the pet. Therefore, the pet could be left in legal limbo if the owner is sick, comatose, disabled, or otherwise unable to care for their pet.

Pet Trusts 

A pet trust allows an owner to exert more control over their pet’s future care, both after the owner dies and during their lifetime if incapacitated. 

All 50 states and the District of Columbia have a pet trust law. These laws vary somewhat, but in general, they allow a pet owner to create a trust and place money in the trust for the benefit of their pets, payable to a named caretaker(s) under the oversight and at the discretion of a third-party trustee. Depending on state law and the type of pet trust, the trust’s instructions can name a specific caretaker and provide authority to the trustee to find an alternative caretaker if the original cannot or will not take possession of the pet. 

Most states allow pet trusts to be established during the pet owner’s lifetime, so the terms of the trust would apply even when the pet owner is alive but incapacitated. These provisions can be highly detailed, specifying how the pet should be cared for, including feeding, housing, veterinary care, and burial or cremation. 

Pet trusts can be designed to benefit multiple pets, including different species of animals and sometimes the offspring of those pets. This should be considered when deciding how much to allocate to a pet trust, as certain types of pets require more substantial funds to cover their care and needs. 

The owner can even state in the trust document that any money remaining after their and their pet’s death goes to a nonprofit animal rescue organization (or any other beneficiary—human or otherwise—of their choice). They can further state how—and how often—trust money should be distributed to the caretaker for the pet’s care or even for compensation for the caretaker. 

Pet owners can be as meticulous as they want in their trust instructions. They can also allow the trustee and caretaker some discretion to decide what is best for the pet. The trust should be funded with sufficient resources to care for the pet adequately over their expected lifespan. 

Pet Care Power of Attorney

Pet owners can also use a power of attorney to plan for pet care during their incapacity.

A power of attorney is a document that gives one person the legal authority to decide for someone else. Depending on state law, the document can be limited or broad in scope. It can also be ongoing (effective until the document’s creator dies or revokes it) or only effective for a defined period. 

A power of attorney for the care of a pet should include language that authorizes a named individual to make pet care decisions on the owner’s behalf. It could provide broad authority, stating that the pet caretaker is allowed to do whatever they think is reasonable, or it could limit their authority to specific actions. 

A power of attorney can address pet issues like care services and finding a new home for the pet if the owner remains incapacitated for a long period or has to move out of their home. 

Pet Incapacity Planning Is Often Overlooked

Your animal companions have a special place in your heart. But do they currently have a place in your estate plan? 

Even the most detailed and well-thought-out estate plans may fail to include pet care and incapacity provisions. If you have questions about pets and estate planning or you need to update your estate plan to cover a new pet, get in touch with our attorneys.

1. Anna Brown. About half of U.S. pet owners say their pets are as much a part of their family as a human member, Pew Rsch. Ctr. (Jul 7. 2023), https://www.pewresearch.org/short-reads/2023/07/07/about-half-us-of-pet-owners-say-their-pets-are-as-much-a-part-of-their-family-as-a-human-member/. ↩︎
2. Id. ↩︎
3. Michelle Megna, Pet Ownership Statistics 2024, Forbes Advisor (Jan 25, 2024), https://www.forbes.com/advisor/pet-insurance/pet-ownership-statistics/. ↩︎
4. Pet Statistics, ASPCA, https://www.aspca.org/helping-people-pets/shelter-intake-and-surrender/pet-statistics (last visited Aug. 22, 2024). ↩︎
5. Pet Care Resources, Best Friends, https://bestfriends.org/pet-care-resources/estate-planning-pets-preparing-will-or-trust (last visited Aug. 22, 2024). ↩︎
6. Id. ↩︎

The relationship between spouses is special in all contexts, not the least of which is the estate planning context. In many instances, you can exclude people from your estate plan, including your parents, siblings, and adult children. But there are special protections built into the law that may help protect a spouse from being disinherited. 

No matter which state you live in, your surviving spouse is entitled to a specified share of what you own at your death. While state laws vary on the particulars of this protection, they are aligned on the basic premise that each spouse has a statutory claim to a portion of the deceased spouse’s money, property, and income. 

