The Perils of Online Estate Planning

The rise of online estate planning has lead to a rise in problems attorneys discover after the fact, many of which an estate planning attorney could avoid.

While the attraction of simplicity and low cost is appealing, the results are all too often disastrous, affirms Insurance News in the article “Mind Your Mouse Clicks: DIY Estate Planning War Stories.” The increasing number of glitches that estate planning attorneys are seeing in online estate planning after the fact has increased, as much as the number of people using online estate planning forms. For estate planning attorneys who are concerned about their clients and their families, the disasters are troubling, and very difficult to fix in estate administrations.

A few clumsy mouse clicks can derail an online estate plan and adversely affect the family. Here are five real life examples.

Details matter. One of the biggest and most routinely made mistakes in DIY estate planning goes hand-in-hand with simple wills, where both spouses want to leave everything to each other. Except this typical couple neglected something. See if you can figure out what they did wrong:

John’s will: I leave everything to my wife Phyllis.

Phyllis’ will: I leave everything to my wife Phyllis.

Unless John dies and Phyllis marries someone named Phyllis, this will is not going to work. It seems like a simple enough error, but the courts are not forgiving of errors.

Life insurance mistakes. Jeff owns a life insurance policy and has been using its cash value as a “rainy day” fund. He had intended to swap the life insurance into his irrevocable grantor trust in exchange for low-basis stock held in the trust. The swap would remove the life insurance from Jeff’s estate without exposure to the estate tax three-year rule, and the stock would receive a stepped-up basis at death, leading to tax savings on both sides of the swap.

However, Jeff had a stroke recently, and he’s incapacitated. He planned ahead though, or so he thought. He downloaded a free durable power of attorney form from a nonprofit that helps the elderly. The POA specifically included the power to change ownership of his life insurance.

Jeff put his name in the space designated for the POA. As a result, the insurance company won’t accept the form, and the swap isn’t going to happen.

Incomplete documents. Ellen created an online will leaving her entire probate estate to her husband. It was fast, cheap and she was delighted. However, she forgot to click on the space where the executor is named. The website address for the website company is the default information in the form, which is what was created when she completed the will. The court is not likely to appoint the website as her executor. Her heirs are stuck, unless she corrects this, hoping the court will understand. Hope is a terrible estate plan.

Letting the form define the estate plan. Single parent Joan has a 6-year-old son. Her will includes a standard trust for minors, providing income and principal for her son until he turns 21, at which point he inherits everything. Joan met with a life insurance advisor and applied for a $1 million convertible 20–year term life insurance policy. It will be payable to the trust. However, her son has autism, and receives government benefits. There are no special needs provisions in her will, so her son is at risk of losing any benefits, if and when he inherits the policy proceeds.

Don’t set it and forget it. One couple created online wills, when the estate tax exclusion was $2 million. They created a credit shelter, or bypass, trust to reduce their estate taxes, by allowing each of them to use their estate tax exclusion amount. However, the federal estate tax exclusion today is $11.4 million per person. With $4 million in separate assets and a $2 million life insurance policy payable to children from a previous marriage, the husband’s separate assets will go into the bypass trust. None of it will go to his wife.

Online estate planning is dangerous because there is no opportunity to receive legal advice on how to meet your goals in your estate plan.  An experienced estate planning attorney who is licensed to practice in your state is the best source for creating and updating estate plans, preparing for incapacity and ensuring that tax planning is done efficiently.  This post will help you get started.  https://galligan-law.com/how-to-begin-the-estate-planning-process/

Reference: Insurance News Net (Sep. 9, 2019) “Mind Your Mouse Clicks: DIY Estate Planning War Stories”

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The Importance of Business Succession Planning

Business succession planning is a critical part of estate planning, especially when you plan to use the value of your business to fund your retirement

Business succession planning prepares for a business owner’s retirement or untimely disability or death. Research shows that 78% of small business owners responded that they plan to use the sale of their business to fund their retirement. However, just 25% of private business owners say they have a succession plan in place.

The Houston Business Journal’s recent article, “Three tips to employing establishing a strong succession plan,” takes up this matter for discussion.

Applying proactive business succession planning may help your business successfully move to new leadership and keep operations running smoothly. Here are a few tips for establishing your succession plan.  You can also see here for more information.  https://galligan-law.com/practice-areas/business-succession-planning/

Regardless of whether you’re going with a family member to succeed you or bringing in someone from the outside to take over, it’s important that the plan is communicated beforehand. You don’t want workers speculating or feeling blindsided by the decision.

