Specific Questions
Q: Do I need to create a new will if I move to another state?
–Curious Mover
A: Dear Curious:
Most states will accept a will that was executed properly under another state's laws. However, there could be differences in the new state's laws that make certain provisions in your will invalid.
Here are a couple things you should review in your will when moving:
YOUR EXECUTOR
Consider whether or not the executor you've chosen will be able to serve in that role in your new location. Every state will allow an out-of-state executor to serve, but some states have special requirements for executors, such as requiring them to post a bond. Other states require non-resident executors to appoint an agent who lives within the state to accept legal documents on behalf of the estate.
MARITAL PROPERTY
If you are married, consider how your new state treats marital property. While a common-law state might treat the property you own in your name alone as yours, community-property states treat all of your property as owned jointly with your spouse. If your new state treats marital property differently, you might need to draft a new will to ensure your wishes are honored.
If you're moving to our state, meet with us, as your Personal Family Lawyer®, to have your will and other planning documents reviewed.
Q: How do I include cryptocurrency in my estate plan?
— Crypto Owner
A: Dear Crypto:
If you own cryptocurrency, you must leave detailed instructions for accessing it, and ensure that one or more trustworthy people know about your crypto and how to find these instructions. Since accessing crypto can be a complex process, consider including terms in your estate plan allowing your fiduciary to hire an IT consultant or designate a separate co-fiduciary, known as a digital executor, to help him or her manage your digital assets.
Like other assets, crypto is typically passed through a Will or Trust, and we can advise you on the planning vehicle best suited for your situation. From there, specify in your Will or Trust the person(s) you want to inherit your digital currency, and include instructions on how you'd like it managed after your death.
However, NEVER provide the account info, login data, or passkeys for your crypto in your estate plan, especially your Will, which becomes public upon your death.
As your Personal Family Lawyer®, we can help ensure all of your assets—digital or otherwise—are protected, preserved, and passed seamlessly to your family following your death or incapacity.
Q: What is the federal estate tax?
— Tax Planner
A: Dear Planner:
The federal estate tax is a tax on the value of a person's assets at the time of their death. If the total value of your estate is above a certain amount, known as the federal estate tax exemption, the IRS requires your estate to pay a tax, known as the estate tax.
As of 2022, the federal estate tax exemption is $12.06 million for individuals ($24.12 million for married couples). Simply put, if you die in 2022, and your assets are worth $12.06 million or less, your estate won't own any federal estate tax. But if your estate is worth more than $12.06 million, the amount of your assets that are greater than $12.06 million will be taxed at a whopping 40% tax rate.
You can reduce your estate tax liability—or totally eliminate it—by using various estate planning strategies. However, these strategies are quite complex and involve special types of trusts. To learn how to save your family from such this tax burden, meet with us, your Personal Family Lawyer®.
Q: What estate planning should my child have in place once they reach adulthood?
— Proactive Parent
A: Dear Proactive:
Once your kid becomes a legal adult—which is age 18 or 21, depending on your state—many areas of their life that were once under your control will become entirely their responsibility. If your child doesn't have the proper legal documents in place, you could face a costly and traumatic ordeal should something happen to them.
For instance, if your child were to get into a serious car accident and require hospitalization, you would no longer have the automatic authority to make decisions about his or her medical treatment or the ability to manage their financial affairs. Without legal documentation, you wouldn't even be able to access your child's medical records or bank accounts without a court order.
To prevent your family from going through an expensive and unnecessary court process, speak with your child about the importance of estate planning, and meet with us, your Personal Family Layer® to ensure he or she had the proper legal documents in place as they start their journey into adulthood.
Q: What is a pour-over will?
— Prudent Planner
A: Dear Prudent:
For a living trust to function properly, you must first transfer the legal title of any assets you want to be held by the trust from your name into the name of the trust.
Because it can be difficult to transfer the title to every one of your assets into a living trust before your death, most trusts are combined with what's known as a “pour-over” will. This type of will serves as a backup to a living trust, so all assets not held by the trust upon your death are transferred, or “poured,” into your trust through the probate process.
