Estate Planning

A Law School Tale, About DIY Estate Planning

Tegan Blackburn

While there’s never a ‘perfect time’ to do estate planning, it’s not something to be put off. I tend to do a lot of estate planning after the holidays and start of the New Year; it just seems to be the right time for many people.

Sometimes, I run across clients who do the planning on their own, or through LegalZoom or other on-line so-called legal providers.  The one thing I consistently notice when I see this is the lack of depth involved in ‘do-it-yourself’’ estate planning. With estate planning, it’s not enough to get the right answers; you have to start with the right questions.

I’m reminded of a case from my law school years.
There was an eccentric old man, who lived in the middle of nowhere in Texas. He lived on a rundown old farm, hoarder-like, though friends and family knew he had made a small fortune in oil a generation earlier.

He had been a wildcatter, he amassed his fortune on his own, he made it clear to everyone who had an interest that he was going to disperse it as he saw fit. Good for him.

In short, he did his own estate planning, let it be known that he had a Will and was not above changing it if any of his heirs displeased him. Since he lived hundreds of miles from the nearest town, perhaps all this was just his way of making sure family visited him with some regularity.

He got sick, died fairly quickly. After his well-attended funeral, his family descended on the farm en masse to search for his Will.

It began civilized enough, the family systematically went through the house looking in all the normal places ~ desk, file cabinets, shoeboxes, cookie tin ~ to no avail.

They couldn’t find it in any of the ‘normal places.’ Soon it was civilization be damned, the house was a dump anyway, and they tore up the furniture, ripped through the walls, pried up the floorboards, dug up the basement, checked the well, you name it, looking for the elusive document.

They brought in bulldozers, dug up huge mounds of dirt, systematically dismantled the barn. No Will anywhere. Nothing.

Finally, after weeks on site, bedeviled by the heat, fire ants, blackflies, they got around to an ancient chicken coop far from the house. Where they found a mason jar under the floorboards.

In the mason jar was a key, obviously to a safety deposit box. It had numbers engraved on it, but no other identifying features.

The potential heirs’ problem was daunting: there were some thirty banks within a three-hundred-mile radius of the ‘ranch’, none closer, many, many more the further one radiated out. There was nothing in the house to indicate that the deceased even had a bank account. The only way to figure it out in the pre-internet age was to pick a direction, drive to a town, go bank to bank to bank trying to match the key, repeat.

It took months. At long last, they found the bank that issued the key and the old man’s safety deposit box. The key fit, it turned, out slid a good-sized box filled with documents, securities, the works. On top of it all was a handwritten note on the deceased’s letterhead. Here’s what it said:

“You will find the key to this safety deposit box in a mason jar under the boards of the chicken coop.”

The moral of the story and what I always advise clients is that when you try to do estate planning yourself (the DIY approach), and don’t get good legal advice, sometimes what seems perfectly clear to you may not be at all clear to anyone else.

And if you’ve gone to all the trouble of doing your Will and it can’t be found by your heirs, intestacy laws apply (meaning no there’s no Will) and the state’s formula, not yours, will determine who gets what, not a good ending.

Asset Transfers, How You Hold “Title” Really Matters

Tegan Blackburn

canstockphoto15887355

Asset transfers are made for a wide range of legitimate business, estate planning and other reasons.   How assets are titled can make all the difference between effortless, prompt transfers or having costly and often uncertain results.  In the estate planning context, it’s important to get it right before you need it.  Sometimes forms designating beneficiaries (and perhaps forgotten) or how deeds or accounts were set up will completely override what’s stated in a Will or other testamentary documents.  Lifetime transfers of business and personal assets can also be done with far greater ease when assets are properly titled, not leaving the door open for more costly delays or other unpleasant surprises.

