by BarryReviewing Your Estate Plan after the Death of a Loved One
The death of a loved one is never easy. Regardless of your relationship with the deceased (for example, a relative, significant other, or close friend), you need space and time to process and grieve your loss. Once you have had time to cope with all that has happened, you should consider updating your estate plan in light of your loved one’s death.
Although your estate plan primarily focuses on what will happen if you become incapacitated (unable to make or communicate your wishes) or die, the death of a loved one can have a significant impact on your planning. If you have an estate plan, one of the first things you need to do when a loved one dies is to review the documents with the following questions in mind:
Was your deceased loved one named as a beneficiary of money or property under your will or revocable living trust? If so, do your documents address what happens to that money or property should your loved one predecease you?
One of the main objectives of establishing a will or revocable living trust is to create a plan for what will happen to the things you own at your death. If you have strong feelings about who should receive your money and property, you must name who will inherit from you and also who will inherit the money and property if your first choice dies before you.
If your will or trust does not list a contingent (backup) beneficiary, the gift in question is canceled when the first-choice beneficiary passes away, and the accounts and property you wanted to leave to your now-deceased loved one become part of your general estate and will be distributed according to the remaining terms of your will or trust. This cancellation can be problematic if your beneficiary has a spouse, children, grandchildren, or other loved ones whom you would have wanted to receive the beneficiary’s inheritance instead.
Some states have enacted antilapse laws to protect against this result. In these jurisdictions, the beneficiary’s heirs will receive the gifts. There are a few caveats and distinctions from jurisdiction to jurisdiction. For example, some states limit the heirs who can benefit from antilapse laws to blood relatives.
Is a trusted decision-maker now deceased?
As part of your comprehensive estate plan, you likely selected several different important decision-makers to act on your behalf if you become incapacitated (agents under your financial and medical powers of attorney and a successor trustee) or to wind up your affairs after your death (a successor trustee, personal representative, or executor). If your deceased loved one held any of these positions, make sure a backup was nominated. If not, you need to update the affected document to include a new first choice and at least one alternate. If you have already named a backup in the document, you will want to update your document to name your backup as your new first choice and remove your deceased loved one’s name to prevent confusion when a third party reviews the document.
Personal representative (also known as an executor). This trusted individual, appointed in your last will and testament, is responsible for collecting all your accounts and property, paying your outstanding debts and taxes, and distributing your money and property to your named beneficiaries after your death. This person’s task is to wind up your affairs, which can be time-consuming. If your chosen personal representative dies before you and there is no named backup at the time of your death, the probate court will use your state’s laws to determine who is next in line to serve as personal representative.
Co-trustee or successor trustee of your trust. Serving either with you (as co-trustee) or after you become incapacitated or die (as successor trustee), this trusted person or entity is charged with managing, investing, and distributing the money and property from your trust to you during your lifetime (if you are incapacitated or are otherwise unable to act as trustee) and to your chosen beneficiaries after your death.
If your deceased loved one was a co-trustee with you, you should review your trust agreement to see what happens next. There may be a provision that either allows you to continue serving as the only trustee, names a specific person to step in and serve with you as co-trustee, or describes how to determine who your new co-trustee will be.
If your deceased loved one was named as your successor trustee, nothing noticeable will happen with respect to how your trust is managed right now. However, if you become incapacitated or die and there is no successor trustee, your loved ones must look to your trust agreement for guidance on filling the vacancy. Your trust may provide that a certain number of your beneficiaries can appoint a new trustee without court involvement, or your trust might require that the court approve any new trustee. The outcome will depend on the trust’s wording and your state’s laws. Because your trust is revocable and amendable during your lifetime, it is best to update your trust to appoint a new successor trustee or change any of these provisions as needed while you still have the ability to do so.
Agent under a financial power of attorney. Your agent is an individual you choose to manage your property and finances (such as communicating with your mortgage company, paying your bills, or accessing funds in your bank account for your care) on your behalf. If the person you selected is deceased and there is no named backup, no one else can act on your behalf when needed. If you become unable to manage your property and finances without appointing an agent in a financial power of attorney, your loved ones will have to go to court and have someone appointed by a judge to take care of your financial and property matters. The judge will make this determination based on state law, which prioritizes a spouse or blood relative serving in this role, and the person selected may not be the person you would have chosen. Not only is this process time-consuming during a stressful time, but it can be expensive and exposes the details of your condition and family dynamics to the public.
Agent under an advance directive for healthcare. Your agent under your advance directive for healthcare is typically authorized to make decisions or communicate your medical wishes in the event you are unable to do so yourself. Because this person can act only when you cannot, you may not feel an immediate need to update your advance directive for healthcare if your chosen agent has passed away. However, if you have an accident, become incapacitated, or are otherwise unable to communicate your medical wishes and you do not have an agent who can act for you, your loved ones must go to court to have a guardian appointed before anyone can speak on your behalf. The judge will look to the standards and guidelines provided under state law to aid them in appointing the appropriate person, who may not be the person you would have chosen to make your decisions. Second, the selected person may not know your wishes about the medical care you want to receive.
