Can You Inherit Your Parents’ Debt?

There’s a lot to sort through after the death of a parent – photos, heirlooms, documents. But what about outstanding debt? In most situations when a person dies the burden of debts falls on the estate (not the heirs personally), but the debt can eat into an inheritance and heirs are known to make missteps in distributing assets without settling debt first. However, settling certain types of debt could become your personal responsibility. Which kinds of debt? Let’s run through them. TAX DEBT Taxes still apply beyond the grave. The estate must pay any property or income taxes, which you need to sort out before divvying up the inheritance. If you don’t it can come back to haunt you. For example, if an heir tries to sell their parent’s home before a tax debt is paid, the IRS can place a lien on the property to settle the debt. CREDIT CARD DEBT If you’re a cosigner on a parent’s card, all associated credit card charges will fall to you. Even if you weren’t a cosigner, debt collectors might still hassle you to collect the outstanding money from the estate (but see below about bill collectors). If the estate has the money those debts must be paid by the estate; if the estate doesn’t have the money those debts will most likely die with the debtor. Be wary of bill collectors, who are known to use aggressive tactics so do the following to minimize the problems:

• After a death, alert all the relevant credit card companies that the cardholder is deceased; send them a certified copy of the death certificate (or a faxed/scanned copy if they allow it since death certificate costs can add up).
• In most states, this should stop any interest from accruing while the executor settles the estate.
• If family members receive harassing phone calls from bill collectors during this process, it’s good to know your rights. Some collectors will say anything to get paid, and some even claim that a spouse or sibling is a cosigner on an account when they’re not. Always ask for relevant paperwork to back up their claims and direct them to speak with the Executor, who’s currently settling the estate.
• If things get heated, always remember: If you’re not a cosigner for the card, this isn’t your debt and you don’t have to take any abuse.

Don’t Get Rattled: Credit card companies hand these debts off to other companies to collect and their bark is often much worse than their bite. It doesn’t make it less annoying but at no point should you use your own money to pay off debts that aren’t yours no matter what they tell you. MEDICAL DEBT Was your parent covered by Medicaid? Then the state where the death occurred can attempt to recover payments by placing a lien on your parent’s house or other assets, but there’s a lengthy list of things it cannot do while attempting to collect that debt (a.k.a. “estate recovery”):

• It can’t ask you to use your own funds to foot the Medicaid bill.
• It can’t go after a surviving spouse.
• It can’t collect if you or another sibling lived in your parent’s home at least two years prior to his/her death and personally provided care that postponed admission into a nursing home.

If your parent wasn’t on Medicaid and left hospital or doctor bills behind, the estate is responsible for those like any other debt. However, this is when you have to watch out for “filial responsibility” statutes, which according to MarketWatch “can be traced back to colonial times and (in theory) impose a duty on adult children to support their impoverished parents.” It basically forces adult children to pay for a parent’s lingering medical debt when the estate simply can’t. More than half the states in this country have these laws, but rarely enforce them. However, when it comes to collecting debts anything is possible. MORTGAGE DEBT This can be a tricky one. If your parent still has a mortgage at the time of death, most of the time the estate won’t have to pay it in full immediately – but the estate needs to continue making payments until the property is transferred to another person or sold. If you’re saddled with a mortgage that’s worth more than the actual property (“underwater”), you can ask the bank for a short sale. Should they say no, you can ask to foreclose instead. But be warned: Banks can pursue the estate for the difference between the sales price and the money still on the loan in the event of foreclosure. You only have to worry about a foreclosure affecting your bank account and credit score if your name is on the mortgage. Again, if you didn’t sign or cosign for the loan then it’s not your problem. If your parent had a reverse mortgage, payment is due on those normally within six months, and it’s best to settle them ASAP. Should your parent’s mortgage become too much of a headache, you can always disclaim or refuse your inheritance. This passes the house off the person who would’ve gotten it if you were no longer alive. ONE MORE THING ABOUT BILL COLLECTORS… It’s important to note that there are laws in place to protect you from disingenuous or abusive debt collectors. You may send complaints to the Federal Trade Commission or your state attorney general’s office. IF YOU NEED HELP WITH SETTLING AN ESTATE, WE ARE HAPPY TO ASSIST. CALL US AT (720) 266-8190 OR FILL OUT THE FORM BELOW AND WE'LL CONTACT YOU SHORTLY.

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The Hidden Importance of Beneficiary Designations

You may think their estate plan is complete just because you’ve signed a will or trust. Not true!