When attorneys talk about “titling” assets, we’re talking about who the “legal owner” is.  Married couples will often own real estate as joint tenants with rights of survivorship (JTWROS).  So when a spouse passes away, the title vests 100% to the surviving spouse with ownership passing immediately to the surviving spouse.  This applies to any property provided the property is property titled in “survivorship”.

Alternatively, property is sometimes acquired or owned as “tenants in common” (TIC).  When, for example, multiple family members or unrelated individuals own property acquired through an inheritance or for investment purposes with each holding some specified share of the property.  Property owned as TIC is freely divisible whereas property owned in survivorship is not.  If a TIC owner dies, their share will be transferred in accordance with their Will (or Trust or if owned by a business, as designated in the governing documents) to the named beneficiary.  (If there is no Will or the Will is invalid even bigger problems can arise under state intestacy laws).  Lifetime transfers of TIC properties can pose challenges for the owners who now hold title with who knows who – since interests are freely divisible (unless there is a first right of refusal retained by the other owners in a valid document).  Trusts (or other agreements) can also be utilized by individuals or businesses to provide more seamless transfers.

Property is sometimes held in a sole individual name.  Property owned solely or “individually” at the time of death is considered a “probate asset” requiring a court order to transfer the property; subject to a few of the exceptions if property is deeded though Trusts and properly recorded, etc.  After the death of a spouse, a surviving spouse, who owns the property in her sole name, may wish to create a trust or other testamentary instrument so that property will not require probating and pass directly to heirs.

Each of these types of ownership interests will have dramatically different results so how to hold title should be carefully considered.  When titled properly, real estate, bank accounts and other assets can pass immediately to co-owners, survivors and beneficiaries, after death, without the delay or the involvement of probate court.  In the estate planning context, it’s extremely important to keep in mind that how accounts are titled will override the provisions in a Will.  While there are a number of options, how to take title during lifetime ownership will depend on a variety of factors and there are instances where jointly owned accounts may not be advisable. Many people choose a transfer on death (“TOD”) designee (which works like naming a beneficiary in a Will) so the account will pass automatically to the named TOD designee unlike a joint account, which during lifetime could be accessed and completely drained by any of its owners. Joint accounts should be identified as (JTWROS) and, as noted, there are some precautions to point out as any one of the owners can access, withdraw and make decisions on the account – so care should be taken here.

Keeping in mind that named beneficiaries or TOD election will override any provisions in a Will to the contrary, it’s extremely important to keep up-to-date records of beneficiary designations and document how accounts were set up.  Too often bank records aren’t correct, documents are lost or people forget to update beneficiary designations.  Don’t rely on bank representatives or family members to advise you.  I’ve seen situations where misinformation was provided to clients or mistakes were made by bank representatives causing unnecessary, lengthy delays, because documents prepared long ago were not done correctly or how they were done was not understood.  This can cause assets being transferred in a ways an owner never intended.   It’s critically important to make sure there are no inconsistencies with your wishes and that documents are correctly prepared.  Otherwise, costly, unpleasant, unintended consequences can and do result. The beneficiary designation (again, properly done and documented) will prevail over any contrary provision in a Will care must be taken!  The assistance of qualified legal counsel is important to make sure these avoidable, unintended (and sometimes irreversible) consequences don’t occur.

Preparing documents that meet your needs and reviewing your documents every year or two (or whenever a major life change occurs) is a great way to have peace of mind and feel secure about your future.  Everyone regardless of age should have a Will.  Anyone who owns a business should have a  Business Succession Plan, as well as Will. Having these documents in place before they’re needed is critically important.  If something unplanned occurs, it may be too late. Many times clients believe this will be an overwhelming process and are often surprised by how easy we make this process by listening carefully and explaining options.  There is often a great sense of relief for accomplishing business succession, estate plans or just having a review or update done to confirm all is well. Regardless of age or circumstances, it’s important that documents be properly titled so they can accomplish important goals. There’s nothing worse than finding out documents you prepared sometime ago may completely override what you intended.

