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Keeping Your Will Updated and Naming Beneficiaries on Assets

A Last Will and Testament is an important estate planning document that contains provisions for assets and the distribution of property upon death. Unfortunately, many individuals fail to account for assets that do not pass directly under a Will. These assets may include life insurance policies, pensions, IRAs, and 401(k) or 403 plans. After the policyholder of these assets dies, the policies may distribute the benefits to their heirs at law if there is no beneficiary designation and no Last Will and Testament. Following major life events, such as marriage, divorce, change of employment, disability or death of a spouse, individuals should create or update their Last Will and Testament and their beneficiary designation forms on retirement benefits or other assets.

 

A life insurance policy is a financial instrument that pays out a sum of money either on the death of the policyholder or after a set time. A policyholder must designate a beneficiary of the policy proceeds when he or she passes away. If the individual fails to update their policy, especially following a major life event, an unintended party, such as a former spouse, may end up being the sole beneficiary. For this reason, it is best for policyholders to consistently amend and update polices to align with their wishes for the future. A policyholder may be able to name their estate as a beneficiary, to have the policy’s proceeds pass under a Last Will and Testament and divided amongst the individual’s designated beneficiaries. However, if the proceeds become part of the insured’s estate, they are not exempt from the estate’s creditors and are subject to probate.

 

Generally, if the deceased names a beneficiary for a pension, IRA or a qualified retirement plan such as a 401(k) or 403 plan, it will not be subject to probate and thus the terms of a Will do not control. Once an individual dies, the beneficiary named on the policy or IRA will be entitled to the funds remaining in the account. To access the funds, the beneficiary makes a claim and the IRA/Pension/Insurance policy makes a payment or a series of payments to that person.

 

However, complications arise when individuals fail to keep beneficiary designations up to date or fail to name a beneficiary at all. If an individual does not name a beneficiary, the funds will be payable to the estate and subject to probate for distribution. The probate process could result in delays, reducing the amount of funds received by the beneficiaries and limiting payout options. It is important that, if the individual gets married, has children, or gets divorced, he or she updates their beneficiary designations. If an individual dies without changing a plan’s designation from a former spouse, his or her ex-spouse will be entitled to its contents, even if the ex-spouses haven’t spoken in years or if the ex-spouse remarried. It is important to also update the retirement accounts if a beneficiary passes away. If a beneficiary dies before the account holder, it would be construed as if there were no beneficiary named and the account’s funds would most likely be payable to the estate and subject to probate.

 

Neglecting to update a Will, life insurance policy, and retirement accounts when major life events occur may lead to unwanted outcomes. It is important that individuals review these documents regularly to ensure that it reflects their current situation and wishes for the future. If you or a loved one needs assistance with reviewing a Will or another estate planning matter, look to the experienced New York estate planning lawyers at Hobson-Williams, P.C. The firm’s attorneys will help you establish an estate plan that is reflective of your current wishes and will help ensure your assets will pass as intended. For more information or to schedule a consultation, call contact our New York estate planning law firm at (718) 210-4744.

Why Establishing a Durable Power of Attorney is Important

A power of attorney is an important estate planning document and can be an essential tool in ensuring that an individual’s wishes are carried out should he or she become mentally or physically incapacitated. A power of attorney is a standardized legal document that allows an individual, known as the principal, to designate a representative, known as the agent, to make financial decisions on their behalf if they become incapacitated or unable to act on their own behalf. A power of attorney specifies how much power an agent will have and can be created with limited powers, broad powers and can become effective upon the occurring of an event. Many individuals assume that regardless of whether it is limited or broad that the document will contain the same language and provisions. However, more often than not, this presumption is incorrect and may lead to issues in the future.

A durable power of attorney gives an agent essentially the same powers as the principal. The term “durable” means that the power of attorney will still be effective even if the individual becomes incapacitated or subsequently disabled. A power of attorney goes into effect as soon as it is signed and notarized. The principal may specify that the agent cannot use the power of attorney unless he or she becomes incapacitated or unable to act for themselves. However, if this stipulation is not specified, the power of attorney may be able to utilize his or her power prior to those circumstances.

Some individuals seek to establish a power of attorney that is effective upon a triggering event, such as incapacitation. However, there are several unforeseen issues that may arise if this type of power of attorney is created. One issue that may arise is that the agent may need to show an affidavit that states that the triggering event has occurred prior to them utilizing the power of attorney. Another issue that may arise is that regardless of the law stating that the agent can make financial on behalf of the principal with the affidavit, banks and other institutions may be hesitant to grant the agent his or her power under this type of power of attorney.

