I know, a happy little Friday topic! One of the best stress-relievers you can leave for your family is to keep as many financial accounts and insurance policies as possible out of your estate. Why? Because your beneficiaries will get the money faster and with (mostly) little hassle.
You see, most financial accounts allow you to designate a beneficiary, a person who will more or less automatically get that account or the money in it when the financial institution is notified of your passing. A POD, or "pay on death", account only requires a death certificate in order for the bank or credit union to cut a check to the person you designated as the POD beneficiary. A TOD, or "transfer on death", account is much the same way, only the assets are transferred into a new account in the beneficiary's name when the institution gets a copy of the death certificate and some paperwork gets filled out. The reason we have TOD accounts rather than making them all POD is that the assets in a TOD account might fluctuate in value or have penalties for liquidation (think fluctuating stocks or mutual funds, or an IRA where the beneficiary isn't old enough to start making penalty- and tax-free withdrawals).
Another way to avoid having accounts pass through your estate involves designating the accounts as JTWROS (joint tenants with right of survivorship), where the surviving owner just keeps on owning the assets in the account - many married couples have this type of account.
Quick note on insurance policies: sometimes people take out a policy and name their estate as the beneficiary (or, as too many military members are advised, say "by law"). Although there are situations where this is the smart thing to do, it's usually not. Like mostly not. Like practically never. If you want your spouse, kids or whoever to get the insurance proceeds, specifically name them in the beneficiary designation form the insurance company provides. Easy peasy.
All of these tools will ensure that the assets you want your heirs to have will get to them quickly, rather than having to wait (sometimes months) for the will to be probated. Your survivors will thank you! Now go have a beer, it's Friday!
I've probably drafted over 5,000 estate planning documents in my 32 years as a lawyer. At least half of those have been advance directives of some ilk: financial powers of attorney (POAs), medical POAs, directives to physicians, etc. Not until my father became ill, however, did I have to make use of one myself. We're in the middle of that season right now, and I have discovered a few things about the practice of implementing advance directives that I didn't know:
1. A lot of people who should ask to see a medical power of attorney just don't ask. I've discussed my dad's care and condition with a number of nurses and other staff who just accepted that I was who I said I was and that I was the primary agent named on the MPOA (I'm not, and didn't tell them that I was). Does that mean you shouldn't get one? NO! It simply means that there's a lack of training in the institutions we've been dealing with, which (as a former hospital attorney myself) shocked me a bit.
2. A lot of people who have no need to see an advance directive ask if you have one. Why? I guess because it's on their checklist, and it's on the checklist partly because it's easier on the facility if you have one. Often, if you don't have one, they'll urge you to fill one out. Remember, you don't EVER have to complete a living will if you don't want to.
3. As long as you know the patient's name and date of birth, you can get a fair amount of information from the physician's staff over the phone. One office even declined when I asked if they wanted me to scan the HIPAA release and send it to them! I guess I have a telephone voice that inspires confidence...
As happened when I had to serve as executor of my brother-in-law's estate a couple of years ago, I find that walking in the shoes of the people I serve, like executors and healthcare agents, gives me a better view of the challenges and surprises they face, and that, hopefully, helps me be a better advisor, counselor and representative. That's what I'm choosing to take away from this experience, anyway. I'll address more of these issues as our personal journey continues. In the meantime, if you have any spare prayers, please send them my father's way. I know where he's going, I'm just not wild about the process of him getting there.
While I sit here waiting for the car to get washed (why do I do this on Sunday afternoon? Why?) it occurs to me that things seem to run in packs in my practice. The latest recurring theme is people needing to probate the estate of a loved one who say, in various fact patterns, "We can't find his/her original will but here's a copy, that should be okay, right?"
Very often, the answer is, "Wrong." Why? Because in Texas and many other jurisdictions, if the testator (person who made the will) was in sole and exclusive possession of the original and it can't be found after the testator dies, the law presumes that the testator destroyed or revoked it.