As your Personal Family Lawyer®, we will not only make sure all of your assets are properly titled when you initially create your trust, but we will also ensure that any new assets you acquire over the course of your life are inventoried and properly funded to your trust.
Whether you need a trust set up, funded, or you need a pour-over will prepared, contact us, your Personal Family Lawyer® to get started.
Q: Can I tap into my retirement savings to pay for my child's college education?
—Pondering Parent
A: Dear Pondering:
If your kids will need financial assistance, beyond student loans, to pay for their college education, it's vital that the way in which you choose to save will not negatively impact their qualification for such assistance. To this end, while you can use your retirement funds to pay for college expenses, this can affect your child's eligibility for various need-based financial aid programs.
Retirement funds withdrawn to pay college expenses are reported on the Free Application for Federal Student Aid (FAFSA) as additional income. Consequently, when using retirement funds, the expected family contribution used from FAFSA will be higher, which will therefore reduce your child's chances of qualifying for financial assistance.
Consult with us as your Personal Family Lawyer if you choose to tap into your retirement savings to fund college expenses, so we can ensure it's done right and will have the maximum benefit for everyone involved.
Q: What estate planning documents should my son, who just turned 18 and is planning to attend college in the fall, have in place?
–Prudent Papa
A: Dear Prudent:
At age 18, your son is now an adult in the eyes of the law. This means you no longer have the authority to make decisions regarding his medical care, nor will you have access to his finances if something happens to him.
Since you are no longer in charge, your son's greatest liability from a planning perspective is what would happen if he were incapacitated by illness or injury and become unable to make decisions on his own behalf. To prepare for this scenario, you should have your son sign three key documents: medical power of attorney, a living will, and durable financial power of attorney.
Medical power of attorney allows your son to grant you (or someone else) the legal authority to make healthcare decisions on his behalf in the event he is incapacitated and unable to make decisions for himself. Used in conjunction with medical power of attorney, a living will provides specific guidance about how your son would want his medical decisions made in the event he is incapacitated.
Q: Do I need to create a new will if I move to another state?
–Curious Mover
A: Dear Curious:
Most states will accept a will that was executed properly under another state's laws. However, there could be differences in the new state's laws that make certain provisions in your will invalid.
Here are a couple things you should review in your will when moving:
YOUR EXECUTOR:
Consider whether or not the executor you've chosen will be able to serve in that role in your new location. Every state will allow an out-of-state executor to serve, but some states have special requirements for executors, such as requiring them to post a bond. Other states require non-resident executors to appoint an agent who lives within the state to accept legal documents on behalf of the estate.
MARITAL PROPERTY:
If you are married, consider how your new state treats marital property. While a common-law state might treat the property you own in your name alone as yours, community-property states treat all of your property as owned jointly with your spouse. If your new state treats marital property differently, you might need to draft a new will to ensure your wishes are honored.
Q: How can I determine how much life insurance I should have?
—Family Planner
A: Dear Planner:
When purchasing life insurance, you'll want to make certain you have enough term life insurance to cover the expenses that your dependents will require until they are no longer dependents—or until you are certain you will have enough money saved up to cover their needs.
If you have children with special needs or a non-working spouse, they will require a longer period of care, compared to a family with two incomes and children who will achieve independence in their late 20s or early 30s, so keep that in mind when getting your policy.
If you plan on staying in your business well beyond the typical retirement age, if you are an absolutely indispensable part of your company's success, or you will have estate taxes to cover upon your death, you should consider getting permanent life insurance. And you'll want to obtain enough permanent coverage to fulfill those obligations.
To determine exactly how much life insurance you should have, consult with us your Personal Family Lawyer® to get a full evaluation of your assets, liabilities, and family situation.
Q: What is “diminished financial capacity,” and why is it so dangerous for seniors?
—Concerned Caretaker
A: Dear Concerned:
The National Institute on Aging estimates that nearly half of all Americans will develop some form of dementia, such as Alzheimer's Disease, during their lifetime. And while the cognitive decline brought on by dementia affects a variety of different mental functions, one of the first mental abilities to go is one's “financial capacity.”