In every single case, if your beneficiary designations are not reviewed when you sign a will or trust, your estate plan likely will not work out as you think.

Here’s what I mean: You probably have retirement accounts or life insurance policies or both. Whether you have an employer sponsored retirement account, your own IRA, a life insurance policy through work, or an individual stand-alone life insurance policy – all of these types of assets have one thing in common: BENEFICIARY DESIGNATIONS. When you opened these accounts, you named beneficiaries as part of the process. But time has passed since then. Maybe you were single when you opened the account and now you’re married, or maybe you didn’t have children when you opened the account and now you have children. Maybe you named your now-ex-spouse as a beneficiary but you’ve since divorced, or you named a minor child as the beneficiary, or you named a sibling as the beneficiary with the verbal promise they’ll use the money to support your children. Whatever the case, your beneficiary designations are out-of-date by the time you sign a will or trust.

Why does this matter? Beneficiary designations trump a will or trust. Any asset with a named beneficiary pays out to the named beneficiary regardless of what your will or trust says.

We’ve seen a life insurance policy paid out to the ex-girlfriend of someone who passed away and who left a surviving spouse and children. Sadly, the deceased person’s surviving wife and children had no right whatsoever to the life insurance policies even though his estate plan said “I leave everything to my surviving spouse and children” – because the beneficiary designation to the ex-girlfriend trumped his estate plan. We’ve also seen a life insurance policy with a minor child named as beneficiary, throwing the surviving family members into the probate court system where a judge is deciding who is in charge of the life insurance proceeds until the child turns 18. Everything filed in the probate court is public, exposing your and your child’s private information to solicitors, and then you have a young adult who just turned 18 in charge of a very large sum with no more mentorship or oversight on how to use the money responsibly. The good news is that you can update beneficiary designations at any time. This is the hidden danger of do-it-yourself estate plans – a computer program is not going to review your beneficiary designations or even tell you it’s important. If your attorney is not asking you about beneficiary designations as part of the estate planning process, you might as well do a do-it-yourself estate plan because in either case, your estate plan will very likely not play out as intended since beneficiary designations trump a will. The bottom line: A beneficiary designation is an incredibly powerful tool, so it is imperative that you pay very close attention to them and make sure to review them when you are signing a will or trust. So, how should you name your beneficiaries? Here’s your typical “attorney answer” – it depends on your specific circumstances! At Wills & Wellness, we take a holistic and comprehensive approach to your estate planning and we want to ensure your beneficiary designations achieve what you want them to in light of your family, your assets, and your goals. The last thing we want is for the estate plan you worked hard to put in place to be trumped by something you weren’t even aware of. Your Wills & Wellness Estate Planning Attorney will always review your beneficiary designations as part of your planning to ensure your entire estate plan is harmonious and will achieve your ultimate wishes at the end of the day.

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Who Plans Their Own Funeral?

Funeral Planning Workshop Wed, Oct 26 at 6:00pm

Free admission. Light refreshments and babysitting will be provided.

RSVP at http://ift.tt/2a2jH8r

Few of us are prepared for the death of someone we love. Those left behind struggle with many difficult questions: What type of funeral service would my loved one want? What arrangements can our family afford? The purpose of a Pre-Arranged Funeral Plan is to help with these important decisions.

But I don’t need a funeral. When you’re dead, you’re dead.

A funeral or memorial services has very little to do with the person who died. It’s for the people they leave behind. Loved ones benefit by meeting the deep human need to mourn surrounded by their family and friends.

But my wishes are in my Will.

On the day of the death, loved ones go to the funeral home, not the safe deposit box. By having everything in place at the mortuary, loved ones are spared the burden of making the plans.

But my kids know what I want.

On the day of a death, people are not in their right minds. Even if they know what you want, they might not be able to think at that time.

I have life insurance to pay for my funeral.

Most people maintain life insurance to cover the risk of their death at a young age. As they get older, term insurance becomes prohibitively expensive and people discontinue it. Then their loved ones are left to pay for it.

Medical care is so good, death is optional.

It’s very hard for us to recognize that we’re all mortal. We never know when our death will come, just that it will.

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Family History and DNA Testing

Introduction to Genealogy Workshop Tues, Aug 23 at 6:00pm

Free admission. Light refreshments and babysitting will be provided. We will cover topics such as DNA testing, genealogy mapping, family history resources, and more!