Don’t wait – Please contact us today for assistance in reviewing your documents and goals.

At Last – Some Good News for Powers of Attorney

Tegan Blackburn

Did you know – until recently there was no Connecticut law requiring banks or financial institutions to accept a Power of Attorney?  Those of you who do know – have likely seen first-hand the problems this caused. A new Connecticut law, at last, has come to the rescue.  (See notes below on Adoption of Connecticut Uniform Power of Attorney Act).  This blog highlights the benefits of the new law and reasons Powers of Attorney are rejected, sometimes for valid reasons, sometimes not:probate image canstockphoto13987862 (2)

Here’s the top 2 reasons Powers of Attorney are rejected: 

  • Drafting problems. Banks, financial institutions and others can and often do refuse to accept a Power of Attorney (POA), because it doesn’t state the specific authority for what the agent wants to do.  For instance, the agent appointed under the POA wants (often needs) to access a safe deposit box, but the document doesn’t specifically mention a safe deposit box.  Documents can be more carefully drafted to avoid these types of problems; and
  • Internal bank policies. Powers of Attorney also get rejected without any really legitimate reason other than “our policy is such and such…” and your document doesn’t meet their policy. While banks came under greater scrutiny since the 2008 Wall Street debacles (through laws like Sarbanes Oxley (SOX) and Gramm Leach Bliley (GLBA) and some of the policies they adopted were intended to protect consumers, all too often  POAs are rejected for reasons that boggle the mind.  In one instance I know of a bank rejecting a POA, because it was executed more than 6 months ago. A number of other larger, well-known banks have adopted polices requiring POAs be no more than 12 months old or they reject them.  Needless to say, this caused a lot of unnecessary turmoil.  In many instances a perfectly good POA is rejected, because of these types of these internal policies.

Yes, banks can and do get away with this – until very recently there was no state law requiring them to accept an otherwise perfectly validly POA. Some banks have even have gone so far as to require their own forms be signed – huh, how practical is this?  It doesn’t take a rocket scientist to understand how this completely defeats the entire purpose of having these forms prepared and in the hands of those appointed before they’re actually needed.  For anyone attempting to act on behalf of a principal in a time of need; especially when the principal is incapacitated or unavailable and the agent has important duties to perform this can be a nightmare. The result is often engaging legal counsel to fight the battle, creating a new POA (if the principal is available and competent) or as a last resort needing to go to probate court for a conservator to be appointed – more unnecessary expense and delay.

This new law is incredibly welcome news.  The law creates a presumption of validity for a person who accepts a POA if they believed in good faith it was validly executed. The law also limits the circumstances under which a POA can be rejected – for example, when the bank knows the POA was terminated or that it violates a state or federal law, perfectly legitimate reasons.  Also included in the new bill is a provision allowing the probate court to require the person who rejects a POA to accept it and can also award attorney’s fees and costs to the prevailing party – very welcome news!   (See sHB6774 for the full text of the bill – effective date October 15, 2015 was revised to be effective July 1, 2016).

If you want to avoid these costly, lengthy (often unnecessary) issues that frequently arise with some POA forms, we recommend carefully reviewing your current documents to make sure they still meet your needs with the assistance of a qualified attorney.  There are also some important new provisions in the new law that POAs should be updated to include. If you need assistance with this review, please contact me for a consultation.

(For readers of this blog unfamiliar with POAs – Powers of Attorney are created and used for a lot of different reasons, but the primary purpose is designating someone (called the agent) to legally make decisions or take actions on behalf of the principal.  The powers granted can be very limited or specific or they may be very broad.  In the estate planning context, powers of attorney are often durable, meaning they survive the incapacity of the principal.  Once incompetent, a person cannot enter into a new POA (or any contract for that matter.)

