Issue 46.09

If a client does not have a trusted friend or family member to name in their will or trust as caretaker of their pet, want can be done?

For fifteen years I have worked with clients regarding their estate planning and end of life affairs.  As part of my planning, I have spent much time addressing concerns related to pets.  Many clients have become very attached to their pets.  Some clients after losing their spouse have relied on the love of their pets to help them through the most difficult time in their lives.  In doing their planning, these clients feel strongly they want to provide for these “extensions” of their family.

A problem arises when there is no one in the area that can take care of the pet.  In helping these clients, I have come to rely on Homeless Animal Rescue Team (H.A.R.T.).  H.A.R.T. is a 501(c)(3) non-profit organization formed to provide care and shelter for neglected, abused and abandoned dogs.  H.A.R.T. is actively engaged in monitoring the animal shelters in the area and retrieving dogs that are scheduled to be euthanized and placing them in temporary and later permanent homes.

Because H.A.R.T.’s primary focus is the placement of animals, I have found them well suited to help with caring for animals of estate planning clients. 

Many clients set aside part of their estate for the care of their animals.  The funds can be retained by the trustee, personal representative of the will or the client can designate a representative of the organization named as caretaker of the animal.  The funds are then used to care for the client’s pet and to be administered to the individual or family providing the care.

In conclusion, many of us love animals.  Planning for the animals we love most, our pets, can sometimes be hard.  Using an estate planning attorney to prepare the necessary documents and relying on charitable organizations equipped to help, can make the process easier and rewarding.  

Jeffery J. McKenna is a local attorney serving clients in  Utah, Arizona and Nevada. He is a shareholder at the law firm of Barney, McKenna, and Olmstead with offices in St. George and Mesquite.  If you have questions you would like addressed in these articles, you can contact him at 435 628-1711 or jmckenna@barney-mckenna.com.

Issue 44.09

Love knows no bounds.  Many couples have experienced the extent and truth of this common saying. 

Often, older couples have to cope with adult children who cannot understand why mom or dad wants to remarry.  By updating one’s estate plan, many concerns related to the marriage can be minimized.

In second marriages later in life, there is often a desire to allow the estate of the first spouse to die to be available for a surviving spouse during his or her life.  However, the deceased spouse often wants the estate to ultimately be distributed to his or her children upon the surviving spouse’s death.

The best way to ensure that one’s assets are available for a surviving spouse but ultimately distributed to one’s children from a prior marriage is through the use of a trust.  The trust can be created within a will (this is called a testamentary trust) or it can be created within a living trust (this is a trust created while one is alive). 

Significantly, the trust maker would set forth the terms of the trust according to his or her wishes, and would select the trustee (or trustees) to manage the trust.  Upon the death of the trust maker, the trustee would then manage the trust assets subject to those specified wishes of the trust maker.

For couples in a second marriage, it is often important to sign a marital agreement that states each spouse can dispose of his or her estate as desired.  If such a document is not signed, a surviving spouse could legally attempt to “override” the estate plan of the deceased spouse. 

Often, a given state’s law will provide that a surviving spouse can “elect against the will.”  This means that a surviving spouse is entitled to a spousal share as specified by statute despite the fact that the will may provide differently. 

Proper estate planning in these circumstances can be a great blessing.  It can relieve significant concerns of adult children when a parent remarries later in life, and it can bring peace of mind to the parent, knowing that he or she has succeeded in protecting the financial legacy of the children. 

Jeffery J. McKenna is a local attorney serving clients in Utah, Nevada, and Arizona. He is a shareholder at the law firm of Barney & McKenna, with offices in St. George and Mesquite.  He is the former President of the Southern Utah Estate Planning Council.

Issue 42.09

In doing estate planning, it is essential to plan not only for death — but for life.

Lifetime planning involves preparing for the care and management of assets in the event you become incapacitated.

There are two main objectives of lifetime planning.  First, it is important to plan for the effective administration of your estate upon incapacity.  Second, it is important to preserve the estate if your incapacity requires professional long-term care. 

Effective administration of your estate during incapacity.  In planning for the administration of your estate during incapacity, it is critical that certain documents be executed. 