RSVP at http://ift.tt/2aqPq16

Have you seen the popular TV shows Who Do You Think You Are, Genealogy Roadshow or Long Lost Family, where individuals connect with their ancestral roots or biological families? It’s no surprise that the hobby of genealogy has dramatically increased in popularity over the last decade. Did you know that beyond an interesting hobby, knowing about one’s family history has been proven to be a powerful tool to help children cope in today’s world? In an Emory University study published in the Journal of Family Life, it was documented, “Children show higher levels of emotional well-being if they know stories about relatives who came before them…[because] family stories provide a sense of identity through time, and help children understand who they are in the world.”

“Children show higher levels of emotional well-being if they know stories about relatives who came before them…[because] family stories provide a sense of identity through time, and help children understand who they are in the world.”

Many people have the desire to connect with their roots and to leave a family legacy for the future generations, but they aren’t sure where to start. Maybe they’ve been told family stories, but the details are a bit fuzzy and they would benefit from some fact-checking. Or maybe their parents and grandparent were tight-lipped about the past, so they really know very little and would like to fill in the gaps. These individuals want to take the scattered bits and pieces of their family’s history and put them into a cohesive form that can be shared and preserved for the future. In the not-to-distant past, family history research required trips to courthouses or libraries near and far to browse through dusty, forgotten records, or crank reels of microfilm in hopes of finding a shred of evidence about the family. Now historical records are being digitized at a rapid rate with online availability at websites like Ancestry.com or FamilySearch.org. And to top things off, it’s now easy to share stories and historic photos via social media or our smartphone apps. Modern technology and science are also making family connections possible with DNA testing in the fast-growing field of genetic genealogy. Often decades-old brick walls that cannot be solved with traditional research alone are being toppled by the submission of a saliva sample in a test tube. The possibility of connecting with genetic cousins or learning more about one’s ethnic roots has attracted nearly 4 million people to DNA test in just the last 5 years. Have you thought about what your DNA might tell you? Getting started with family history research can be fun and addicting! There are many tools and resources online that the search can literally begin in your armchair in your pajamas. Having a basic foundation in the knowledge and methods to get started will help maximize your success in discovering new information about your family. Do you have a famous (or infamous) character somewhere in your family tree? Do you know the stories of your heritage, culture and traditions? Would you like to put names to the faces in that old album of unidentified photos? Do you want to connect with cousins with whom you share the DNA of your ancestors? It’s all about discovering, sharing and celebrating the lives of those who came before us, who made us uniquely who we are today. Wills & Wellness Estate Planning will be hosting a special Introduction to Genealogy program by professional genealogist and national speaker Deena Coutant. Deena will inspire you to get started with your own personal journey of discovery and will guide you down the path of genealogical success. Come learn how to incorporate your family history, DNA, photos and stories into something special to be preserved for future generations. DNA test kits will be available for purchase at the end of the class. Free admission. Light refreshments and babysitting will be provided. Please RSVP here - http://ift.tt/2aqPq16

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7 Must-Do’s Before Your Summer Vacation

The summer season is here! And that means travel and vacations are high on everyone's list. One thing that might not make it to a typical traveler's to-do list is estate planning—but it couldn't be more important as you prepare to enjoy the sandy beach or the Rocky Mountains. Americans spend more time planning their vacation each year than planning their estate. Knowing what would happen to your family if something happened to you is critical for travel with peace of mind. Before heading off on your summer vacation, check a few estate planning items off the list first: Establish guardianship for minor children. If you have minor children, there is never a good excuse to neglect this all-important step: choosing a guardian for your children. Give your children's caretaker the legal short-term guardianship document needed to ensure they can make decisions for your children in case of an emergency. Also lay out the plan for long-term guardianship if you aren't able to raise your children. Review or update your incapacity documents. Clarity in a legal document about what exactly happens in a medical emergency—who makes medical decisions for you, who your care providers can speak with, and what you want in an end-of-life scenario—takes this heavy burden off family members. Supplement these documents with an emergency wallet card to ensure your plan's wheels are rolling as quickly as possible. Organize your legacy drawer. Be sure you have an organized file of all your account statements and your full estate plan before you go. Also include a full list of usernames and passwords to your online accounts. And be sure to tell your family where they can locate the file if and when it becomes necessary. Complete an estate plan if you don't have one. If you've been putting it off, now is the time to complete your estate plan! Ensure your loved ones know exactly what you'd want them to do and that your insights, values, stories, and experiences aren't lost. Plus, without an estate plan, any children 18 and over will have full control over their share at 18 years old—that would be like winning the lottery but not in a good way! Update an existing estate plan. Has something changed in your life since you last updated your estate plan—a birth, death, marriage, divorce, different job? Each of these live events triggers the need to update your estate plan before you go out of town. Review beneficiaries. Beneficiaries of your retirement accounts, life insurance, and other assets should be reviewed frequently to ensure the proper beneficiaries are named. If you have minor children, it is never advised to name your children outright as beneficiaries; instead you should set up a trust and name the trust as beneficiary so your assets can pass without court oversight. Review or update insurance. Does your life insurance coverage still meet your family's needs? If not, it is time to update your insurance benefits before you hit the road.