Be sure that you have legal documents in place and clear expectations, guidelines, and rules, so there aren’t any gray areas when the time of transition comes.  This is essential in business succession planning.  This may come in many forms from traditional estate planning such as Wills or Trusts, and business specific documents such as Buy-Sell Agreements, the documents governing business operation and more.

If you are appointing a family member, set out details on how other family members will contribute to the company if they are interested. You could have more than one family member run the company, but it may be best to have one clear decision maker.  Part of business succession planning is establishing the plan before you stop operating the business yourself.  So, if you are appointing a family member who isn’t currently involved in the business, bring them in early to teach them and familiarize them with the company and its employees and vendors.

If you want to have an outside party come in to run the company or have a longtime employee assume leadership, be open to ideas. Don’t overlook someone who may be a good leader and a good fit for the position. As business climates shift, technologies advance and workplace skills change, make a selection of a leader who can adapt to those changes.  Remember to pick someone who will be in the best position to keep your business profitable, especially if the business will help fund your retirement.

As you work on business succession planning, leverage a team of experts, such as an estate planning lawyer, business lawyer and an accountant. You should also work with a business broker who can provide a realistic valuation of your company.

Reference: Houston Business Journal (September 3, 2019) “Three tips to employing establishing a strong succession plan”

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Caring for an Elderly Parent Without Ruining Your Relationship

Caring for an elderly parent can strain the relationship. Keep these issues in mind to protect your relationship while caring for a parent.

Caring for an elderly parent is not easy.  If you have elderly parents, you might have to provide caregiving services at some point.  Whether that concept means hands-on personal assistance with things like bathing, dressing, grooming, and feeding, or handling their finances and making decisions for them, this change in your roles can be challenging for you and your parent. If you enjoy a great relationship with your parent, the initial conversation about these issues may be easier and you may find the suggestions I made in this Kevin’s Korner very helpful.  https://youtu.be/UI8mMp2ZnWg

But even if you don’t, its important to realize your parent’s condition may affect your relationship, and you want to be prepared so you can care for your loved one without worsening your relationship.  Here are some issues to consider about how to help your elderly parent without ruining your relationship.

It’s Usually Not “Leave It to Beaver”

Many people grow up seeing fictional families on television and wishing their parents and siblings got along better. No families measure up to the imaginary ones of fiction.  In fact, quite a few people have strained interactions with their parents.

Relationships carry the baggage of the past. It is not helpful for people to tell you to forget about the past. Your parent is the same person with whom you have had conflict, which means he or she will continue to do things that upset you. If your parent was extremely authoritarian or independent, it will be difficult for him or her to accept someone telling them what to do – especially one of their children.

Patience versus Doormat

You should try to be understanding of what your parent is going through, losing independence, feeling less valuable or powerful or no longer acting as a primary decision maker for the family. He might get confused and forget you already did things, he now accuses you of not doing. He might also be dealing with chronic pain and other health issues.  Some diseases such as dementia cause paranoia, and your parent might become suspicious of you because of it.

You should, however, set boundaries. Getting old does not give your parent a right to be physically, verbally, or emotionally abusive. Be firm with your parent, if any of these things happen. Being a dutiful son or daughter does not include being a doormat. Calmly inform your parent of the behavior that is not acceptable. You might need to have someone in social services arrange for counseling to help your parent adjust to the reality of aging and needing assistance.

Get Help

Caregiving takes a toll on the financial and physical health of the caregiver.  Understand that even though you love your parent, you don’t have to do everything.  Consider speaking with a care manager who can work with you to establish a care plan for your parent and help you hire other service providers to care for your parent.  This will relieve some of your burden, and give you a sense of comfort knowing your parent is cared for.  See this blog for more details.  https://galligan-law.com/long-term-care-whats-it-all-about/

The Silver Lining

For some people, this stage of life is a time to deal with unfinished business. You can talk out problems or questions. You might be able to resolve conflicts that could have caused you regrets down the road. The best approach for this goal to tread lightly. Remember that your parent might be frail no matter what they might think, and you should not assault them with a long list of criticisms and complaints.

Address only one piece of a small issue in a visit, and do not dredge up unpleasant topics in every visit. You do not want your parent to dread seeing you. Be the kind of person you might wish your parent had been when you were a child – kind, compassionate and nurturing.

Those of you who have enjoyed a happy, healthy relationship with your parents can deepen your mutual affection and interaction. Since your parent is no longer rushing around to work and raise a family, you can have uninterrupted conversations and create memories to treasure. People who have had strained relationships might reach the point at which they have pleasant times and treasured memories with their elderly parents.

References:

A Place for Mom. “Parenting the Parent: Caring for Elderly Parents.” (accessed August 21, 2019 ) https://www.aplaceformom.com/planning-and-advice/articles/caring-for-elderly-parents

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