You may have a legitimate reason for wanting to leave your spouse out of your estate plan. That reason may not even be related to bad blood. For example, your spouse may be independently wealthy and may agree that it would be better to leave your accounts and property to your children or a charity. However, unless your spouse has waived their statutory claim in a prenuptial agreement or postnuptial agreement (if legally recognized in your state), you may not be able to leave your spouse out of your estate plan entirely. 

State Laws on Disinheriting a Spouse 

No state allows a spouse to be disinherited against their wishes. The amount surviving spouses are legally entitled to receive, however, varies by state and depends on the following key factors: 

• How the state determines the size of a spouse’s elective share. An elective share, also known as a spousal share, statutory share, or forced share, gives a surviving spouse a fixed portion—typically around one-third to one-half—of the deceased spouse’s estate.
  • In some states, the elective share applies only to the probate estate, which comprises accounts and property held solely in the deceased spouse’s name that did not have a beneficiary designation.
  • In other states, the elective share applies to the augmented estate. The augmented estate includes the property that makes up the probate estate in addition to accounts and property that have transferred outside of probate by beneficiary designation (e.g., life insurance and retirement accounts), by certain types of joint tenancy ownership, or because they are owned by the decedent’s revocable trust. 
  • Some state laws also factor in how long the couple was married and whether they had children during their marriage. 
  • In some states, a surviving spouse may have to petition the court to request their elective share if it was not provided in a will or trust. 
• Whether the state is a community property state. Nine states—Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin—have community property laws.
  • In these states, married couples equally own all accounts and property acquired during marriage prior to a spouse’s death, with some exceptions. Spouses in community property states are automatically entitled to one-half of the property covered by this rule. 

Prenuptial and Postnuptial Agreements

In some states, a prenuptial or postnuptial agreement can override spousal inheritance rights in both elective share and community property states. 

Prenuptial agreements (signed before a couple is married) and postnuptial agreements (signed after marriage, but not legally recognized in all states) are contracts in which each spouse gives  up their rights to the other spouse’s accounts and property in the event of divorce or upon their death (which includes a waiver of their right to the elective share). The provisions can be general and can waive inheritance rights to all of their spouse’s accounts and property, or they can include carve outs for some accounts or property. 

These agreements are common when a spouse wants to pass their money and property on to children from a prior relationship rather than to their current spouse. Having a legally enforceable document showing that the disinherited spouse has waived their spousal rights can help avoid elective share litigation, which research has shown often pits a stepparent against their former stepchildren. 

It is important to note, however, that, regardless of how it is structured, the pre- or postnuptial agreement can be ruled invalid under certain circumstances, such as when it is coerced, not executed with full disclosure (e.g., one spouse hid assets or liabilities), or signed by a spouse who did not have the opportunity to consult with proper, independent legal representation prior to the time of signing. 

Estate Planning That Does Not Require Spousal Considerations

The laws outlined above limit your ability to leave your money and property at your death to people other than your spouse. You have far more latitude to exclude your spouse, however, when it comes to selecting who manages your affairs when you are alive but cannot manage them yourself or who winds down your affairs after your death. Namely, you do not have to include your spouse in powers of attorney and healthcare directives. 

• A power of attorney addresses who can act on your behalf for financial and medical matters. In some cases, a power of attorney takes effect only if you are unable to manage your affairs; at other times, it can take effect immediately. A power of attorney can be general and grant another person broad authority to handle your affairs for you, or it can describe only those specific matters you want another person to handle on your behalf. 
• An advance directive denotes the types of healthcare you would like to receive if you are badly hurt or seriously injured and cannot communicate your wishes. It allows you to specify your wishes related to life-saving treatments and other end-of-life matters as well as your spiritual beliefs about death. 

If your spouse is currently named as your power of attorney, you can change the designated agent on the document and give this power to a different individual. If you do not have a power of attorney and are unable to manage your affairs, your spouse could petition the court to be appointed as your guardian or conservator, and spouses have priority to be appointed to such positions under most state laws. If the court does not know your wishes, it could very well allow your spouse to act in these very important roles.

Living Together, Planning Alone

There are several instances in which you may consider limiting your spouse’s inclusion in your estate plan. Maybe you do not have the heart (or the energy) to divorce your spouse later in life. Perhaps your spouse already has significant money and property of their own, and you have agreed to pass your money and property to those who need it more, such as your children from a prior relationship. 