All individuals engaging in estate planning should strongly consider executing a durable power of attorney.

A durable power of attorney will enable someone else to manage your assets should you become unable to manage your own assets for any reason.  If the power of attorney is not “durable” (which means it specifically states that it will be effective in the event of your incapacity), it will not be effective if you become incapacitated.  Significantly, many powers of attorney are not durable powers of attorney.

Preservation of your Estate During Incapacity.  In addition to concerns related to how your estate will be administered during your incapacity, you must also consider expenses related to an extended period of incapacity.

In a previous article, I explained that Medicare and private insurance do not cover long-term care (care for the basic functions of life such as eating, dressing, bathing) for extended periods.  Medicaid is the government program that covers extended long-term care.  Because Medicaid is a welfare program for the poor, an individual will only qualify after income and assets have been depleted. 

In doing lifetime planning to preserve your estate during incapacity, it is usually not advisable to deplete your estate in order to qualify for Medicaid.

A more effective approach for planning for incapacity would be the purchase of long-term care insurance.  Long-term care insurance greatly eases the burden of paying for long-term care. 

In working with families that have long-term care insurance within their estate, I have found a much greater degree of comfort and security. 

Jeffery J. McKenna is an attorney licensed in three states and serving clients in Utah, Nevada, and Arizona. He is a partner at the law firm of Barney, McKenna and Olmstead, with offices in St. George and Mesquite.  He is a founding member of the Southern Utah Estate Planning Council. If you have questions or topics that you would like addressed in these articles please email him at jmckenna@barney-mckenna.com or call 435 628-1711.

Issue 40.09

For your benefit and the benefit of your family, it is a good idea to organize your estate planning documents into a family estate planning binder.  The documents within your binder should constitute a complete estate plan.  The question then is, “What documents constitute a complete estate plan?”

First, the cornerstone of the estate plan can be either a will or a revocable trust.  As discussed in articles previously published in this column, whether the estate plan should be a  “will based plan” or a “trust based plan” depends on your desires with respect to privacy and avoiding probate, as well as the location, size and types of assets comprising the estate.

If the cornerstone of your estate plan is a revocable trust, it is important that you still have a will.  All “trust based plans” must still have what is called a “pour over will.”  It is a simple will that serves as a safety net to “pour over” assets into the trust.  This type of will directs the property into the trust. 

In addition to a will and possibly a trust, a complete estate plan should have a durable power of attorney for financial matters.  This document allows legal decisions to be made regarding your financial matters in the event you become incapacitated. 

In addition to the above documents, your estate planning binder should contain documents pertaining to medical treatment decisions.  If desired, a living will for the state in which you now live should be included.  A living will (also called a “directive to physician”) specifies that no use of artificial life-support systems should be used once you are beyond reasonable hope of recovery. 

A medical power of attorney is also an important document.  A medical power of attorney allows a specified individual to make medical decisions for you in the event you are too ill to do so.

Lastly, your estate planning binder should contain information pertaining to funeral arrangements.

In conclusion, a family estate planning binder is a wonderful way to put your affairs in order.  Although you hope the binder will not be needed for many years, you will feel more secure knowing that it is ready. 

Jeffery J. McKenna is a local attorney serving clients in Utah, Nevada, and Arizona.  He is a shareholder at the law firm of Barney, McKenna & Olmstead, with offices in St. George and Mesquite.  He is a former President of the Southern Utah Estate Planning Council. He can be reached at 628-1711.

Issue 38.09

Relocating to a new state often creates issues affecting estate planning.  Many people wonder if they need a new will or trust when they move from one state to another.  Although a will or trust validly executed in one state should be valid in a different state, it is a good idea to have the estate planning documents reviewed.  By addressing issues related to the relocation, an individual can avoid certain problems and maximize possible benefits.

One problem that can be avoided relates to references to another state’s laws.  Often, estate planning documents reference a particular state’s law as the governing law.  Many times specific state statutes are referenced.  If someone dies in a “new” state, the references in the estate planning documents to the “old” state’s laws can be problematic.  By executing an amendment to the trust or codicil to the will that changes the state law references to the “new” state’s law, one can avoid possible problems.

