Planning Your Estate When You’ve Named a Former Spouse Beneficiary

Oct 19, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: asset protection, Estate Planning

Divorce is an unfortunate part of life in the modern United States. It is a process that can exact a heavy toll on a person’s mental and physical well-being, and can lead to some unwanted and unexpected results down the road, if not handled properly. If you are going through a divorce, or are already divorced, ask yourself “do I want my ex-spouse to benefit if I were to die tomorrow?” If the answer to that question is “no,” and you haven’t taken the necessary steps to remove your former spouse as a designated beneficiary, then you should keep on reading.

An important detail that is often overlooked by folks that get divorced using a DIY Divorce kit is checking the designated beneficiary on any life insurance policies and employer-provided pension plans. Why is this important to check? Generally, the law will not make assumptions about to whom you actually intended the benefits to go, but will rely on the person designated as the beneficiary. As a result, if you get divorced and then remarry, but forget to change the name of your designated beneficiary, your former spouse will receive the benefits instead of your current spouse.

However, some situations arise in which a person wants to keep his or her former spouse as the designated beneficiary. In those cases, the best approach is to re-designate your former spouse as a beneficiary; if you fail to do so, some states have automatic revocation statutes that will prevent the payment of funds to that former spouse.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

When Debt Collectors Come Calling After Death

Oct 18, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: asset protection, Estate Planning, Financial Planning, Probate

It isn’t uncommon for people who have recently lost a spouse or close family member to be approached by a debt collector who is attempting to collect on the deceased person’s debt. Dealing with these debt collectors at such an emotionally difficult time is never pleasant, but there are some tips you can remember that will help make the process easier.

Tip 1: You are not responsible for someone else’s debt

Some debt collectors can be unscrupulous in their attempts to collect money. Even when a collector or creditor knows that the debt left behind by a deceased person is not the responsibility of other family members, that may not prevent the collector from trying to convince those family members to pay. Debt collectors can use tactics such as trying to persuade you that it is your moral responsibility to pay for the debt or by trying to pressure you to assume it. Never give in to these tactics. If you’re being pressured by debt collector to assume a debt you should demand they stop contacting you and refer them to the estate representative. If that doesn’t work, contact your attorney.

Tip 2: Joint debts are still your responsibility

It’s very common, especially for spouses, to have joint debts, such as joint credit card accounts. In this situation any debt left behind by a deceased person is still your responsibility if you entered into it as a joint debtor. However, not all debts that married couples have our joint debts, and you should never sign an agreement creditor since you asking you to assume a debt. Instead, review the original debt documentation and refer the matter to your attorney or the estate representative.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Protecting Yourself From Gold-Diggers

Jul 12, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: asset protection, Estate Planning, Financial Planning

For a single elderly person, the prospect of the new romantic relationship can be incredibly exciting and comforting. However, there is often danger in these relationships, especially when you have a significantly higher amount of assets than your new partner, or if the new partner is significantly younger than you. If you’re worried about protecting yourself from a gold digger, consider these two options as possible protections.

Powers of Attorney

As much as we don’t like to think about it, there will come a time when you may lose your ability to make wise financial choices. Even if you never develop a medical condition such as dementia or Alzheimer’s disease, cognitive decline is common as we get older. At some point, you may want to transfer your financial decision-making abilities to someone else through a financial power of attorney. With this document you can choose whomever you want to manage your finances on your behalf. This way, you will be less able to cause financial damage to yourself, if you enter into a new romantic relationship.

Prenuptial Agreements

If the relationship has progressed and there is now talk of marriage, it’s always in your best interest to use a prenuptial agreement, also known as pre-marital agreement. These contracts can protect both you and your would-be spouse by clearly defining what would happen in the event you would divorce. You can also protect your children’s inheritances by having your new wife waive a spousal inheritance right, or at least a portion of it.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Gift Tax Exemption Mostly Disappearing at End of Year

Jun 30, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: asset protection, Estate Planning, Taxes

For individuals and families with significant assets, the time to use the $5 million gift tax exemption is running out. As soon as January 1st, 2013 rolls around, the $5 million exemption will be reduced to $1 million, and any gifts above that amount will be taxed at a 50 percent rate.

The gift tax exemption applies to gifts that parents give to their families during their lifetimes, instead of through a will. Currently, parents can give individuals up to $13,000 per year as non-taxable gifts up to the $5 million limit. That limit will significantly decrease in about 6 months.

Estate planning attorneys are already dealing with an influx of clients seeking to take advantage of the exemption, though doing so isn’t always as easy as it sounds. Gift giving strategies sometimes take weeks, or even months, to structure properly and make sure they mesh with the other elements of a complete estate plan. In other words, those who wait until the end of the year to try to take advantage of the gift tax exemption may wait too long.