Whatever your reason for wanting to disinherit your spouse, state law may prevent you from doing so entirely, even if you modify your estate planning documents to reflect your wishes. If your spouse is on board with your plan, removing a spouse from an estate plan is easier. 

To discuss spousal disinheritance laws in your state and what estate planning you may be able to do on your own, please reach out to our attorneys. 

You have meticulously created your estate plan to ensure that it includes and addresses all of your most important assets (accounts and property). You have reviewed your asset list repeatedly, and everything seems to be accounted for. But what if you have forgotten something? 

Americans own a lot of stuff. Taking stock of your tangible and intangible possessions when creating an estate plan can be a tall order. Some assets may be overlooked and end up in what is called the residuary estate. A residuary estate can be created intentionally or unintentionally and may include valuable assets. 

You can include a clause in your will or trust directing that any leftover assets in your estate go to a residuary (i.e., backup) beneficiary. You can even name multiple residuary beneficiaries in your estate plan, including your family members and favorite charities. 

The Residuary Estate

The ordinary meaning of the word residue is a leftover part or remnant. In estate planning, residue has a special meaning, referring to the portion of a deceased person’s assets that remain after all debts and taxes have been paid and gifts have been made to beneficiaries. 

Wills and trusts are designed to distribute specific assets to specific beneficiaries. Typically, a will or trust directs that assets such as real estate, personal property, and financial accounts be divided among named beneficiaries. 

Sometimes, assets slip through the cracks and are not assigned to a specific beneficiary or explicitly given to a beneficiary. These assets comprise the residuary estate—think of them as “leftovers” or “everything else” in an estate plan. This can happen for a few different reasons: 

• The assets were not considered valuable enough to be explicitly included in a will or trust and may have been deliberately excluded. For example, the average American home has thousands of items, and about one in 10 homes also includes off-site storage rental. It may not make sense to mention specific items in an estate plan that just amount to clutter. 
• An asset was accidentally left out of a will or trust. When making an estate plan, certain assets may simply be overlooked. Assets obtained after a will or trust was created are likely not explicitly mentioned in these documents. Assets that should have a named beneficiary (such as a payable-on-death account or life insurance policy) but fail to name one may also end up in the residuary estate. 
• A beneficiary predeceases the willmaker/trustmaker. If a will, trust, or account names a beneficiary but the beneficiary passes away before the person who created the will or trust passes away, the assets may become part of the residuary estate if no other beneficiary is named to receive these assets. 

The residuary estate does not necessarily consist of worthless scraps a person did not plan for. Residuary assets such as financial accounts that lack named beneficiaries can be quite valuable, and multiple small assets can be valuable in the aggregate. In some cases, the residuary estate could be the most significant part of an estate. 

Naming Multiple Residuary Beneficiaries

Wills and trusts often name multiple beneficiaries to operate as backups to the primary beneficiaries. They can also name residuary beneficiaries if all other beneficiaries named in the will or trust cannot receive the assets. 

Naming multiple remainder beneficiaries may be used as part of a strategy to equalize remaining assets and avoid conflicts between survivors. If a family has multiple children, for example, but just one is the residuary beneficiary, that person could end up with a larger share of the estate than their siblings. 

Since the size of a residuary estate can change over time as assets increase in value, debts accrue, and beneficiaries pass away, a residuary beneficiary could be in line for a windfall—or next to nothing. Family members are unlikely to fight over scraps. If the residuary estate is valuable, however, it could have competing claims. 

It is not unprecedented for a family to discover a high-worth asset such as artwork or sports memorabilia that belonged to a late relative but was not part of their estate plan. It is also possible that an asset not thought to be valuable turns out to be worth a great deal of money. 

In all but the most harmonious families, this could set the stage for infighting and maybe even estate litigation. Residuary beneficiaries have the same rights as other beneficiaries in many states—including the right to challenge a will and request an accounting of estate assets. 

To avoid confusion and conflicts about how the residuary estate should be divided among multiple beneficiaries, a will or trust should contain detailed instructions, such as stating the percentage of the residue each beneficiary will receive. 

Family conflicts over residuary assets may be avoided by gifting the residue to charitable organizations. Naming a charity as the residuary beneficiary allows you to support your favorite cause while prioritizing your loved ones in your estate plan. Charity gifts are tax-deductible and can help minimize your estate’s potential tax liability. 