Another concern that should be addressed pertains to special health care documents.  In a complete estate plan, one should have legal documents pertaining to medical treatment decisions.  These documents usually consist of what is commonly referred to as a “living will” (more formally titled “Directive to Physicians”) and a durable power of attorney for medical matters.  These documents are very useful if an individual becomes incapacitated and unable to make his or her own decisions.  The documents allow one to specify what medical treatment he or she desires.  Additionally, the living will directs the treating doctor or health care facility to allow the termination of life support if the individual is determined to be in a vegetative state without possibility of recovery.

Significantly, these documents are created by state law.  Many states have special provisions related to these medical treatment documents.  Although a living will or power of attorney validly executed in one state should be valid in another, the doctors or health care facilities will probably be most familiar with the documents used in their state

Another issue related to relocating to another state that should be addressed in order to maximize potential tax benefits pertains to community property.  There are ten community property states (Arizona, California, Nevada, New Mexico, Idaho, Texas, Washington, Louisiana, Wisconsin, and Alaska – with Alaska recently adopting a form of community property ownership).  Many married couples have relocated to Southern Utah from community property states.  If a married couple has moved from a community property state or is planning to move to a community property state, they should have their estate plan reviewed. 

Jeffery J. McKenna is a local attorney serving clients in Utah, Nevada, and Arizona.  He is a shareholder at the law firm of Barney, McKenna and Olmstead, with offices in St. George and Mesquite.  He is a founding member of the Southern Utah Estate Planning Council. jmckenna@barney-mckenna.com or (435) 628-1711.

Issue 36.09

To answer the above question, I must first tell you what I mean by “the box.”

When I say “the box,” I am referring to the beneficiary designation box found in many financial instruments.  For example, life insurance policies, annuity contracts, IRAs (individual retirement accounts), and other retirement plans allow the owner to designate (usually in a box or line on the form agreement) who is to be the beneficiary or recipient of the proceeds upon the owner’s death. 

In addition to the above categories of beneficiary designations, many bank accounts, investment accounts, stock certificates and CDs (certificates of deposit), allow for a POD (Pay On Death) beneficiary.  As with the insurance, annuity and retirement account beneficiary designations, the designation of the POD beneficiary is usually done by inserting one or more names in a box or line on an account agreement.

Now that I have explained the question, what is the correct answer?  If someone has designated a former spouse as the beneficiary on a life insurance policy or retirement plan, can a new will designating a new spouse as the beneficiary of all the individual’s assets supersede the earlier designation?  In other words, does the designation in the will supersede the designation in the box?  The answer is no.  In almost all cases, the will does not supersede the contractual designation.

Many people mistakenly believe that the will controls the distribution of all their assets and supersedes any earlier beneficiary designations.  It is understandable that many people have this mistaken belief.  First, a will has many formalities associated with it.  A will generally has to have the signatures of at least two unrelated witnesses.  An attorney normally prepares the will.  It is usually notarized.  Often much time and thought accompanies the signing of the will, as well as other formalities.  On the other hand, the beneficiary designation is usually very simple.  Usually, it involves nothing more than printing or typing a name in a box.

Another matter to be considered with regard to beneficiary designations is that they are limited.  If the beneficiary designation is just a line or box, there is no opportunity to describe how the proceeds should be used or who should receive the proceeds if one of the named beneficiaries predeceases the owner.

In conclusion, proper estate planning involves a thorough review of all assets and beneficiary designations.  It is very important that beneficiary designations be coordinated with an individual’s estate plan.

Jeffery J. McKenna is a local attorney serving clients in Utah, Nevada, and Arizona.  He is a shareholder at the law firm of Barney and McKenna, with offices in St. George and Mesquite.  He is a founding member of the Southern Utah Estate Planning Council and can be reached at 628-1711.

Issue 33.09

It is common to hear the statement, “I want to avoid probate” or “I don’t want my family to go through the horrors of probate.”  When you ask these same individuals “What is probate?” many do not have an answer.

Simply stated, probate is a special state court legal process for settling the debts of someone who has died, and distributing the remaining property to rightful heirs. 