It's not just the will that needs to be available, it's powers of attorney, advance directives, bank and financial account numbers and passwords, insurance policies, other recurring online transaction information, property records, etc. - all the stuff that needs to be dealt with and wrapped up after you die. At the firm, we include a list of these documents with every state planning packet we prepare.
The best thing you can do for your family is to have a binder with all this information in it, ready for your personal representative to grab and go. Original documents (most importantly your will) should be in clear plastic sleeves in the binder and the binder should be stored in a secure location (could be a locked filing cabinet or firebox). Give your executor separate instructions on how to locate and access the binder (hey, make it a scavenger hunt: "check the center drawer of the desk, the combination to the lock box/key to the filing cabinet is inside"). This will ensure your most important documents are accessible and organized when your loved ones need them most.
I'm a retired Air Force officer (JAG - love my Corps!). The title of this blog reflects the old Air Force Doctrine Document 1-1 (pronounced One Dash One), "Flexibility is the key to air superiority". Nowhere is flexibility more in evidence today than in Houston and southeast Texas, where nobody's waiting for somebody else to jump in and be about the work of rescue, response, reprovisioning and shelter. Texas and Louisiana boat owners have poured into the area, giving relief and supplementation to government resources stretched beyond the maximum, going house to house and neighborhood to neighborhood in search of stranded residents. Churches like Christ Church UMC in Sugarland (www.christchurchsl.org/) and Bayou City Fellowship (http://bayoucityfellowship.com/) - the churches my kids attend - have sheltered evacuees and marshalled and distributed desperately needed assets, coordinating with local authorities but not waiting for permission, simply being the hands and feet of Christ to those in need, even while many parishioners and staff are dealing with their own flood-related challenges. It is a mighty work to behold and reminds me powerfully that, in the words of one of my recent favorite Facebook posts, "Charlottesville isn't America, Houston is America". Houston Texans defensive monster J.J. Watt's fundraising efforts have garnered over $4 million in about four days. Color and background and personal lifestyle choices are nowhere to be seen; they - we - are just neighbors to be loved as ourselves. Blessings and prayers for safety, stamina and perseverance to all those in need and all those assisting.
On the legal side for you who are affected by Harvey, some tips:
1. blog.texasbar.com/2017/08/articles/guest-blog/vick-state-bar-has-legal-resources-to-help-during-harvey/ has some great tips and links for disaster-related legal services, most of which are free.
2. Don't pay anybody cash to help you connect to resources, or start cleaning up your property, or get "on the list" for repairing your house, and DON'T BE PRESSURED. Shysters and evil, ungodly opportunists abound and walk about like wolves in sheeps' clothing wherever they perceive an opportunity to prey on the temporarily weak.
3. If you have flood insurance, contact your insurance company promptly, even before you can get back to assess the damage. If you have renter's insurance, same advice.
4. If you don't have flood insurance on your property, FEMA loans will be available. Keep on top of announcements of when/where/how to apply.
Most of all, thank God for the people who are willing to pitch in and help, whether paid first responders, Cajun Navy or your down-the-street neighbor. And look around for that same opportunity - there's always somebody worse off than you. Hands and feet, people. Hands and feet. God bless.
A large part of my law practice is business formation and representation, and I hear this entirely too often: "Oh, I just went onto the state website and formed my LLC/corporation, it was easy!"
Then I start asking questions:
Are you in business with somebody? Lemme guess, 50/50, right? If so, do you have a company agreement or bylaws? If you don't have a company agreement, how are you going to resolve issues where you fundamentally disagree? In fact, you should have a CA even if it's just you, so that if you bring on another owner later, you'll have a framework for how to do that. And did you have an organizational meeting or annual meetings? If so, did you make a record of the meeting?
The answer is usually, "Well, no, I just have this Certificate of Formation..."
Or I'll have somebody come in who used one of those online services that included a company agreement, but the agreement doesn't cover what they're worried about, and there wasn't anybody to ask when they originally formed the company. And they haven't had a meeting since they started the company (one of them hadn't had an annual meeting or minutes in the 12 years he'd been in business).