Residuary assets can also be divided among charities, family members, and other beneficiaries. However, depending on the size of the residuary estate and the number of beneficiaries, estate residue divided among many beneficiaries could result in tiny gifts for each. Many residuary beneficiaries can also add to estate administration costs, as the executor, personal representative, or trustee must parse the various assets and beneficiaries. Review your instructions and ensure each gift will truly benefit your chosen beneficiary.

Forgetting something? Talk residual gifting with an estate planning attorney. 

To discuss these and other factors that can affect your residual gifting strategy, reach out and schedule a time to talk to one of our estate planning attorneys. 

You have two primary options for leaving an inheritance to a child. The most straightforward is to give it to them in a single lump sum, with no strings attached. But this might not be the best option for some children. You may be concerned about the child’s ability to handle the money responsibly, fear they will spend it in pursuit of a cause you do not support, want to avoid the need for a court-ordered conservatorship to manage the funds if the children are minors, or have some other reason for wanting to set conditions on their inheritance. 

Estate planning lets you control from beyond the grave who receives your money, when they receive it, and how they may use it. If you wish to restrict the flow of inherited money to your child, you can do so through your will or trust. While there are legal limits on conditional gifting, you are generally free to structure an inheritance the way you would like.

Questions about whether a conditional gift is legally enforceable should be discussed with an estate planning attorney. 

Ways to Use Conditional Gifts

When raising children, most parents hope to shape their children’s behaviors, provide them with specific values, and help them become productive members of society. Parents often use a “carrot and stick” approach to get the desired outcomes, incentivizing approved actions with rewards and discouraging unapproved actions with punishments. 

An estate plan allows parents to require or disincentivize specific actions before a child receives all or a portion of their inheritance. This type of provision is known as a conditional gift. There are two main types of conditional gifts:

• A condition precedent gift is only given upon a beneficiary meeting a stated requirement (i.e., the “carrot” approach). 
• A condition subsequent gift refers to gifts that are given unconditionally but can be later revoked if a specific event transpires (i.e., the “stick” approach). 

Condition precedent gifts are frequently tied to age, with money given to beneficiaries upon attaining certain ages (e.g., turning 21) or intervals of time (e.g., disbursements made one, three, and five years after the parent’s death). Usually, such restrictions are put in place because a parent is concerned that their child is not mature enough to manage a large sum of money immediately. Parents may also choose conditions related to certain life events, such as the child graduating college, getting married, buying a home, or starting a business. 

There are still other cases where a parent wants to protect a beneficiary from themselves or others. Children who have a history of drug and alcohol abuse might need a combination of the carrot and stick approaches that tie their inheritance to becoming—and staying—sober. 

These are just a few reasons why conditional gifts may be included in an estate plan, and the conditions used can vary as much as the reasons for implementing them. Whether a parent is trying to develop a sense of purpose in their child, discourage bad behavior, or align their child’s values with theirs, any number of strings can be attached to a bequest. Consider these less common conditions: 

• Making an extra distribution for a perfect grade point average or doing volunteer work
• Setting distributions that match amounts given to charity or earned at a job
• Restricting distributions if the child is not working
• Providing seed money to start a business 
• Conditioning a gift on the ability to pass a random drug test
• Incentivizing work in the family business
• Making sure a child caregiver does not place a surviving spouse in a nursing home

Not All Conditions Will Hold Up in Court

Although parents can be highly creative and detailed in structuring conditional gifts, their freedom to impose terms is limited. 

In general, courts will not uphold conditions that are illegal, uncertain, unreasonable, impossible, or contrary to public policy. Here are some guidelines parents should consider when they create conditions for their children’s inheritances.

• A beneficiary should not be asked to engage in activity that breaks the law or is unconstitutional.
• The conditional gift should be executed in clear and precise language. If there is doubt about what actions need to be taken—or refrained from—for the condition to be satisfied, the court could declare the condition void. 
• There must be a chance that the beneficiary can satisfy the condition. In part, a court’s determination on this matter is based on the circumstances of the beneficiary and the context of the gift. 
• Conditions that violate public policy are not illegal per se. Instead, they are deemed to harm the public welfare because they are unfair or unreasonable. Historically, many courts have voided on public policy grounds conditions that restrain a person’s right to marry or incentivize divorce. 