Gifting also often involves creating trusts to handle turning over major assets, such as real estate. Trusts may also be important when the parents wish to give gifts to children who are too young to manage the property.

Regardless of the method of gift giving, anyone with significant assets should speak to an estate planning lawyer as soon as possible to discuss how the gift tax exemption might apply to your estate.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Why Would a Man Adopt His 42-Year-Old Girlfriend?

Mar 04, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: asset protection, Wills and Trusts

Recent news out of Florida has shed light on one of the stranger legal cases to arise in the past several years. A 48-year-old multimillionaire named John Goodman recently legally adopted his 42-year-old girlfriend. At first glance it seems like a very strange move, to say the least. However, there is a legal method behind this apparent madness.

One night back in 2010, Mr. Goodman was driving and got into a car crash that resulted in the death of another man. It appears as if Mr. Goodman had been drunk behind the wheel, and after the accident he fled the scene on foot. Now Mr. Goodman faces manslaughter charges as well as a civil lawsuit brought the deceased man’s family for wrongful death. The end result of all this could be that Mr. Goodman spends the rest of his life in jail and loses his entire fortune.

However, much of Mr. Goodman’s fortune is owned by an irrevocable living trust he had created several years ago for the benefit of his two teenage children. The trust, worth about 400 million, does not allow the children to choose how to distribute the funds until they reach the age of 35. So, when Mr. Goodman adopted his adult girlfriend she automatically became entitled to one third of the trust money and is old enough to choose how to use it. Effectively, she can choose to give it all to Mr. Goodman.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Washington State Creditor’s Claims Procedures for Insolvent Estates: Part 2 of 3

Feb 03, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: asset protection, Estate Planning, Financial Planning, Probate

The Washington State Legislature created a relatively simple procedure for helping insolvent decedents. The Washington Creditor’s Claim Procedure allows creditors to settle their debts outside of probate. Often, small estates are not subject to probate procedures pursuant to Washington State law.

Often called a Personal Property Affidavit or Small Estate Affidavit, the Revised Code of Washington sets forth a procedure for individuals with small estates to avoid probate procedures. A Small Estate Affidavit allows a resident to avoid probate using a statutory form if their assets do not exceed $100,000 and only include personal property. In this case, a Washington State resident can devise all of their personal property using the Small Estate Affidavit without going through probate. A resident with more debts than assets cannot use the affidavit to convey property and avoid their creditors. As such, if you are a Washington State resident without real property and your net worth is $100,000 or less, you can use the statutory form if you take care of your debts owed to creditors.

According to the Washington Revised Code, personal representatives or executors of a decedent’s estate must strictly comply with the statute triggering the limited period for creditors to make claims against the estate. Failing to comply with the strict statutory requirements may give creditors up to 24 months to make their claims and prohibit you from making distributions to heirs for the entire period.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Washington State Creditor’s Claims Procedures for Insolvent Estates: Part 3 of 3

Feb 03, 2012  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: asset protection, Estate Planning, Financial Planning, Probate

Continuing the three-part blog series covering Washington State’s law allowing personal representatives and executors to expedite the allowable statutory limitations period in which creditors can file claims against a decedent’s estate, this final blog covers the mechanics of the Washington State Creditor’s Claims Law.

The Washington Legislature passed the Creditor’s Claims Law that allows creditors to receive their debts within a relatively short period thereby allowing heirs to receive their inheritances quicker. Without the statutory provision, creditors would have 24 months to make their claims for unpaid debts after a decedent’s death. With the statutory provision, creditors have only four months to claim their debts after the estate publishes a Probate Notice to Creditors in a local newspaper of general circulation. Whereas before the state passed this statute, heirs had to wait at least 24 months to receive their inheritances, they are only required to wait four months after the state passed this statute. Creditors have up to four months to perfect or make their claims for unpaid debts against estates.

You can contact our office to schedule an appointment to discuss your estate planning options and potential claims from creditors. We can help you determine if you can take advantage of the Washington State Creditor’s Claims Law.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

6 Ways to Protect Your Beneficiaries with Estate Planning

Oct 07, 2011  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: asset protection

You can protect your beneficiaries with good and comprehensive estate planning.  In fact, you can give protections for them that you can’t get for yourself, without taking your assets off-shore.  Here are 6 ways to protect your spouse, children, and grandchildren with estate planning.

  • You can avoid disinheriting your children by holding assets in trust, as opposed to owning assets jointly with your spouse or someone else.

 

  • You can protect the governmental benefits of a special needs beneficiary by passing assets in a special needs trust, not outright.