Many individuals believe that by establishing a power of attorney his or her agent has broad gifting power. Usually, when someone establishes a statutory power of attorney that is not the case or, in some instances, it will not allow an agent to make a gift in excess of $14,000 per person, per year. When a power of attorney does not include a statutory gift, rider authorizing major gifting power, it may result in an agent being unable to transfer assets.  This may result in the Principal being unable to transfer funds to be eligible for Medicaid or to receive reductions in estate tax. Furthermore, a broadly drafted power of attorney with language permitting an agent to create a revocable or irrevocable trust on behalf of the creator can save a tremendous amount of money in the future, whether it is for estate planning or long-term care planning purposes.

In New York State, an agent is permitted to gift and transfer assets to themselves and others.  However, this is only allowed if the power of attorney clearly states that the agent can do so. This is referred to as a statutory gift rider, also known as a gifting clause. By establishing a power of attorney with a gifting clause, it allows an agent to make gifts or transfer assets for purposes such as long-term care planning or to meet estate and income tax needs.

A common question people ask regarding the establishment of a power of attorney is, will the principal lose control of his or her finances and assets after the legal document is established? The answer is “perhaps”. The principal still has the right to control his or her financial resources and properties. However, with the establishment of a power of attorney, the principal allows the agent access to their finances without permission. For this reason, it is important that individuals choose an agent they trust who will not be dishonest or unscrupulous with the assets.

For individuals seeking to establish a power of attorney, it is important that they consult an experienced estate planning lawyer who will draft the document to meet your current and future needs and wishes. The elder law and estate planning attorneys at Tanya Hobson-Williams, PC are skilled in all aspects of estate planning and are dedicated to representing its clients with diligence and compassion during emotional times. Contact the experienced New York estate planning and elder law attorneys at Tanya Hobson-Williams, PC for a consultation by calling (718) 210-4744 or by filling out our contact form

The Musical Icon Prince May Have Died Without a Will

According to documents obtained by People Magazine, Prince did not have a Last Will and Testament. Prince’s sister Tyka Nelson filed an Emergency Petition in a Minnesota Court seeking the appointmeprincent of a Special Administrator.

Sources report Prince’s sister as stating, “I do not know of the existence of a Will and have no reason to believe that the Decedent executed testamentary documents in any form,” states the document, which was filed in Carver County Minnesota.

An Administrator is appointed to settle an estate after a person has died.  A petition must be filed with the court and a personal representative must be appointed.  The personal representative is responsible for the following:

  • Collection, inventory, and appraisal of assets of the person who has died.
  • Protection of the estate’s assets.
  • Payment of decedent’s debts.
  • Distribution of the remaining assets to the proper parties as provided by law.

According to a survey conducted by FindLaw.com, 35% of those surveyed had a Will but individuals over the age of 65 did execute a Will. Without a Will, property passes according to the State’s intestacy laws.

Some sources believe that Prince’s current estate is valued at over $300 million dollars. The failure to execute a Will may result in his property being distributed in a manner contrary to what he may have wanted during his life.

If you or a loved one needs a Last Will and Testament or other Advanced Directives, contact the experienced attorneys at Hobson-Williams, P.C. at (718) 210-4744 to ensure that your property passes to those you choose and not according to the laws of intestacy.

Proposed Rules to Retirement Savings Investments Require More Transparency from Brokers

After four years of planning, federal regulators of the U.S. Labor Department proposed rules that would strengthen the protection of those investing their retirement money.  The new rules would require that brokers owe a stronger fiduciary duty to their clients.  Currently, the rules are vague and use ambiguous language, allowing brokers to skirt around the guidelines and in many instances, put their own investment interests first.

Brokers have to recommend investments that are “suitable” for their clients.  While they need to take into account the client’s age, and both the risk factors and the financial goals of the investment, many times their recommendations are persuaded by their own potential to gain a profit at the client’s expense.  Under the new regulations, a broker would have to inform their client whether they had a conflict of interest and received a fee as a result of the investment.  The transparency required under the new rules would enhance the quality of the advice brokers give to the investors.

Although the financial industry claims that stricter rules will raise costs and limit advice, retirees will be offered greater latitude in making the determination with whom they should be investing their money, and deterring bad advice.  Additionally, there are exemptions to the proposed rules that would allow brokers to receive payments otherwise prohibited, provided that they offer their client the least expensive option.

The proposed rules are open for commentary for 75 days beginning on April 13.

Many people use their retirement funds investments as part of their estate planning.  For more information about estate planning, contact an experienced elder law attorney.  Call the Law Office of Tanya Hobson-Williams at 1 (866) 825-1529 or visit http://www.thobsonwilliamslaw.com.