The way courts interpret a conditional gift based on public policy is not always obvious and can be very fact-specific. It may come down to precedent from past cases and judicial discretion. 

Some courts, for example, have refused to enforce conditions contingent upon a beneficiary getting divorced, but enforced marriage conditions based on age and marrying within the same religion. Public policy also varies to some degree by state, so a conditional gift ruled invalid in one state may be found valid in another state. 

Ask an Estate Planning Attorney Questions About Conditional Gifts

Parents and children do not always see eye-to-eye—in life or in death. Each may have questions about conditional gifts in an estate plan that may be best answered by a discussion with an attorney. 

For parents, as long as the conditions you set are in the best interest of your child, phrased appropriately, and do not contravene public policy or the law, the court should uphold them. On the other hand, if a condition is unclear and left open to interpretation, even the best-meaning condition can lead to a lengthy and costly court proceeding that undermines your intent. 

Beneficiaries may question if a condition is legally valid or if they have satisfied it, or take issue with how a trustee is managing the trust for them. Faced with seemingly unreasonable conditions, they may need to raise a legal objection to receive their inheritance. 

These issues tend to be personally sensitive and legally complicated, involving not only family dynamics but also state law and court decisions. Whether you are a parent setting a conditional gift or a child receiving one, our estate planning attorneys can help you understand your rights, obligations, and options.

Your family, the economy, the law, and society can change rapidly and unexpectedly, affecting your best-laid estate plans in unpredictable ways. To achieve your estate planning goals, you need a plan that can keep up with the changes. And few estate planning tools provide more flexibility than a general power of appointment. 

You cannot see into the future. But appointing a trusted person to decide who will receive your money and property when you are not around to make that decision could be the next best thing.

The Power of a Power of Appointment

For as long as you are alive and mentally able, you can make estate plan adjustments in real time that reflect life’s inevitable changes.

Maybe you have a loved one who recently came into money and no longer needs as much of an inheritance as they once did, so you decide to change your will or trust and divert money to other beneficiaries. Or maybe a loved one suddenly takes on a large amount of debt, prompting you to put money for them in a trust rather than giving it to them in one lump sum in order to protect it from their creditors. Later, that same loved one pays off their debt, and you change their gift back to the lump sum inheritance. Alternatively, there might be a major tax law change that forces you to reconsider your gifting strategy from top to bottom.

These are some examples of circumstances that might cause you to make adjustments to an estate plan. A divorce or birth in the family, the success or failure of a family business, or an economic boom or bust might also prompt you to revisit your plan. 

Ideally, you have been diligent about updating your estate plan every few years to ensure that your plan still reflects your wishes. But you may wonder whether you can plan for changes that occur after your death, both in the near and far term.

The short answer is yes, if you use a power of appointment in your will or trust. 

How a Power of Appointment Works

An estate plan can either leave money and property to a beneficiary outright, or it can direct that the money and property be held in trust for a beneficiary with specific instructions as to when and how the beneficiary can access that inheritance. But a power of appointment allows for additional flexibility. For example, depending on the scope of the power of appointment granted to a beneficiary (the powerholder), the powerholder could redirect to whom all or a portion of their trust share will go while they are still alive or choose new beneficiaries to receive the remaining balance of their inheritance, if any, when they die. 

An article published by the American Bar Association calls the power of appointment “estate planning’s most powerful tool.”¹ It explains that a power of appointment “is a right given to a person under a legal instrument that enables the person to further designate the recipients of property or interests in the property.”² 

In layperson’s terms, utilizing a general power of appointment is like giving somebody a superpower to decide who will receive your property and in what way. Here are some key features and terms to understand about powers of appointment:

• The original property holder (the person who grants the power) is known as the donor.
• The person who receives the power of appointment is called the donee or powerholder.
• When a powerholder exercises their power of appointment and names a new recipient or beneficiary of the property, those recipients are appointees. 
• The property that changes hands is referred to as the appointive property. 
• Depending on the scope of the power of appointment, the powerholder can determine not only who receives the appointive property but also how and when they receive it. A general power of appointment would even allow them to exercise the power in favor of themselves, their estate, their creditors, and creditors of their estate. (A limited power of appointment limits the permissible class of appointees.)
• The powerholder does not have to exercise the power of appointment. It is at their discretion. 
• If a powerholder does not exercise the power of appointment, the individuals who take the property by default (according to the donor’s original will or trust instructions) are the default takers.

