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Don't be that person who passes away without providing for your family. Your death will be hard enough on an emotional level, it doesn't have to be financially, procedurally, and legally burdensome as well. Put all the necessary pieces in place to provide a smooth transition for your family to heal and move forward.
The basic elements you may need from an estate planning attorney include the following:
Other elements of a complete plan may include retirement planning, life insurance, and long term care insurance. You should establish good ongoing relationships with your selected professionals who can work together to make sure your plan makes sense for your situation. These professionals are likely to include an attorney, accountant, financial adviser and insurance professional. In addition, it's a great idea to bring your teenage or adult children into the conversation to let them know what to expect. Some issues you should discuss include who has decision-making power, what your wishes are regarding health care, what type of living situation you would like once you can no longer live independently, and what kind of legacy you would like to leave behind. Putting your estate planning in place is essentially providing your family with a roadmap for when you have an emergency or for your inevitable death. Happy New Year! Time to wrap up last year and usher in new changes with conviction. Many people have estate planning on thier "to do" list or as a resolution for the year. Others aren't even sure if they need it or what it means. So a brief recap might be useful.
Who needs estate planning?
What is "estate planning"? Estate planning is a term that encompases both a process and a variety of documents. The process is a discussion between you and your estate planning attorney about your current life situation including:
Depending on your specific situation, the documents that may result from this discussion include:
If you fall in to any of these categories and want to start or revise your estate planning process, give us a call at (509) 557-7797 to schedule an appointment today. May your year be productive and fulfilling!  Around the holidays every year, we see an uptick in donations, volunteerism, and charitable giving. The season reminds us to look inward and find ways to help our communities. Part of my estate planning practice is to help my clients find ways to include charities into their legacy through a variety of options. Individuals can make gifts during their lives, sell property to charities at a bargain, or name charities as the beneficiary of life insurance or retirement accounts. If you are over 70 1/2, you can distribute IRA minimum required distributions directly to a charity without paying income tax. If you have real estate holdings that don't produce income or assets that have a high capital gain, there are a variety of other options where you give property to charity, but receive an annuity back for life or some other period of time or you give the property to charity for a period of time and then it reverts back to you or your heirs. Most all of these options have some tax advantage, but most importantly ultimately benefit causes that my clients are passionate about. If you would like more information about charitable giving or would like assistance in putting a plan into action, call me at (509) 557-7797.
Creative v. precise. Artistic v. objective. How often do we find passions or professions that utilize both sides of our brain? I'm lucky enough to have discovered how to get one side to support the other. I have two separate businesses, but they are related enough that what I learn from one directly makes me better at the other.
A little history first. My undergraduate degree is in journalism and public relations. During that time, I came across a cassette tape of stories told by my grandmother. She passed away during my elementary school years. Hearing her voice brought me right back to the hours spent snuggled up on the couch with her watching TV or reading a book. I transcribed those stories and turned them into a short book for my family. That sparked an idea in me that didn't seem to exist at the time, a career as a personal historian capturing stories, experiences, beliefs, and legacies to hand down to future generations (TimesFly, LLC). Fast forward several years, my love of technical details and in depth analysis led me to law school for my JD and more law school for my LL.M. in Taxation. Tax law, you can't get much more left-brained than that. My focus has always been in estate planning, probate, business and tax law, especially the intersections of them all, where organization is key. As an estate planning attorney, the goals and objectives shared with me by my clients spark my curiosity to know more detail about their history. The histories I've recorded have taught me just how deep family emotions can go and how long they can survive, sometimes resulting in unbelievable disputes after the death of a loved one. I have been a part of many such disputes as a probate attorney. My goal as both an attorney and personal historian is to assist my clients in ensuring that their legacy is passed on according to their wishes. A legacy isn't just accumulated wealth or assets, it's the values, beliefs, and sacrifices that that created them. Even if you don't have an impressive net worth, your life and history have a high value. In this Thanksgiving month, I am thankful to be where I am, doing what I do, for the clients I do it for. Whether saving estate taxes or fond memories, one side keeps making the other side stronger. The fiduciary responsibility of an agent (under power of attorney) or trustee is serious and often a difficult and thankless job. The role also provides a mechanism for an agent (adult child, friend, trusted adviser, etc.) to take extreme advantage of the principal (aging parent, developmentally delayed adult, etc.). A fiduciary is required to act in the principal's "best interest". Protecting our family, friends, neighbors and community from elder fraud, abuse and neglect is up to all of us. Do your friends and loved ones a favor and watch out for red flags including:
On the flip side, acting as the agent, you should always be alert to the potential liability you face from future beneficiaries, family members, and the principal himself/herself. Even when the principal passes away, you may be called on by the personal representative (executor) of the estate to account for money and assets you managed under a power of attorney. Protect yourself from claims by putting the following steps in place from the onset of your duties:
The law regarding powers of attorney has been updated in Washington, effective January 1, 2017, with a number of changes. Make sure your documents are up-to-date and if it has been over five years since you had them drafted last, it is a good idea to get them redone. If you are acting as an agent and have questions regarding your duties, rights, or liabilities, please contact our office. If legislation proposed yesterday is passed, the federal estate tax exemption may drop down to $3.5M from the current exemption of $5.45M. Of course, the first hurdle in Washington State is the lower estate tax exemption of roughly $2M and no option for portability (combining exemptions with your spouse). It's also important to keep in mind that your estate value for estate tax purposes includes assets such as retirement accounts, life insurance, and other assets that may transfer outside of probate. An article by Accounting Today covers more details regarding the proposed legislation.