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It’s Not Just Death and Taxes: You Need an Incapacity Plan That Works When It’s Needed

Estate planning is not only about having a plan in place to deal with what happens at your death, it is also about having a plan in place to deal with what happens if you become mentally incapacitated. In this issue you will learn:

• What happens without an incapacity plan.
• The essential documents for managing finances during incapacity.
• The essential documents for making health care decisions during incapacity.
• How to choose the right person for managing finances and making health care decisions during incapacity.
• The importance of keeping your incapacity plan up to date.

If you have any questions about incapacity planning or whether you need to make updates to your incapacity documents, please call our office now.

Court-Supervised Guardianship or Conservatorship: How to Lose Time, Money, and Control During Incapacity

Mental incapacity caused by an accident, injury, or illness means you will be incapable of making informed decisions about your finances and well-being. Without a comprehensive incapacity plan in place, a judge can appoint someone to take control of your assets and make all personal and medical decisions for you through a court-supervised guardianship or conservatorship. You and your loved ones could lose valuable time, money, and control until you either regain capacity or die. Planning Tip: You may believe you are protected if you become mentally incapacitated because you hold your assets in joint names with your spouse, a child, or another family member. While a joint account holder may be able to access your bank account to pay bills or access your brokerage account to manage investments, a joint owner of real estate will not be able to mortgage or sell the property without the consent of all other owners. Aside from this, adding names to your accounts or real estate titles may be deemed a gift for gift tax purposes. In addition, if a joint owner is sued, your property could be seized as part of a judgment entered against them. Only a comprehensive incapacity plan will protect you and your assets from a court-supervised guardianship or conservatorship and the misdeeds of your joint owners.

The Essential Documents for Financial Management During Incapacity

There are two essential legal documents for managing finances that must be in place prior to becoming incapacitated: 1. Financial Power of Attorney. This legal document gives your agent the authority to pay bills, make financial decisions, manage investments, file tax returns, mortgage and sell real estate, and address other financial matters that are described in the document. Financial Powers of Attorney come in two forms: “Durable” and “Springing.” A Durable Power of Attorney goes into effect as soon as it is signed, while a Springing Power of Attorney only goes into effect after you have been determined to be mentally incapacitated. 2. Revocable Living Trust. This legal document has three parties to it: The person who creates the trust (the “Trustmaker” or “Grantor” or “Settlor” – they all mean the same thing); the person who manages the assets transferred into the trust (the “Trustee”); and the person who benefits from the assets transferred into the trust (the “Beneficiary”). In the typical revocable living trust situation you will be the Trustmaker, the Trustee, and the Beneficiary of your own trust. However, if you become incapacitated, then your Successor Trustee will step in and manage the trust assets for your benefit. Planning Tip: To be part of an effective incapacity plan, your Revocable Living Trust should contain provisions to determine your mental status through a private process (i.e., a disability panel, an attending physician, the opinion of two physicians, or some other method) instead of a public court process. In addition, the trust agreement should contain specific instructions about how to take care of you if you are declared mentally incapacitated.

The Three Must-Have Documents for Health Care Decision-Making

There are three essential legal documents for making health care decisions that must be in place prior to becoming incapacitated: 1. Medical Power of Attorney. This legal document, also called an Advance Directive or Medical or Health Care Proxy, gives your agent the authority to make health care decisions for you if you cannot do so because you have become incapacitated. 2. Living Will. This legal document gives your agent the authority to make life-sustaining or life-ending decisions if you become incapacitated. 3. HIPAA Release. Federal and state laws dictate who can receive medical information without the written consent of the patient. This legal document gives your doctor or other health care provider the authority to disclose your medical information to the agent selected by you. Planning Tip: Your loved ones may be denied access to medical information during a crisis situation and end up in court fighting over what medical treatment you should, or should not, receive (like Terri Schiavo’s husband and parents did, for 15 years). Without these three documents, a judge may also appoint a Guardian or Conservator of the Person to oversee your health care, thereby adding further expense and hassle to your court-supervised guardianship or conservatorship. You should have these three documents examined and updated frequently to ensure they accurately reflect their wishes.