 

 

Succession Planning – Protecting Your Legacy

Tegan Blackburn

The Business Side of the Equation

A recent Forbes Magazine article highlights an important issue for all business owners – most don’t have adequate estate plans – in some instances not even a basic, current Will. Current stats on this show less than 50% of Americans have a Will and the business side the same trend with less than 50% of U.S. companies without adequate succession plans (sometimes no plan at all). Succession planning (and a personal estate plan consistent with it) is critical for businesses of all sizes. If the CEO or another key business leader in your organization became critically ill, suddenly departed or worse – then what?

This blog highlights how critical succession planning is to growth, sustainability and wealth preservation of any organization. My next blog will take a look at the personal side of the equation and the importance of completing personal estate planning tied to the goals of the succession plan.

Succession planning is basically the process of deciding who will lead an organization when a planned or emergency vacancy occurs in key leadership roles – someone becomes disabled, retires, passes on or suddenly departs under friendly or not so friendly circumstances. Over the past few decades as counsel to a number of closely-held entities, I’ve seen the good, the bad and the ugly on this issue. Business owners and those who rely on them suffer personally and financially if this important planning isn’t done. Businesses that fail to plan leave a lot to chance. A good succession plan will meet the needs of the organization, its key stakeholders, family members, employees, customers and others.

For closely-held and family-owned businesses, a business and the value of the business often represents the single biggest asset and most integral part of an owner’s wealth and financial security.

The Key Benefits of Succession Planning:

1. Preserving the value of the business by limiting (often eliminating) costly, disruptive disputes over who fills important roles and what direction the company takes in times of planned exits or unexpected exigencies. If the CEO or another key player is suddenly incapacitated or some other event forces an exit – then what happens? Are sufficient financial and human resources in place to be readily called upon to sustain business? No one wants to consider these issues, but it does happen and often without warning. In recounting just one instance of what can and does happen – a successful, closely-held business had misfortune strike without warning when company’s founding member & CEO passed away a short time after a stroke leaving grieving family members at an impasse over what to do. A key senior manager with more than 2 decades of experience at the company, the most ideal candidate to step in to lead the company, was “passed over” by the CEOs highly-political daughter, who appointed herself to “step into his shoes”. The fall out resulted in the senior manager and other employees leaving the company and customers concerned about the future. The end result of no planning was a lot of unnecessary damage to their business reputation and very public, costly lawsuits that ensued.

2. Smooth business transition and continued growth. Well-constructed succession plans provide the necessary framework for avoiding a lot of unnecessary headaches that can negatively impact a company’s reputation and bottom line. Completing this important planning gives employees, customers and decision maker’s confidence about the future – a key element of any successful businesses.

3. Enhancing continuity, goodwill and reputation of the business. A great deal of the value of a company is tied to its goodwill and reputation. These types of disputes drain resources, harm relationships and often lead to very public disputes by disgruntled employees, unhappy family members and customers. A great deal of effort went into building a successful business why leave it to chance. Succession planning is one of the most critical determinants of maintaining the value of a business now and in the future.

4. Tax Implications. Creating a tax advantaged plan consistent with both short-term and long-term goals puts the company in the best position for a possible third-party sale, internal succession by family members or employees (ESOP) or other strategies to enhance the bottom line.

5. Those who don’t do this planning leave a lot to chance. The cost of completing this process is far less than what’s lost by failing to plan and well worth a good night’s sleep, keeping good customers, happy employees and a sustainable future.

How do you get started? Working with a qualified legal and financial advisor with succession planning expertise is a great way to ensure the best result.

Digital Assets – Not Just the Here and Now

Tegan Blackburn

The reality – digital assets are a part of everyday life. And the need to protect them has never been greater. Planning for both the protection and conveyance of digital assets is more important than ever. While I’ve written extensively about the importance of data protection and cybersecurity here on my blog (Archives on: Data Protection: What Every Business Needs to Know; Steps Consumers Can Take to Protect Their Data, related topics and articles published in the Hartford Business Journal, Hartford Courant, Connecticut Law Tribune and others), digital information also plays great importance (or can cause a lot of problems) for family members, executors, heirs, care-givers and others after the here-and-now. This blog post highlights – why typical estate planning documents may not be enough.

