Category Archives for "Estate Planning"

Elements of Estate Planning: Power of Attorney

During the month of April, we are going to focus our newsletters on the most common documents that comprise an Estate Plan. In last week’s newsletter we discussed Wills.  This week we will look at a document essential to your Estate Plan, the Power of Attorney.

Estate planning is more than arranging for the disposition of assets at death.  It includes having a plan to deal with the possibility of incapacity during lifetime.

It is important for everyone to have a Power of Attorney, sometimes called a Financial Power of Attorney, a General Power of Attorney, or a Durable Power of Attorney.

The person executing the Power of Attorney is called the Principal.  The Principal appoints an Agent to manage some or all financial and legal matters.

A Power of Attorney can be immediately effective, or it can be a springing power of attorney that springs into effect when a condition is met, such as a doctor providing a statement that the Principal is incapacitated.

The Georgia Power of Attorney Statutory form explains that a special legal relationship is created between the Agent the Principal, imposing legal duties on the Agent.

If the Agent knows what the principal’s expectations are for the Agent in dealing with the Principal’s financial affairs, the Agent is supposed to carry out those expectations.  If the Principal has not communicated any expectations, the Agent is supposed to act in the Principal’s best interest.

The Agent should keep careful records of all receipts, disbursements and transactions.

Georgia law authorizes an Agent to be reimbursed for reasonable expenses.  For the Agent to receive compensation, the Power of Attorney must specifically authorize compensation.

The current Georgia Power of Attorney law was enacted in 2017.  If a Power of Attorney was executed prior to 2017, it is important to do a new one that follows the 2017 statute.  If it is time to update your Power of Attorney, please call our office at 770-817-4999 today.

Do you have other questions about estate planning?  I am hosting a webinar with Attorney Jeremiah Amos on Saturday, April 24th that may help you identify what you need to “protect your stuff”.  For more information or to register, click here.

Elements of Estate Planning: Last Will and Testament

During the month of April, we are going to focus our blog posts on the most common documents that comprise an Estate Plan. We will begin with the document that most often comes to mind when someone is considering Estate Planning, a Last Will and Testament.  If you are receiving our newsletter, you likely already have a Will in place, but do you know what a Will does?

The primary purpose of your Will is to serve as a roadmap for the distribution of your assets at death. By having a Will in place, you decide who is in control of your estate, who gets what assets and when. A Will can be used as a stand-alone document governing the distribution of your entire estate or it can be used in conjunction with living trusts – in which case it may simply direct that the assets be added to an existing trust to be distributed under its terms.

In your Will, you name an Executor who will manage your estate after your death and ensure that the terms of your Will are carried out. You should name someone who you trust and who you know will be able to handle the duties of the Executor.

If you have minor children, you should name a guardian in your Will to care for them if both parents are deceased. You can also create a trust in your Will to hold assets for a young child and choose someone to manage the trust assets until the child is more mature and responsible.

After being appointed by the Court and paying off any debts of your estate, your Executor will distribute your assets according to the terms of your Will. You can choose to leave cash gifts to relatives, friends, charities, or other organizations. You may also provide for the distribution of your personal effects to ensure, for example, that your sister gets your great-grandmother’s quilt. You can also designate who should care for your pets after you are gone. Any remaining property will be distributed to the beneficiaries you select in the shares you determine.

Your Last Will and Testament is an important building block to ensure your Estate Plan will be effective. Without a Will in place, these decisions are left to the state.

The next step is to update your beneficiaries on assets like life insurance policies and qualified retirement plans to align with your Estate Plan. You can learn more about the importance of naming beneficiaries here.

Do you have questions about estate planning?  I am hosting a webinar with Attorney Debra Robinson on Saturday, April 24th that may help you identify what you need to “protect your stuff”.  For more information or to register, click here.

Do you have questions about your personal Estate Plan?  Give us a call at 770-817-4999 to schedule an update appointment today.

Asset Protection Using Corporations and LLCs

A small business owner or owner of rental real estate has exposure for liabilities arising from the operation of the business or from the real estate.  To provide protection from that liability, owners will often create a corporation or a limited liability company (LLC).

Corporations have been around for a long time. LLCs are a more recent structure, having come into being in the late 1970s.  Both are formed by filing a document with certain information with the Secretary of State in the state that is the home base.  More information is generally required to be made public with a corporation than with an LLC.

There are two kinds of corporations for income tax purposes.  C corporations are taxed at the corporate rate, and then if profits are distributed to the shareholders, the shareholders pay tax on what they’ve received.  For that reason, most small businesses or owners of rental real estate elect to be S corporations, with profits and losses passing through to the shareholders.