How to Choose the Right Agents for Your Incapacity Plan

There are two very important decisions you must make when putting together your incapacity plan:

1. Who will be in charge of managing your finances during incapacity; and
2. Who will be in charge of making your medical decisions during incapacity.

Factors you should consider when deciding who to name as your financial agent and health care agent include: Where does the agent live? With modern technology, the distance between you and your agent should not matter. Nonetheless, someone who lives close by may be a better choice than someone who lives in another state or country. How busy is the agent? If your agent has a demanding job or travels frequently for work, then they may not have time to take care of your finances and medical needs. Does the agent have expertise in managing finances or the health care field? An agent with work experience in finances or medicine may be a better choice than an agent without it. Planning Tip: Choosing the wrong person to serve as financial or health care agent will result in an ineffective incapacity plan. You can pick different people to fill each role, that is, one person in charge of health care decisions and someone else in charge of financial matters. In order to create an effective plan, you need to carefully consider who to choose as your agent and then discuss your decision with that person to confirm that they will in fact be willing and able to serve.

Is Your Incapacity Plan Up to Date?

As time passes by and your life changes, your incapacity plan will become stale and outdated. It is important for you to have your incapacity plan reviewed every few years or after a major life event (such as a divorce or a death) to insure that the plan will work the way you intend it to work if it is ever needed. Please contact our office to discuss your questions about incapacity planning and to schedule your plan review.

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Pets Need Protection Too

For many pet owners, pets are members of the family. Pet owners often say that if something happens to them, they are as concerned about will happen to their pets as they are with their children and spouse.

What Happens to the Pets When the Owner Becomes Disabled or Passes Away?

Most pet owners want the assurance of what their pet will experience if they can’t provide for them. Without proper planning, state and county laws dictate what happens to the pet. In many states, a pet is taken to a shelter by Animal Control if a family member is not present and willing to care for the pet and in many cases pets may be euthanized within three to five days if a family member does not come to get your pet. Thus, it is critically important that pet owners know how their state and county laws may impact their pets

Planning Tip: Pet owners should discuss with their estate planning attorney how state and county laws affect pets after the owner passes or cannot care for the pet.

Providing for Pets Upon the Owner’s Passing

Pets have many ongoing financial needs, such as the cost of daily care (food, treats, and daycare), veterinary care (yearly teeth cleaning, shots, nail trimming, and emergency care), grooming, boarding, travel expenses, and pet insurance. As a pet owner, you will want to ensure the pet guardian has the financial resources to adequately support and provide for your pet. You can leave cash for a pet guardian in one of two ways: outright gift or pet trust. Outright Gifts: The law considers pets “property”, and thus an individual cannot leave money outright to a pet, since property cannot own other property. Instead, you may leave an outright gift of cash to a pet guardian with the request that the pet guardian use the funds to care for the pet for the rest of the pet’s life. Note, though, that if the caretaker receives the cash gift outright and not in a pet trust, no one is responsible for ascertaining whether the pet is receiving the care requested by the pet owner. Pet Trusts: To protect a cash gift for pets from being spent on anything other than the pet, you can utilize a pet trust instead. A pet owner names a pet guardian as the beneficiary of a pet trust, requires that the distributions to the beneficiary are dependent on the beneficiary caring appropriately for the pet, and requires the trustee to ensure that the beneficiary is properly caring for the pet using trust assets. A pet trust is helpful when the amount of cash left for the pet is significant, otherwise the cost for separately maintaining and administering a pet trust may not be worth the benefit. If you opt for the pet trust, here are several things to take into consideration:

• Creating a pet panel to offer guidance to the trustee and pet guardian, and to remove and replace the trustee and pet guardian if necessary. Consider including a veterinarian to make the final decision regarding euthanization for medical reasons, to ensure that the pet is not euthanized prematurely by the pet guardian.
• Paying the pet guardian a monthly gift for caring for the pet.
• Awarding a bonus to the pet guardian at the end of the pet’s life as a “thank you” for taking care of the pet.
• Determining how the trustee is to distribute the remaining trust funds after the last pet dies.

Planning Tip: Will planning is inadequate for pets because a last will does not address disability and because of the time lapse between the pet owner’s death and the will being admitted to probate.

Do you have a pet? Is your pet protected by your estate plan? Contact us for comprehensive pet planning as part of your estate plan.

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