Estate planning attorneys have always used a variety of legal documents to help clients and their loved ones manage assets (during incapacity) or transfer assets (after death) through the use of Powers of Attorney, Wills and/or Trusts. Another “tool” estate planning attorneys use is an inventory (or questionnaire) where clients identify all of their assets – real estate, personal property, health information, bank accounts, retirement accounts, life policies, retirement accounts, veteran’s benefits, intended beneficiaries and other important information necessary to assess and accomplish important estate planning objectives.

All too often Powers of Attorney, Wills and Trusts don’t say anything about “digital assets” – things like online accounts, passwords, security questions, files stored on computers or in the cloud, email accounts, social media sites, domain names, online digital photo albums – the list goes on… While a few states have enacted legislation enabling executors to have access to digital accounts, it’s a much more cumbersome (and often uncertain) process than it needs to be. In some instances, it may be a client’s wish (during incapacity or after death) that this information remain private and accounts terminated. In other instances, digital assets may have value (financial or emotional) and be important to convey to beneficiaries or successors of business interests. What happens to the face book or twitter account? What’s the password for online bank accounts, business urls or websites?

Depending on the number and nature of digital assets (which can change as often as accounts are added, modified or terminated), it’s important to keep an up-to-date inventory of these assets whether printed, stored on computer, smart phone or other devise, CD, DVD, flash drive or cloud. (Keeping in mind, of course, the importance of updating this information and protecting access with sufficient passwords, reliable vendors…) The person(s) selected as caretakers during incapacity or after death – executors, conservators or others will need to know the location of Wills, Trusts and other important estate planning documents, including the inventory of assets identifying accounts and, of course, any digital assets – such as online accounts and passwords. Unfortunately, many of the traditional estate planning documents prepared by attorneys today don’t adequately address “digital assets”. Adding even more complexity to the issue is the fact that many online vendors, such as twitter, face book, EBay, Google have a wide variety of differing terms of service “TOS” that can prevent or hamper a non-owner’s access. If it has to go to a probate court to get resolved, the Computer Fraud and Abuse Act, internet law, probate law and numerous other laws are also likely to come into play.

Living in today’s “digital age” means keeping track of this information and making decisions on how you want it to be conveyed, used or terminated (and by whom) with the right legal instruments in place to accomplish these important goals. Powers of Attorney, Wills, Trusts and other conveyance documents should be reviewed (and updated) every few years by a qualified estate planning attorney. If estate planning documents haven’t been updated in a while, you might also run the risk of having banks or others reject them as outdated or not covering a particular subject – such as online accounts. Many banks now require Powers of Attorney to be updated every year (some require every 2 years). I’ve seen many instances where banks, insurance companies and others rejected documents (often because they’re outdated or were prepared by clients themselves or other firms), because they didn’t specifically provide for access to online accounts (the same problem often comes up with safe deposit boxes and other depositories, because they weren’t specifically mentioned). In the past, there was an assumption that checking the box on the Power of Attorney giving authority for “all other matters” would be enough. Clearly, this catch-all phrase of the past has little to no legal significance today. While probate courts can and often do accomplish important things – they’re not known for acting quickly and anything coming before them is a public proceeding. Without clear, legally sufficient documents stating clear intentions about digital assets (and other property) – the door will be open to delays, uncertainty and the possibility of lingering entanglements with online vendors, banks, business partners and family members.

To make sure your intentions are carried out in the here-in-now and after-life will require a little more planning and the right documents in place. Digital assets are here to stay and need to be included in your planning decisions for now and the future. (Preventing identity theft when it’s been more present than ever and privacy considerations must, of course, be considered to keep the information properly protected.) We welcome inquiries on our estate planning, data protection and businesses succession services, as well as requests for our articles and guidelines on these important topics available to the public on request.