The new LLC Act has been effective in Washington for almost two months now. However, many business owners are focused on their finances and activities from last year as they organize documents for their CPA in hopes of meeting the April 15 deadline. While digging through paperwork, this would be a great time to dig out your LLC Operating Agreement (or figure out that you don't have one). If you are in business with others, you should have some agreements in place regarding how you will manage your company together including who is allowed to represent the company to third parties (all members or just a manager?), what happens to a member's interest if he or she dies (inherited by family or bought out by other company members?), and how voting works when it comes to company decisions (per person or based on capital contributed to company?).
Some companies rely on the default provisions under the Washington statutes, but the statute has now been updated and several important defaults have changed. Just a few important changes include: Voting - Voting is no longer determined by capital contribution of the members ("% of ownership"), but a per-member vote. This could change the balance of power in many companies and what it means to be a minority-interest holder. One member may have contributed (and own) over 50% of the company, but will now only have the same vote as another member who contributed significantly less. Company Management - If a company wishes to be manager-managed, the election cannot be designated in the Certificate of Formation any longer, but must be elected in the LLC Operating Agreement. Oral Agreements - Oral agreements are now allowed between members, which sounds like it would help reduce paperwork, but may actually result in more litigation once members want to break up the company or enforce an agreement and have little evidence of those agreements. The new LLC statute is RCW 25.15. In addition to the new LLC statute, a completely new administrative section has been created to serve as a statutory hub to the spokes of the Limited Liability Company Act, Business Corporation Act, Nonprofit Corporation Act and others. The new administrative hub is called the Uniform Business Organizations Code and is codified at RCW 23.95. An LLC Operating Agreement can alter almost all of the default provisions to match the intent of the members. Now is the time to review your documents and the statute itself. Think about how you run your company, what agreements you assume are in place, and what you have written down. Pull out your documents, read through them, and ensure that if a disagreement should arise among the members, you have provided yourselves with a roadmap to settle the issues. Naming your trusted child as attorney-in-fact (AIF) under your durable power of attorney does not always protect him or her from being sued after you pass away. Siblings can and do challenge the actions of the AIF and claim your estate (their inheritance) should be worth more or have more than it does because the AIF/"favored child" made gifts to themselves, spent your money inappropriately, or didn't keep adequate track of assets spent during your life.
Yesterday, a lengthy decision from the Washington State Court of Appeals (In re Estate of Lowe) illustrated this fact when an AIF son assisted his mother with her finances, giving some to himself and spending some on her expenses, at her direction and request. The case involved hiding silver coins and bars in the chimney, moving them to a new location, accounting for them, selling them, and deciding who got them after the death of both the father and mother of the family. Many legal issues were discussed and decided. However, just one useful tidbit, a distinction is made between the AIF acting under his powers as AIF and a son merely following the directions of his mother regarding her own property. There is also a distinction between the role and duty of an AIF (under a durable power of attorney) and a personal representative (under a will), especially with regard to inventory and accounting of assets. To protect yourself and your attorney-in-fact, take the time to learn the pitfalls of the role and give clear and detailed instructions regarding your wishes. Don't brush off a power of attorney as a one-size-fits-all "boilerplate" or "form". The attorney-in-fact won in court this time, but clearly a lot of money was spent in the process and the family relationships will never be the same. One of the most common questions regarding estate planning is, "how do I avoid probate?" However, a better question is, "should I avoid probate?" Probate horror stories abound, but the process doesn't have to be expensive or stressful if the decedent's affairs are in order with a clear, appropriate estate plan in place. Depending on a number of factors (size of estate, location of assets, whether he/she has a surviving spouse), probate may actually be a good thing, especially when it comes to making use of certain kinds of trusts to fully utilize each spouse's state and federal estate tax exemptions.
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AuthorMegan M. Lewis Archives
February 2019
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