One size often does not fit all. That's why it's important, maybe even crucial, that people starting a business talk with a business lawyer about how to do it. Not having a company agreement can put you in a death grip with another owner of the LLC if you fundamentally disagree. Not having annual meeting minutes can result in you being personally liable for debts and obligations of the LLC or corporation if you get sued. This stuff matters.
If you're thinking of starting a business, talk to a business lawyer as a part of your due diligence. If you're already in business but behind the curve on one of the issues discussed above, talk to a business lawyer. Yes, it's how we feed our children, but it's also money well spent to get you started off on the right foot (or get you back on track).
Confession time: until I had a daughter who's an elementary school teacher, I was pretty clueless about how far funding goes in the public school system, and how much teachers dig into their own pockets to supply and equip their classrooms. My daughter teaches at a lower-end-of-the-socioeconomic-scale school in Houston, and I spent Saturday cutting out crate covers that double as seats for some of the kids in my daughter's class, and a little more time whacking composition notebooks in half so they'll go farther with her kids, all bought with non-budgeted (out-of-pocket) funds. She's also on our Amazon account, so I see all the stuff she buys in the course of a school year, with her own money. I'm astounded at how much she spends to give her kids the kind of education she knows they need - and she'd spend more if she had it. She's not alone.
Enter you. Not for my daughter, but for your kids' or grandkids' or neighbor's kids' teacher's classroom (yes that's a lot of possessives, but it works!). Visit www.donorschoose.org/ - it's a website with oodles and scads of projects that need funding, posted by teachers all over. Click on "Find a classroom to support" and a new page comes up with subjects you can support, or you can enter your local school, town or zipcode.
Kids and their teachers, including my amazing, passionate daughter, Mara, are headed back to school this month. You can help make it a better, stronger, more productive school year with any size contribution. Don't leave it to the education system, participate yourself! And thanks.
College students, you’re headed (or headed back) to campus in a few weeks, perhaps a long way from home. Let this estate planning lawyer/father of two daughters who are college graduates give you a little advice about something that few consider when loosing the parental collar.
Once you're 18 years old, you're an adult in the eyes of the medical world. That means your doctor/hospital/pharmacist can't, without your permission, share your information with your parents or let them be involved in your treatment.
"Good!", I hear you say. "None of their business if I'm on the pill or getting prescription meds while I’m at school."
No (well, not much) argument here; however, it also means that unless you give your parents authorization ahead of time to make treatment decisions for you in the event you're not able to (called a Medical Power of Attorney, or MPOA), or let them have access to your medical records when necessary, they can't help you. And when you need an MPOA, it's too late to get one.
Situation 1: Imagine you’re in a car accident that renders you unconscious or worse, but not dead. Without an MPOA, after the initial emergency is over, neither your parents nor anybody else can make treatment decisions about your care without going through a huge, complicated process that usually involves the courts and a LOT of expense.
Situation 2: You’re at a bar or a frat party or an initiation event (I know, you’d NEVER drink alcohol before you reached the age of 21, but humor me here) and have so much to drink that you pass out, vomit and aspirate it into your lungs. Think that’s not a medical emergency or that it would never happen? It is, it does, and it has long-lasting complications. Without the MPOA, your parents are back to the expense, the courts and the heartache.
Do yourself - and your family - a favor: get a medical power of attorney before you go (or go back) to school this fall. You can find the form online (I wouldn't recommend this option, but it's available). Better yet, talk to your parents about going to an estate planning attorney to have one prepared. A good estate planning lawyer doesn't just do wills (which also wouldn't be a bad idea): he or she will explain your choices and give you (and your parents) peace of mind that if something bad happens, you (and they) are prepared.