Why Everyone Should Have a Will

Tegan Blackburn

By most estimates, less than 50% of Americans have a Will or some other testamentary device.

Some compelling things to consider,

  1. Without a Will (or some other testamentary device) the state you reside in will decide for you who gets what and who’s in charge of your estate. Whether you have a small estate or a large one, unless you have a valid Will, Trust or some other testamentary device, the state formula outlining distributions for “intestate estates” (those with no Will) will be used for distributing your property to your heirs. For those married at the time of death if there are other living heirs (such as parents, children or grandchildren) in many states the surviving spouse will receive only a portion of the decedent’s estate. In Connecticut, what a surviving spouse receives under “intestate succession” laws (the leaving no Will formula) depends on whether or not there are living parents, children, grandchildren or great grandchildren. Needless to say, this can cause lot of unpleasant surprises for a surviving spouse, other family members and a lot of unnecessary inter-family conflicts. The formula used in Connecticut can be viewed at Conn. Gen. Stat. Sec. 45a-437(b) – 45a 438 www.cga.ct.gov and will give you an idea of just how many different scenarios you might be dealing with after the death of a family member who left no Will.

    “Not having a Will leaves a great deal to chance

  2. When there is no Will (or the Will cannot be located) surviving family members and friends are often left behind with different views of your wishes. Stating your wishes in a legally binding way with a Will (sometimes in combination with other testamentary devices) will help avoid the contests, fights and uncertainty that often arises when there is no Will. For those who have a Trust or other instruments making beneficiary designations, having a valid Will can also help in situations where property wasn’t properly titled and transferred to the Trust or beneficiary designations or updates weren’t made.
  3. Why should everyone have a Will? Making a Will is not just for those in later seasons of life. For those who are married, widowed, have young children, have accumulated some assets, or are in, or approaching retirement having a Will is one of the best ways to ensure those you leave behind won’t be left with a lot of uncertainty and turmoil about what the future holds. Are you willing to leave it to chance? Having a Will benefits everyone.
  4. What should be in a Will? Specifying who’s in charge of handling your estate by appointing someone you have confidence in and an alternate to act as the Executor is a good place to start; when there are minor children appointing a guardian is recommended to help avoid inter-family contests and disputes over who should be given this important role; if there are special needs for particular family members this should be considered (if unequal distributions or provisions are being made it’s good to say so and why); if there are business interests at stake making sure the Will is compatible with the company’s succession plan is critical to avoid potential conflicts with business partners; identifying any special gifts that you’d like to make; and lastly specifying how you would like your real estate, personal property or other property divided and distributed to your heirs, others or charitable causes are among the most often included provisions of a Will.
  5. What will your legacy be? Your legacy is more than just what you’ve acquired during your lifetime and the property you leave behind for others. Leaving family members and loved ones with the confidence of knowing your wishes and settling your affairs without a lot of unnecessary problems is one of the most important reasons for preparing a Will. Too often this important topic and preparing a Will is put off for another day. Why wait – when one of the best legacies you can leave is having a valid Will describing your wishes so family members aren’t left with the additional burdens of sorting things out after you’ve gone or learning when it’s too late they won’t be entitled to what they expected from your estate. It’s extremely important that your Will be validly created and can be located when needed. It’s best to consult with a qualified estate planning attorney to ensure your Will isn’t subjected to legal questions about its validity and includes everything that’s appropriate for your situation. For those who created Wills sometime ago, it’s good to review your Will every few years to make sure it still meets your needs.

This article was written by Attorney Tegan Blackburn, who concentrates her law practice on Estate Planning, Wills & Trusts, Probate, Succession Planning, Business & Corporate Law, Real Estate and Family Law. This article is not intended to be and should not be construed as legal advice and the reader should consult with an attorney concerning their particular situation.