Guardian for your minor child. You have likely invested a lot of time and consideration in deciding who you would like to serve as the guardian of your minor children if you and the children’s other parent are unable to care for them. If the loved one you have selected has passed away, it is imperative that you update this selection. While your circumstances may vary, if your chosen guardian is unable to serve for any reason, and you have no alternate guardian nominated, the probate court will determine who will raise your child. As with other roles, the selected person may not be the one you would have chosen, and absent input from you, the judge may have limited information when making this critical decision.
We Are Here to Help
We understand that you are grieving the loss of a loved one. When you are ready, we are here to help you take the next step in your estate planning journey, whether you are starting, completing, or updating your estate plan. Contact us today to schedule your in-person or virtual appointment.
by BarryFour Tips for Every New Homeowner
Congratulations on the purchase of your new home! Whether this is your first home or you are upgrading or downsizing from your current home, the purchase of a home is a big event in your life. When major life events occur, it is important that you have a plan in place to ensure that you are properly prepared for the future. Below are a few things to consider now that you finally have the keys to your new home.
1. Update Your Address
Now that you are in your new home, it is very important that you update your address with the appropriate entities. Your local United States Postal Office has a form you can fill out. If you cannot make it into the post office, you can also update this information on their website. This will assist them in forwarding your mail to you.
To ensure that you do not miss any important tax notices or refunds, you will also want to update your address information with the Internal Revenue Service using Form 8822, as well as with your local state tax agency.
2. Make Sure That Your House Title Coordinates with Your Estate Plan
While it is still fresh in your mind, take a look at your new deed to determine how your new home is titled. Ideally, you had a discussion with an estate planning professional prior to purchasing the new property to determine how you would like to own your new property, whether in your name individually, jointly with a spouse, or in the name of your trust. It is important to review your current estate plan after the purchase of the home to ensure that it aligns with your estate planning goals.
For example, if your plan had a specific instruction to give your prior property to someone, and the instruction references the address of your prior home, you will want to ensure that you update this provision once you no longer own the previous property to avoid confusion down the line. On the other hand, if this is your first home and your estate plan includes a trust to avoid probate, you will need to ensure that your home is titled in the name of the trust and not in your name individually. Alternatively, you could have a transfer-on-death (TOD) deed prepared to add the trust as a beneficiary to the home. Additionally, if you would ultimately like your property to be distributed to a specific individual or held in trust for the benefit of your loved ones (for example, your minor children), you will want to ensure that provisions are added to accomplish this.
3. Check Your Life Insurance Coverage and Beneficiary Designations
Unless you were fortunate enough to pay cash for your new home, chances are you now have a monthly mortgage expense. In order to protect your loved ones, it would be prudent to prepare for the possibility of dying before you pay off your mortgage. You may want to consider whether you have enough life insurance to pay off the balance of the mortgage. This is especially important if you have a surviving spouse or children who will likely continue to reside in the home to ensure that they have sufficient funds to alleviate one of the largest monthly expenses they will probably have. Life insurance can provide valuable funds during what is usually an emotionally—and sometimes financially—difficult time.
When you buy a new home, it is a great opportunity to double check your beneficiary designations. Life changes happen so quickly that sometimes updating beneficiary designations can be overlooked. If your designations do not align with the rest of your estate plan, you may end up inadvertently disinheriting a family member, having a large sum of money fall directly into the hands of an individual (for example, a young adult or minor child) without any guidelines, or having your hard-earned money and property go to someone you no longer want to benefit from your life insurance.
Lastly, now that you have a home and homeowner’s insurance, call your insurance agent to make sure that you are getting all of the discounts to which you are entitled. Many insurance companies will offer discounts when you bundle services. If you already have car insurance through a carrier and use the same company for your homeowner’s insurance, you may be entitled to a better rate than if you obtained the policies at separate carriers. In addition, homeowners often get discounts that renters do not.
4. File for the Homestead Exemption
As a new homeowner, one of the best ways to reduce your property taxes is to file for a homestead exemption in the county where your home is located. The homestead exemption offers a significant property tax break for homeowners who occupy their home as their primary residence. It’s a simple process that can save you money every year!
To file for the exemption, you’ll need to visit your county’s tax assessor’s office or tax commissioner’s office or apply online, depending on your county. Generally, you’ll need to provide proof of residency, such as your driver’s license and a copy of your deed. Most counties require that you file by April 1st of the year after you purchase your home, so don’t wait too long. Once granted, the exemption renews automatically as long as the property remains your primary residence.
This small step can make a big difference in your property tax bill—so make it a priority after settling into your new home!
We Are Here to Help
Buying a new home is a big step, and we are here to help you plan to protect both your loved ones and your new investment. Give us a call so we can help ensure that your new purchase and your estate plan are working together to accomplish your goals. Contact us today to schedule your in-person or virtual appointment.