An LLC combines the characteristics of a corporation with those of a partnership.  LLC members can choose how they will be taxed.  They can be treated as a sole proprietorship, a partnership, or a corporation.  The most common option is a sole proprietorship so that profits and losses are passed through to the members.

LLCs are often used by owners of rental real estate.  Owners with multiple rental properties will sometimes isolate the liabilities by having each rental property owned by a separate LLC.

Deciding which entity structure to use depends on the type of business, tax consequences, the owners long and short term goals, and other factors.  We advise our clients to consult with their CPA before forming either of these entities.

Could your business interests benefit from one of these types of protection?  Our team will work with your financial and business advisors to be sure you are protected.  Call our office at 770-817-4999 to schedule an appointment today.

Defensive Asset Protection

We live in a society that files some 70,000 lawsuits per day, many without merit.  The high legal costs of defending a frivolous lawsuit often force defendants who have done nothing wrong to pay an out of court settlement.  The first step to protection is insurance, but it’s not possible to insure yourself against every possible contingency or exposure.  The next step is to implement the tools and strategies developed by asset protection specialists to discourage predatory lawsuits and spurious claims.

A contingent fee attorney is unlikely to launch a lawsuit when there is little prospect of recovery.  The best asset protection is an individualized asset protection strategy that:

  • Deters litigation by minimizing the economic incentive to sue;
  • Insulates business and family assets from the risk of potential liability, without relinquishing asset control; and
  • Puts your assets out of reach legally, if it becomes necessary.

Many of the legal tools and strategies have been around for decades.  Corporations, limited liability companies, limited partnerships and various trusts are often excellent business structures and effective estate planning vehicles.  Properly implemented  they can be powerful asset protection tools as well.

A more sophisticated asset protection plan will utilize a Family Limited Partnership (FLP).  The FLP provides the safest asset protection available domestically.  It creates a legal barrier between your assets and whoever may want to get at them.

The FLP is designed to hold “safe assets” such as stocks, bonds, mutual funds, notes receivable and other liquid assets.  The FLP may also own risky assets, such as rental real estate, through membership interests in limited liability companies (LLCs) that have been created to hold the risky assets.  LLC owners, like the shareholders of a corporation, generally can not be held liable for the acts of an LLC.  Once the risky assets have been placed in an LLC, the FLP can safely hold them.

The ultimate deterrent against lawsuits is an International Wealth Management Trust (IWMT), sometimes referred to as an Offshore Trust.  The IWMT serves as the majority limited partner of the Family Limited Partnership.  If there is the threat of a lawsuit, the IWMT pulls your assets out of reach of the U.S. court system by legally transferring them to a foreign jurisdiction.

After a lawsuit has been filed or a demand made, it’s too late to protect your assets.  The time to act is when the waters are calm.

We are all aware that there is a ton of offense out there.  You can’t drive across town without seeing ads for contingency fee attorneys plastered on billboards and bus stops.  You can’t watch tv or listen to the radio without hearing the ads.  The question is, what kind of defensive asset protection planning have you done?  If it is time to consider updates to your plan, call our office at 770-817-4999 to schedule an appointment.

Medicaid Planning with Trusts

Due to the high cost of nursing home care today, many seniors look to Medicaid for help covering the expense. In order to qualify for Medicaid in Georgia, the applicant’s income and assets must not exceed certain limits. As of this writing, the income cap for Georgia Medicaid is $2,382. An applicant can qualify for Medicaid even if income exceeds the cap by using a special type of trust called a Qualified Income Trust or a “Miller” Trust. In addition to the income limit, there is also an asset limit – the applicant may not have more than $2,000 in assets.

Many people consider giving assets away in order to put themselves below the limit.  In an effort to curtail this, there is a fiveyear look back period. Any assets given away during the five-year period before applying for Medicaid must be disclosed and a penalty period is assessed based on the value of the assets.

What can you do if your assets exceed the limits? If you plan ahead, you can use a Medicaid asset protection trust to qualify for Medicaid without having to spend down or give away your assets. By transferring your assets to the trust, you no longer own the assets for Medicaid purposes. After five years, you can apply for Medicaid without having to disclose the assets held in the trust. Since the assets are owned by the trust rather than the Medicaid recipient, they are also protected from recovery by the state at death.

There are some stipulations to consider.  The trust must be irrevocable, meaning you cannot change or amend its terms. You can be the income beneficiary of the trust and the Trustee may distribute any income earned by the assets held in the trust to you or use it to pay for your care. You cannot be the principal beneficiary of the trust. This means you cannot take an asset out of the trust and put it back in your name. Instead, you would name some other person or persons to be principal beneficiaries, such as your adult children or nieces and nephews. Principal of the trust could be distributed to those beneficiaries who would then use the funds to pay for your care.