Imagine going to your dad's financial institution (bank, investment company, credit union, etc.) because your dad's no longer competent to manage his own affairs. Imagine that while he was still competent, he gave you a statutory durable power of attorney (SDPOA) that meets all the requirements of your state's estates code and that authorizes you to, among other things, manage his financial affairs. Imagine how you'd feel if the institution said, "I'm sorry, our policy requires that the POA be on our form, we can't accept that one." Now you're in the position of not being able to do the precise thing your dad wanted and authorized you to be able to do for him, just because his financial institution wants it on their form - you're also unable to get him to sign "their" POA because HE'S NOT COMPETENT ANYMORE. Think you'd be a little frustrated?
The above scenario happens every single day, all over the country. Since I'm a Texas lawyer, I'll confine my observations to Texas; however, your state is probably very similar. Until the 2017 Texas Legislature recently gaveled to a close, a person presented with a SDPOA was not required to accept it. Effective September 1, 2017, Senate Bill 1974 made a fundamental change to Texas' Estates Code by requiring a person presented with a validly executed SDPOA to accept it. There are a few hoops they can still make you jump through, such as requiring a certification (also spelled out in the statute) or a legal opinion that supports the validity of the SDPOA, but they can't make you use their form except in a few situations.
As a firm working in the estate planning and elder law areas, we have seen entirely too many clients have to go through the frustration of thinking their loved one did everything he/she needed to do, only to be roadblocked by a financial institution's "policy". Thank goodness the Legislature got it right this session. If your parents (or you) don't have SDPOAs, Medical POAs, wills, advance directives and HIPAA releases in effect, or they need to be updated, do yourself and your family a favor: do them or update them this month.
As always, this is legal information, not legal advice, and is based on Texas law. If you have a question or concern about this topic, contact an estate planning, probate or elder law attorney in your jurisdiction.
My wife had our first child when I was 32 years old. Holding that sweet little girl in my arms was amazing - the first newborn I'd ever held (heck, probably only the second baby I'd ever held!). However, the overwhelming wonder and love I felt was accompanied by an equally overwhelming sense of responsibility: all of a sudden it's not just the two of us - there's someone else's welfare to consider. The idea of planning for bad stuff quickly became more urgent.
Now, I think everybody ought to have some simple advance directives, both medical and financial, just in case (after all, when you need it, it's too late to get it). However, parents of young children have an extra burden: who's going to raise those punkins if the parents die before the kids reach the age of majority?
It's not a fun thing to contemplate, but it happens, and closing your eyes to the possibility - failing to plan - puts your children at risk of going into the system. You know, the "We'll take them and place them with some very nice foster parents" system, especially if her family and his are fighting over who gets them. Tragically, this happens more often than you'd think, especially when young parents either 1) just don't want to think about it (denial, river, etc.) or 2) can't agree on who will raise them ("Your brother? Really?"), or 3) don't want to hurt anybody's feelings, so they just convince themselves that the family will pull together and do what's best for the kids. HEY! Why aren't YOU doing what's best for your kids?! Parents, make the hard decision, make wills that name guardians for your minor children and put that nagging worry to rest. And then just enjoy the gift that God gave you.
Caveat right up front: I'm not a CPA and I don't give tax advice. But this is a recurring issue both with our vendors and for some of our clients, so I thought it might be for you, too.
If you're an independent contractor, that means the companies and people for whom you provide services don't withhold employment taxes from your check. "Yay! More for me!", I hear you cry. Not so fast, Mr/Ms Entrepreneur! You see, if you receive more than about $600 per year from anybody for services performed, they have to issue you a Form 1099. They also file that 1099 with their own taxes. That means the IRS will know you got paid, and that worthy agency will want to know if you paid taxes on that income.
It's not too late this year to fill out a Form W-9 and give it to each entity for whom you provide services, and then put away enough from the rest of your income from that entity to cover your tax bracket. That way, when that 1099 comes in next January or so, you won't be unpleasantly surprised by the the amount you'll owe the IRS on April 15th. After all, borrowing money on your credit card to pay your taxes just stinks.
As noted (and as always), the above is not legal or tax advice, and if you have questions or concerns, you should contact an attorney and/or a CPA to discuss your particular situation.