In a probate, the person who is authorized by the probate court to administer the estate of a deceased person is called a personal representative (or executor or administrator in some states).

A primary purpose of the probate process is to have a personal representative appointed for the deceased individual.  The personal representative must be appointed in order to “sign” the decedent’s name after death.

During life, a person signs a deed or bill of sale to transfer property.  When a person dies, it is still necessary to have some document to show a transfer of title.  In other words, a “signature” of the decedent is necessary.  The probate process provides one method of doing this.  By appointing a personal representative, the court authorizes that person or persons to sign for the deceased individual.

Many people believe that if they have a will there will be no probate.  Nothing could be further from the truth.  Whether you have a will or do not have a will, your estate must go through a probate proceeding if the assets are in your sole name. 

The only difference between dying with a will and dying without a will is that if you die with a will, you tell the probate court how you would like to have your property distributed after your death.  If you die without a will, the state legislature tells the probate court how to distribute your estate.  In either case, probate will take place.  

When considering whether to “avoid probate” or not, it is important to understand what is being avoided. 

In all cases, it is important to be educated about the different estate planning tools.  After you have reviewed the different estate planning possibilities, you can then make a decision as to what is best for you.

Jeffery J. McKenna is a local attorney serving clients in  Utah, Arizona and Nevada. He is a shareholder at the law firm of Barney, McKenna, and Olmstead with offices in St. George and Mesquite.  He is a founding member of the Southern Utah Estate Planning Council.

Issue 32.09

The use of a revocable trust (sometimes referred to as a “living trust” or “family trust”) to plan one’s estate has become very popular.  Despite the popularity of the revocable trust, revocable trusts are not without their potential problems. 

First, it is important to understand that there is no definitive answer as to whether a trust is necessary.   Another estate planner explained that asking whether a revocable trust is good or bad is like asking whether a wrench is good or bad.  It depends on what you are trying to accomplish.  A trust is just an estate planing tool.  Whether it is good or bad depends on your needs and desires.

Although there are many factors to consider in determining whether a revocable trust is right for you, here are a few of the more significant factors:

1.  Avoiding Probate.  It is true that a properly funded trust avoids probate.  If the goal of the client is to avoid probate, it is critical that the trust be properly funded.  To “properly fund” a trust, title to all assets and beneficiary designations for insurance policies and retirement accounts must be reviewed.  A properly funded trust avoids probate because the owner of the assets (generally termed the trustor, settlor, grantor or trustmaker in the trust document) conveys ownership from him or herself (in his or her individual capacity) to him or herself as trustee of his or her trust.  Probate is avoided because for “probate purposes” the deceased person does not own assets but rather the trustee of the trust owns the assets.  It is critical to understand that a revocable trust only avoids probate if the assets have been properly transferred to the trust.

Out of State Property.  A revocable trust is especially useful if you own real estate in another state.  Real estate in another state generally requires a probate proceeding in that state.  If you live in one state but own real estate in another state, your beneficiaries may be required to commence multiple probate proceedings.  This situation can be avoided through the use of a revocable trust.

3.  Avoiding Court Appointed Conservatorship.  A properly drafted trust should provide for the management of trust assets in the event the person contributing the property to the trust becomes incapacitated.  This would avoid the need for a court appointed conservator for financial matters.

In conclusion, a revocable trust is an important estate planning tool.  Depending on your individual situation and desires, you may decide to use a revocable trust as your principal estate planning tool.  As in all estate planning decisions, being educated about your choices is key in deciding whether a revocable trust is right for you. 

Jeffery J. McKenna is a local attorney serving clients in Utah, Nevada, and Arizona.  He is a shareholder at the law firm of Barney, McKenna and Olmstead, with offices in St. George and Mesquite.  He is the former President of the Southern Utah Estate Planning Council.  He can be reached at 628-1711.

Issue 30.09

No one likes to think about death much less plan for it.  Many surveys indicate this is one of the biggest factors in not doing estate planning.  However, doing estate planning is an act of love.  This is especially true when there are young children or grandchildren involved. 