 

  • You can protect your beneficiaries’ assets from themselves if they have a drug, alcohol, gambling, or other addiction.

 

  • You can protect your beneficiaries’ assets from their own bad decisions and bad relationships by including spendthrift provisions and a professional trustee.

 

  • You can avoid your beneficiaries’ assets being taken in a lawsuit, bankruptcy, medical crisis, or divorce by passing them in a protected trust.

 

  • You can protect your beneficiaries from losing assets in a relationship, business failure, or a bad car accident with trust planning.

The key to protecting your beneficiaries is to pass assets in trust, not outright.  If the assets go outright, they can be attached by creditors, stolen by predators, and lost through addictive behavior and bad decision-making.  You determine how much control your beneficiaries have.

The highest level of asset protect comes from passing assets in trust, with protective language and an independent trustee.  Your beneficiary can serve as a co-trustee, if you’d like.  Young beneficiaries can be taught how to manage money, live within their means, and be good stewards of wealth.  They can become co-trustees, with progressive levels of responsibility.

If your beneficiary is his or her own trustee, with no co-trustee, there is likely little or no asset protection.

If you have any questions about how to protect your own beneficiaries with estate planning, consult with a qualified estate planning attorney.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Estate Planning 101: Insurances You Need

Mar 02, 2011  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: asset protection, Estate Planning

Part of your estate planning includes an analysis of your insurance needs and coverage.  The best estate plan in the world can be all of naught if you are not properly insured. 

1.  Disability Insurance

Most people know to purchase life insurance to cover their loss of income should they die, but equally important is disability insurance to cover loss of income while you are alive, but disabled and unable to work.  Disability insurance provides part of your wages (50%-60%) to replace your income lost due to disability.

Note that if you pay the premiums on your disability insurance, proceeds are not subject to income tax; however, if your employer pays the premiums, the proceeds are subject to income tax.

2.  Life Insurance

Life insurance is used for several purposes:

  • Income replacement to support your family when you die.
  • To create an estate so you can leave your family members an inheritance.
  • To equalize an estate so beneficiaries can receive equal inheritances.
  • To fund a buy/sell agreement.

3.  Umbrella Liability Insurance

Umbrella liability is also known as “personal catastrophic” insurance.  It raises your homeowner’s and your car insurance up to the policy limits such as $1,000,000 or $2,000,000.  It’s very inexpensive for a lot of coverage.

4.  Homeowner’s or Renter’s Insurance

Homeowner’s and renter’s insurance provides liability coverage in case someone is hurt in your home or on your property.  It also covers property damage and property loss in the event of fire, theft, and the like.

5.  Car Insurance

Each state has mandated minimum limits for car insurance.  However, the minimum limits may not be appropriate for you. 

In addition, you would likely benefit from having underinsured and uninsured motorist coverage.  These policies pay for your own losses should you be injured by someone without adequate coverage.

If you have questions about how insurances fit into your estate plan, consult with a qualified estate planning attorney.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.

Working and Social Security Benefits

Dec 31, 2010  /  By: Geoffrey H. Garrett, Estate Planning Attorney  /  Category: asset protection, Estate Planning, Social Security

It is possible to work and receive retirement or survivors benefits from Social Security. Working affects each of these benefit programs in different ways.

Working affects retirement and survivors benefits in the same way. You can work and receive benefits under these programs. Your age at the time you are receiving benefits determines how working affects the amount of benefits you receive.

  • Born between January 2, 1943 and January 2, 1955 – Your retirement age is 66. If you work at full retirement age or older, you can make any amount of money without affecting the amount of retirement or survivor’s benefits you receive.
  • If you are younger than 66 in 2009, you can earn $14,160 before Social Security begins to reduce your benefits. Social Security will deduct $1 (from your retirement or survivor’s benefits) for every $2 you earn above $14,160.
  • There is a special rule that applies if you retire at age 66 because of employment income, you may have received before retirement and if you take a part-time job that pays less in that same year.

If you are one of the lucky few who have managed to weather the current financial crisis without losing significant value from your retirement funds, this is not an issue. However if you need the addition income to make up for loses or you just enjoy working, it is important to know what the rules are to prevent getting an overpayment. Social Security will seek to recoup an overpayment if that happens.

You should keep accurate records of the income you receive in the event that Social Security should determine that you have been overpaid. Remember any action by Social Security can be appealed.

The amount of money you can earn without triggering any penalties changes every year. You can get information about this by going to www.ssa.gov or contacting the Social Security Administration by phone at 1-800-772-1213.

Byrd : Garrett, PLLC is a member of the American Academy of Estate Planning Attorneys.