Financial capacity refers to the ability to manage money and make wise financial decisions. Cognitive decline brought on by dementia often develops slowly over many years, so a diminished financial capacity frequently goes unnoticed—often until it's too late.
Moreover, studies have shown that seniors' confidence in their money-management skills can actually increase as they age, which puts them in a perilous position. As seniors begin to experience difficulty managing their money, they don't realize they're making poor choices, which makes them easy targets for financial exploitation, fraud, and abuse.
As your Personal Family Lawyer®, we can help you put estate planning tools in place to protect your elderly family members and their assets from the cognitive decline brought on by dementia and other forms of incapacity.
Q: What is the IRS's “Rule of 55” for 401(k) plans?
-Ready to Retire
A: Dear Ready:
Although you generally must wait until age 59½ to make withdrawals from your 401(k) without incurring a 10% early-withdrawal penalty, the IRS allows for a separation of service exception for certain workers. Also known as the “Rule of 55,” if you quit, were laid off, or otherwise terminated from your job during or after the year you turn 55, you can take withdrawals from your 401(k) or 403(b) penalty-free from the account associated with that job.
That said, you are still required to pay income taxes on any withdrawals from your 401(k) or 403(b) in the year they were taken. Given this, you may want to consider setting aside some of the withdrawal to pay taxes. Moreover, IRAs are not eligible for this exception, so for those accounts, you must wait until age 59½ to take withdrawals without any penalty.
Meet with us, your Personal Family Lawyer® and financial advisor for additional guidance and support with implementing effective planning strategies for your retirement.
Q: What is the “contestability period'' on a life insurance policy?
—New Beneficiary
A: Dear Beneficiary:
Most life insurance policies contain a contestability period. Such periods are typically between one to two years, and if the insured dies during this period, the insurance company can investigate the claim to ensure that the policyholder didn't commit fraud on the policy application by lying about underlying health problems, family medical history, or other conditions.
That said, provided the insurance company doesn't discover fraud or other issues with the application, it will most likely pay the claim once the investigation is wrapped up.
While collecting life insurance proceeds is typically a fairly easy process, don't hesitate to reach out to us, your Personal Family Lawyer® if you have questions or need support in any way.
Q: Should the person I pick as trustee of my living trust have a background in law or finance?
—Trust Planner
A: Dear Planner:
The person you choose to serve as trustee for your trust does NOT have to have a background or experience in law, finance, taxes, or any other field related to trust administration. In fact, trustees are not only allowed to seek outside support from professionals in these areas, but they're also highly encouraged to do so, and your estate will pay for such professional support.
While serving as a trustee can be a serious responsibility, the individual you select won't have to handle the job alone. Plus, your trustee can also be paid for their service, though close family members often choose to forgo any payment beyond what's required to cover the trust expenses.
Furthermore, as your Personal Family Lawyer®, we will be available to guide your chosen trustee step-by-step throughout the entire process, ensuring he or she is able to properly fulfill all of your wishes as spelled out in the trust, without exposing the beneficiaries—or themselves—to any unnecessary risks.
Q: Should I leave money for my child with special needs in my will?
–Prudent Parent
A: Dear Prudent:
No, and let me explain why—when planning for a loved one with special needs, you must be extremely careful and always work with an experienced lawyer like us, because if handled improperly, you can easily disqualify your loved one with special needs from much-needed government benefits.
Because individuals with special needs often require a lifetime of care, most of them rely on government programs to offset the exorbitant costs of such care. However, these programs have strict income limits, so if you leave money directly to a person with special needs, such as through your will, you risk disqualifying him or her for those benefits.
Instead, the government allows assets to be held in what's known as a Special Needs Trust to provide supplemental financial resources for the person for the rest of his or her life, while preserving their access to government benefits.
However, the rules for Special Needs Trusts are complicated and can vary greatly between different states, so if you have a loved one with special needs, be sure to consult with us, your Personal Family Lawyer®. We can make certain that upon your death, your loved one with special needs would have the financial means they need to live a full life, without jeopardizing their access to vital government benefits.