There are two primary concerns regarding minor children and estate planning.  First, who is going to take care of the children?  The person who cares for the personal needs of the children is called the guardian.  Second, who will take care of the financial needs of the children?  This may or may not be the same person (or institution) as the guardian of the children.  The person responsible for the children’s financial matters may be a court appointed conservator or if estate planning was done prior to death, it could be a trustee of a trust established for the children’s benefit.

Significantly, children under age eighteen cannot legally “own” property in their individual capacity.  Therefore, in order to have life insurance proceeds or any other assets of an estate distributed to a child under age 18, a conservator must be appointed by the court.  The legal proceedings required to get a conservator appointed can be at best an additional expense and inconvenience.  The worst part about failing to plan for minor children may be what happens when they ultimately receive their inheritance. 

A conservatorship ends when the child reaches age 18 unless special circumstances exist and the court allows the conservatorship to continue until age 21.  The result is that at age 18 (or at most 21) the child now has complete control over the assets.  While parents or grandparents may envision their life insurance or other assets of the estate being used for their children’s or grandchildren’s education, church service, or other purposes, children at age 18 or 21 may have other plans. 

Given the concerns related to expense, court proceedings and ultimate, uncontrolled distributions at age 18 (or 21 in special circumstances), parents and grandparents should consider the use of a trust when minor children are beneficiaries.  A trust has many advantages.  First, assets can be distributed to the trustee of the trust for the benefit of the minor child.  The trustee would then manage the assets as specified in the trust document.  Parents can specify that proceeds within the trust are always available for the children’s health, education, maintenance and support.  Additionally, parents can specify that the proceeds will not be distributed outright to the children until the children reach a particular age or will be distributed in incremental stages at various ages.  In short, through the use of a trust, the parents have the opportunity to provide as much instruction as they want with respect to the inheritance they leave for their children or grandchildren.

Jeffery J. McKenna is a local attorney licensed in three states and serving clients in Utah, Nevada, and Arizona. He is a partner at the law firm of Barney, McKenna and Olmstead, with offices in St. George and Mesquite.  He is a founding member of the Southern Utah Estate Planning Council. If you have questions or topics that you would like addressed in these articles please email him at jmckenna@barney-mckenna.com or call 628-1711.

Issue 28.09

The simple answer to the above question is yes.  Even if you have never signed a will or trust, you have an estate plan.  Some of you may be asking, “How?”  The answer is the state has a “default estate plan” for those without their own.

In Utah, if you die without an estate plan, the law provides that your entire estate will be distributed to your spouse if he or she is alive unless you have children from a prior marriage.  If you do not have a surviving spouse, the estate will be distributed to your children and if a child predeceases you, then to that child’s children.  If you have no surviving children or grandchildren (commonly called your “issue”), then your estate will be distributed to other relatives.  If you have a surviving spouse and children from a prior marriage, a certain amount is distributed to your surviving spouse and then one-half of the balance of your estate will be distributed to your surviving spouse and one-half to your children.

Although the state “default estate plan” attempts to represent what most people would want to do with their estate if they had done their own estate planning, it may not be what you want.  There are many concerns about relying on the state’s “default estate plan.”

If you rely on the state’s “default estate plan,” your desires may not be met when you have children from a prior marriage.  As previously stated, the state’s “default estate plan” provides that one-half of your estate will go to children from a prior marriage and the other one-half to your surviving spouse.  Often, it may be desirable to allow the surviving spouse to have a lifetime interest in all or a part of your estate until his or her death and at that time the estate could be distributed to your children.  Additionally, if you marry later in life, you may desire that all your assets be distributed to your children from a prior marriage because your surviving spouse has sufficient assets of his or her own. 

Hopefully, you can see that although we may all have an estate plan, it is very beneficial and sometimes crucial that you take the time and effort to develop your own estate plan and not rely on the “default estate plan” established by the state legislature. 

Jeffery J. McKenna is a local attorney licensed in three states and serving clients in Utah, Nevada, and Arizona. He is a partner at the law firm of Barney, McKenna and Olmstead, with offices in St. George and Mesquite.  He is a founding member of the Southern Utah Estate Planning Council. If you have questions or topics that you would like addressed in these articles please email him at jmckenna@barney-mckenna.com or call 628-1711.