When it comes time for couples to consider estate planning, there are several aspects of it that must be looked at and decided on. Below are 16 points of estate planning that you and your spouse may need to address, depending on your situation.
Preserving the Estate on the Second Death: If a spouse changes their will on a second marriage, it is possible that the children of the first marriage will not get anything. This happens because the first spouse’s children from a prior marriage did not inherit; their parent’s spouse got everything. That person may well remarry and leave everything to their new spouse, not to their stepchildren from a prior marriage. To avoid this problem, communicate, use a marital agreement, use life insurance, consider QTIP trusts.
Life Insurance: You may want to get a life insurance policy to protect your children from a prior marriage, naming them or a trust protecting them if they are minors, as the beneficiary of that policy. This way you protect “yours” from the scenario set forth in No. 1.
Check Beneficiaries: Non-probate assets such as life insurance, retirement accounts, investment accounts, pensions have named beneficiaries and do not go through probate. MAKE SURE you check these designations so the right person inherits.
Posthumously Conceived Children: Make sure that you provide for this if you have pursued in vitro or surrogate options.
Trusts: Make sure you plan how you want to provide for your children if you pass away. You can use a trust to provide for things like their health and welfare but also for things like education, purchase of a reasonably priced car, travel, service and get-togethers with family members. Clients have even indicated their desire to promote a relationship between step siblings by directing the trustee to provide for get-togethers as part of the residuary trust in their wills. This was, in my opinion, a creative and clever use of estate planning to promote mixed family values.
Grandparent Rights: Grandparents often include a residuary trust, which I call a grandparent trust, for their minor grandchildren. This is especially important when the grandparents are providing primary caretaking.
Planning for Problem Adult Children: A residuary or other trust can address issues such as marital issues, substance abuse issues and spendthrift provisions. Even without these problems, young adults have a tendency to run through inherited money, and good planning is key.
Business Owners: At a minimum, they should have a buy/sell agreement that states that if one of the partners passes away, then the other partner will buy out the beneficiaries of the estate. Essentially this switches out cash for the interest in the business. Business Trust reports that only 12 percent of family businesses continue once it is passed on to heirs. Transfer of a family business is a key issue to address. I can help with the estate planning end and recommend excellent counsel on the business end.
Naming Fiduciaries: Personal representative, trustee, guardian, conservator: these are big jobs and have a lot of responsibilities. It is not always going to be the oldest child. It may help to have a person living in the state where the estate is being administered. It should be a person who is good with finances and paperwork. They need to be responsible, well organized, able to complete things on deadline, fair, impartial and avoidant of gossip and drama. They should have the power to stand up to detractors and the humility to hire experts if need be. This is not a time to worry about hurt feelings or being fair. The most important thing is to name the right person for the job. You may need to turn to a corporate trustee in certain situations, such as when a successor is needed. They often charge a percentage of the assets.
Informing Fiduciaries: Your appointees need to know that they were chosen, need to know how to get to important documents and need to have the right keys and access to the documents such as the wills and powers of attorney. So too, your medical health care team needs to have access to your living will and medical power of attorney.
Other Beneficiaries: It helps to research the corporate name for charities, nonprofits, educational institutions and other entities named as a beneficiary in a will. You should also specify what you want to happen if you are leaving to a person who is not a close relative, and they do not survive you.
Apportionment Clause: The primary issue here is whether the client wants to have probate estate bear the burden for the tax due on the non-probate assets. Inside means that the probate assets bear this burden. Outside means that the non-probate asset bears responsibility. Equitable is a third option dealing with charitable donations.
Common Law Marriage: You may not know whether you are married under the common law. In addition, you may choose to use a cohabitation agreement to avoid being married under the common law if this is not your intention.
Laws of Intestacy: Colorado laws of intestacy apply if there is no estate planning or if there are no heirs named in the will. An attorney can explain how this applies to your situation.
Personal Representatives: Just naming someone in your will does not guarantee that person will serve. It is a nomination and a court appointment is necessary. Forms are filed to make it official. It is not an onerous process in Colorado if everyone agrees, but the court does have to sign off on it.
Elective Share: An omitted/disinherited spouse can file paperwork demanding his or her elective share. It is a very complicated formulation, which can take some time to determine.
For a detailed explanation of each of these parts of estate planning, or for information on having Andersen Law PC prepare your estate planning documents, please email me at firstname.lastname@example.org or call me at 720-922-3880.