Reasons to Use a General Power of Appointment: Long-Term Flexibility and Taxes

A general power of appointment gives the powerholder enormous control. Why would anyone give up this degree of control over their own estate plan? Again, one reason may be the increased flexibility that enables you to account for events that occur after your death. Another reason has to do with potential tax planning strategies.

For example, your loved ones may experience changes that impact their financial status. Some may come into money (e.g., win the lottery) and no longer need an inheritance, while others may suffer a disability, develop a substance abuse issue, enter into a bad marriage, incur a great deal of debt, or display a proclivity to waste money or use it in a way you would not have approved of.  

New issues like these can arise after your death when you can no longer update your estate plan. But instead of relying on distribution provisions in your will or trust that may no longer make sense or align with your goals given the new circumstances, unexpected occurrences can be indirectly planned for by granting a power of appointment to a trusted person who decides, in the future, who will receive your money and property. 

A general power of appointment can also be part of a tax planning strategy. The critical thing to know is that a general power of appointment causes the property or assets subject to the power to be included in the estate of the powerholder, which has benefits and drawbacks depending on the circumstances. One benefit is that a general power of appointment may sometimes allow a person to minimize the income and capital gains tax liability on accounts and property. For example, if the powerholder has a power of appointment over trust assets that have appreciated significantly in value over time, those assets may be eligible for a basis adjustment (often called a step-up) when the powerholder dies because those assets are considered part of their estate. This could save money later by eliminating the need to pay capital gains taxes on the appreciated value. One drawback is that having a general power of appointment, which causes inclusion in the powerholder’s estate, may cause the powerholder’s estate to be subject to estate taxation depending on the powerholder’s other assets. These considerations need to be balanced carefully against the flexibility described earlier.

Do I Need a General Power of Appointment in My Estate Plan? 

It is hard enough to anticipate changes tomorrow or the next day let alone those that occur years in the future, long after your death. 

A general power of appointment gives an estate plan unmatched flexibility, allowing someone else to decide how to best dispose of property based on information unavailable to you when you made your estate plan. At the same time, a general power of appointment is a big responsibility with a complicated set of advantages and disadvantages that needs to be evaluated on a case-by-case basis. 

If you are interested in learning more about powers of appointment, our attorneys can explain how this flexible but complex tool can be customized to fit your goals. We can also provide guidance if you have been granted a power of appointment.

1. Jonathan G. Blattmachr et al., Estate Planning’s Most Powerful Tool: Powers of Appointment Refreshed, Redefined, and Reexamined, 47 Real Prop., Tr. & Est. L. J. 529 (2013), https://www.americanbar.org/content/dam/aba/publications/real_property_trust_and_estate_law_journal/v47/03/2013_aba_rpte_journal_v47_no3_winter_article_blattmachr_kamin_bergman.pdf. ↩︎
2. Id. at 531. ↩︎

Planning for your pets in your estate plan is an excellent way to ensure that your beloved pet will receive proper care and attention after you pass on. The problem, of course, is that you will not be there to ensure that your wishes are carried out. That is why it is critical to create a comprehensive estate plan that correctly addresses pet planning so that there are no loopholes or unforeseen situations that could make your plans for your pet go awry. Here are five tragic mistakes people often make when leaving an inheritance to their pets.

1. Setting Aside More Than the Pet Could Ever Need

Stories about celebrities who leave their entire fortune to their pet are not unheard of. Leaving millions of dollars, houses, and cars to your pet is not only unreasonable—it is also more likely to be contested in court by family members who might feel neglected. To avoid this pitfall, create a budget for your pet’s care and leave a reasonable sum of money to ensure that your pet receives the same quality of life that they enjoy now.

2. Providing Vague or Unenforceable Instructions

Too many pets do not receive the care their owners intend because their owners were not specific enough in their instructions or did not use a properly prepared estate planning tool (such as a pet trust) to make the instructions legally binding. Luckily, a pet trust can clarify your instructions and make them legally valid and enforceable. 