If the trust owns your residence, you can continue to live in the residence, the Trustee can sell the residence and purchase a new residence for you, or maintain the sales proceeds in investments to provide additional income for your care. If the trust owns an investment account, the income earned on your investments can be used to provide for your care.

After your death, the trust provides for the distribution of any remaining property to your beneficiaries.

Are you concerned about long-term care costs depleting your estate? Contact us today to discuss your options and let us get a plan in place to accomplish your goals.

How To Protect Your Adult Child’s Inheritance

When a client has a child who is under 25, I always recommend that the client leave that child’s inheritance in a trust until the child reaches a more responsible age. The goal is to protect those assets and prevent a young, inexperienced beneficiary from squandering the inheritance. But what about an adult child who never seems to mature into a financially responsible individual?

Often times, it is prudent to leave an adult child’s inheritance in a trust until an advanced age or even for the child’s lifetime. When deciding whether a trust is needed to protect your child, you should honestly assess your child’s abilities. Is your adult child able to manage money properly? Do you have a child who is struggling with addiction and might not make the best decisions for himself or herself? Many clients also express concern over divorce and the risk that the child’s spouse would try to take half of the child’s inheritance. In any of these situations, a trust may be the best answer.

The trust protects the beneficiary from his own inexperience because you decide who is in control of the investment and distribution of assets by naming a Trustee. Assets may be distributed based on the needs of the beneficiary as determined by the Trustee. You can alsodirect that the Trustee distribute a certain percentage of the assets or a fixed sum at intervals you determine.

Another benefit of a trust is protection from creditors and divorce. In most instances, creditors cannot force the Trustee to withdraw funds from the trust. Rather than making distributions directly to the beneficiary, which could become subject to creditor’s claims, the Trustee could instead use the assets to pay for the beneficiary’s needs and bypass the creditor while providing for the beneficiary. The trust also provides protection from a divorcing spouse because the assets are considered separate property while held in the trust.

Trusts are a great way to protect your child’s inheritance. By controlling when and for what purposes the assets may be used, a trust enables the child to make the most out of an inheritance.

Have you planned properly to ensure that your child’s inheritance will not be squandered?  If it is time to consider updates to your plan, call our office at 770-817-4999 to schedule an update appointment.

Want to learn more about Asset Protection?  We are hosting a webinar with attorney Douglass Lodmell, an expert on the subject, on March 25th.  For more information or to register, click here.

The Importance of Naming Beneficiaries

Certain types of assets, such as life insurance, IRAs, 401ks and annuities, allow the owner to name a beneficiary.  The asset will pass directly to the named beneficiary, outside of probate.

When creating or updating an estate plan, making sure the beneficiaries are correctly named is a very important aspect that is often overlooked.

In addition to naming a primary beneficiary, the account holder is able to name a contingent or secondary beneficiary in the event the primary beneficiary predeceases.  If a contingent beneficiary is not named, the default beneficiary under the insurance, retirement plan or annuity will often be the estate. That means that asset, which would not require probate if a beneficiary was named, has become a probate asset. 

If the asset was purchased years ago, the beneficiary designations set up at that time may no longer be correct.  There have been many cases where someone names a spouse as beneficiary of life insurance or an IRA, divorces that spouse and remarries, but never changes the beneficiary from the former spouse to the current spouse.  The failure to update the beneficiary meant the former spouse received those funds.

There have been cases where the company that serves as custodian of a retirement plan changed to a new custodian, or maybe had several changes in custodian, and the records showing who was named as beneficiary were lost.  Sometimes it hasn’t even involved a change in custodian.  The account may have been held at one financial institution for twenty years, but when that institution updated its systems, the records showing the beneficiary for that particular account did not get updated. Those occurrences show that checking the beneficiaries every so often, even if there isn’t a need to change, is important.

It’s also important to make sure that the way the beneficiaries are named coincides with the account owner’s Will or Trust.  For example, if a widowed mother with two children has a Will that leaves her estate equally between her two children, but names only one child as beneficiary of her IRA, which is her sole asset, the other child is unintentionally disinherited. 

It is possible to undo the intention of an estate plan without realizing it by changing or failing to change a beneficiary.  Check your beneficiary designations periodically to make sure your wishes are carried out.

When Heirs Go Missing

One common goal for many clients is to ensure that, at death, assets are distributed to their intended beneficiaries without unnecessary delay or difficulty. As time passes, relationships may change and family members who were once close may drift apart. Beyond the emotional strain that this may cause in life, it may also bring unnecessary complexity in death.

In order to distribute assets from a deceased person’s estate, a petition is filed with the Court and all of the deceased person’s heirs must be notified, even if the person left a valid Will.

If the individual was married and had children, then the spouse and the children are theheirs. But let’s say the individual was single and had no children, in that instance the individual’s parents would be the heirs, or if they are deceased, the siblings and half-siblings. As you can imagine, it can get more complicated from there.

If a family has not been in contact for years, or even decades, locating that long-lost relative may be difficult. If an heir cannot be located through other family members or internet searches, there are companies that assist with locating heirs. If the heir still cannot be located, you may request that the Court provide notice by publication by showing the Court all of the efforts taken to locate the heir. After the notice runs in the county newspaper, the personal representative can proceed with administering the estate.

Before the estate can be closed, all of the estate assets must be distributed. If the missing heir is entitled to any portion of the estate, he or she must be located or that share must be distributed by other legal means, such as requesting that the Court hold the assets in a custodial account until the heir is located.

If you believe that it may be difficult for your personal representative to locate an heir, it would be wise to consider using a trust as part of your estate plan. If all of your assets are structured so that they flow through the trust, you can avoid probate at death and completely bypass the need to involve the Court and your heirs.

Is a Trust right for you? Reach out to my team at 770-817-4999 or to learn more.

Avoid Headache For Your Beneficiaries

When a Georgia Probate Court appoints an Executor or Administrator to be the personal representative of a decedent’s estate, the first requirement that person must meet is to publish a notice in the legal newspaper of the decedent’s county of residence.  That notice, called the “Notice to Debtors and Creditors”, requires that anyone who owes the estate money make immediate payment, and notifies creditors of the decedent to file their claims against the estate.  The Notice to Debtors and Creditors is published once a week for four weeks.  Creditors have a period of three months after the last publication to file a claim.

Before distributions can be made to the beneficiaries of the Will, or to the heirs of an intestate estate, all legitimate claims made during the claims period must be paid.  Even for individuals who don’t carry significant debt during their lifetimes, creditor claims after death can delay receipt by a beneficiary of funds he or she might need, and can diminish significantly the amount that is ultimately received.

If death occurs because of an illness, there may be medical expenses not covered by insurance.  The personal representative is responsible for paying those medical bills.  If death occurs because of an accident that is found to have been the decedent’s fault, the entire estate could be lost to paying that judgment.

In some states, claims are filed with the Probate Court, and the Court supervises their payment.  In Georgia, all a creditor has to do is send the bill to the personal representative.  Creditors will sometimes file a claim with the Probate Court, but the burden lies with the personal representative to make sure claims are paid.

Concern about creditor claims is one reason why people will choose to arrange their estate planning to avoid probate. Do you need to review your plan to ensure that your beneficiaries will be able to avoid the headache of probate?  Reach out to my team at 770-817-4999 or to learn more.

Where’s The Will?

Imagine that your loved one passes away and a Will cannot be found. The consequences could be devastating. That’s why I always check that my clients have a safe place to store their new Will at the time of execution.

Typically, when the location of a Will is not evident, the regular course of action is to search the deceased person’s home and personal effects, as well as consult family members and even the attorney who drafted the Will. If it remains unfound, the process to probate a copy can be quite an undertaking.

In this situation, there is a legal presumption that the original Will was intentionally destroyed. In order to overcome that presumption, you must show the Court all of the steps taken to locate the original Will and that there was no change in circumstances to cause the deceased person to change or revoke the Will. If these requirements are met, and none of the heirs object, the Court will allow you to proceed with probate using a copy of the Will.

If a copy of the Will cannot be located, the only option is to proceed as if the deceased person died without a Will at all. In this instance, the distribution of your assets is determined by Georgia law and undue responsibility may be placed on family or friends. Usually a family member or friend would petition the court to be appointed Administrator and begin to manage the estate. The Administrator must resolve any unsettled debts and expenses of the estate. Then the remaining assets would be distributed to the deceased person’s heirs as determined by Georgia law, not as provided in the lost Will.

I cannot overstate the importance of storing your Will in a secure location; preferably a safe deposit box or a fireproof safe. Also be sure to inform your family, and especially your Executor, of the location so they can ensure your wishes are carried out.

Taking these simple and seemingly small precautions can help protect your loved ones from experiencing unnecessary headaches—and even heartache—during what is already a difficult time.

Want to be sure that your documents are safe and your loved ones have assistance when they need it most?  We offer storage of original documents and a complimentary consultation with your family or helpers at your death as part of our Annual Maintenance Program.  Reach out to my team at 770-817-4999 or to learn more.

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