If you leave money to a caretaker without a pet trust in place, hoping that it will be used for the pet’s care, nothing stops the caretaker from living very well on the pet’s money. But when you use a pet trust to designate how much the caretaker will receive and how much should be allocated for the pet’s care, you provide a legal structure to protect your furry family member. You can be as specific about your wishes as you would like, from how much should be spent on food, veterinary care, and grooming to how much your pet’s caretaker should receive for their dedication to your pet. You can even include detailed care instructions, such as how often the dog should be walked. However, it may be better to outline these types of details in a separate letter of instruction outside of the trust so that they can be changed as frequently as needed as your pet’s needs and preferences often evolve throughout their lifetime.

3. Failing to Keep Information Updated

Assume that hypothetical client Bill sets up a pet trust for his dog Sadie, but she passes away while Bill is still alive. What happens then? If Bill gets a new dog named Gypsy but does not update his trust to account for this, Gypsy could easily wind up in a shelter or worse because she is not specifically named in the trust. This can be easily avoided by working with an experienced estate planning attorney to create a pet trust or an estate plan that anticipates future pet ownership. It is important to review your estate plan regularly with an estate planning attorney to ensure that it continues to work for your entire family, including your furry family members.

4. Not Having a Contingency Plan

You may have designated a trusted friend or loved one as a caretaker in your pet trust, but what happens if that person is unable or unwilling to assume that role when the time comes? If you have not named backup caretakers, your pet might end up at a local shelter without a home. Working with an experienced estate planning attorney means that you will always have a plan B in place for your pet, and nothing will fall through the cracks.

5. Not Engaging a Professional to Help

Too many people make the mistake of trying to set up a pet trust themselves, assuming that a form downloaded from a do-it-yourself legal website will automatically work in their circumstances. Only an experienced estate planning attorney should help you create a legally enforceable estate plan for your pet to help ensure that everything works exactly the way you want and is legally valid under your state’s laws.

When attempting to leave an inheritance to your pet, the good news is that with professional help, all of these mistakes are preventable. Talk with us today about your options for planning for your beloved pet. This can include setting up a new pet trust, adding a pet trust to your current estate plan, or implementing specific provisions or tools to plan for your pet’s future. We are here to help.

Sometimes, pet owners can get a bit creative when providing for their pets’ future care. The following three famous cases involving pet trusts offer some important lessons.

David Harper and Red

David Harper, a wealthy, reclusive bachelor in Ottawa, Canada, was not exactly famous during his life. In his death, however, he made headlines by reportedly leaving his entire $1.1 million estate to his tabby cat, Red. To ensure his wishes were fulfilled, Harper bequeathed the fortune to the United Church of Canada under the stipulation that they care for Red! The ploy worked.

Lesson learned: You can be creative in ensuring your pets receive proper care after you are gone. 

Maria Assunta and Tommaso

In a four-legged, furry version of the classic rags-to-riches story, wealthy Italian widow Maria Assunta rescued a stray cat from the streets of Rome and gave him a proper home and name: Tommaso. As Assunta’s health failed, she tried for several years to find an animal organization to entrust Tommaso with. When no suitable organization was found, Assunta left her estate, valued at $13 million, directly to the cat in her will and named her nurse as caretaker. She passed away in 2011 at age 94, knowing her beloved Tommaso would be well taken care of. 

Lesson learned: Do not assume someone will automatically care for your pet when you pass. The best way to ensure that your pet is cared for is to plan ahead, choose a caretaker you trust, and put your wishes in writing with a proper estate plan. 

Patricia O’Neill and Kalu

Patricia O’Neill, daughter of British nobility and ex-spouse of Olympian Frank O’Neill, had designated a fortune worth $70 million to her chimpanzee, Kalu, and other pets in her will—or so she thought. It was discovered in 2010 that the heiress was, in fact, broke, thanks to the shady dealings of a dishonest financial advisor. This story provides perhaps the most famous example of a pet trust gone dry while the owner was still alive.

Lesson learned: You can only give away what you have. If caring for your pets after your death is important to you, make sure your financial plan aligns with your estate plan and that you have taken appropriate steps to oversee your advisors. 

Establishing a pet trust is the best way to ensure that your beloved pets receive the care they deserve after you pass on. To learn more about your options, give us a call today.