What Happens if Your Account and Property Ownership Do Not Match Your Estate Plan?
Have you been lulled into a false sense of security because you have “done” your estate plan? Unfortunately, one of the dirtiest tricks that can be played on an unsuspecting family member may be lurking in the shadows: The way you own your property does not match your estate plan. This could make your estate plan a meaningless relic. How can you ensure that your estate plan works the way you anticipate for your loved ones when the time comes?
The key to ensuring that your estate plan will work the way you envision is understanding that how you own your money and property (i.e., how title is held) determines whether your will or trust, or neither, controls who will receive that money and property. A will only controls the accounts and property titled in solely your name or that do not have beneficiary designations when you die. So, if you jointly own a bank account or home (and are not the only owner) with a right of survivorship, the joint owner will likely inherit the account or home when you pass away rather than it going to a person you have named in your will. Because you were not the sole owner of the bank account or home, your will likely does not control who receives it. Rather, under the law, the surviving joint owner receives that property. The law assumes that if you had wanted your will to control who received that property, you would have held title differently.
Likewise, your trust instructions only control the accounts or property that are owned by the trust or that have designated the trust as the sole beneficiary after your death. (A beneficiary designation names who receives the money in an account or a piece of property at the owner’s death.) Regardless of what your trust says, it will not apply if the trust does not own or is not the named beneficiary of an account or piece of property.
Example: Gomez Addams has a will, and a trust that names his wife Morticia as beneficiary. Gomez owns the Addams family home jointly with Uncle Fester. Gomez also has a life insurance policy. He names his daughter Wednesday and his son Pugsley as beneficiaries on the policy’s beneficiary designation form. After Gomez’s death, Uncle Fester becomes sole owner of the family home, and Wednesday and Pugsley split the life insurance proceeds. Neither the will nor the trust controlled because of how title to the property was held and how the beneficiary designations of the policy were completed. Morticia is left with nothing.
Avoid tricking your loved ones when you intend to give them a treat. We can help you ensure that your account and property ownership is consistent with your estate planning objectives so that your plan will work the way you expect.
Will Your Trusted Decision Maker Be a Hero or Villain?
Failing to Appoint Trusted Decision Makers
While Halloween, The Exorcist, or The Shining may top your list as some of the scariest horror films ever, I Care a Lot is the stuff of real-life nightmares. The movie I Care a Lot tells the story of a con artist named Marla Grayson who makes a living by becoming the court-appointed guardian of vulnerable elders who she places in a nursing home, where they are sedated and left unable to manage their affairs. Meanwhile, Marla sells all of the elderly person’s belongings and property and pockets the cash, while the elderly person’s family members watch helplessly. Fortunately, this nightmarish circumstance can be avoided by doing one simple thing.
By naming trusted decision makers in your estate planning documents, particularly in financial and medical powers of attorney, and updating these documents regularly, you can avoid being placed at the mercy of a court-appointed guardian like Marla Grayson. A power of attorney allows you to appoint someone to make financial and medical decisions for you when you are unable to make them for yourself. You can customize your choices by appointing one person to make financial decisions and another person to make medical decisions. You can even choose backups to act as alternates in case your first choice cannot or will not act.
Unfortunately, if you do not choose someone to be your decision maker, or if the person you have chosen cannot or will not act, the state may choose someone for you. This person will have extensive authority to act on your behalf, but at this point, you will have no say in who that person should be. Sadly, the person chosen by the court could be a family member who you do not want making decisions for you or a court-appointed person with bad intentions, such as Marla Grayson. With the odds of becoming incapacitated stacked against you, this is not something you want to leave to chance, particularly when the solution is so easy.
You can avoid a real-life nightmare by taking the simple step of creating or updating your power of attorney. We know how important it is to select the right person to be your trusted decision maker, and we would be happy to help you create or update this important piece of your estate plan.
Tips to Defeat the New Bogeyman: Inflation
Surviving High Inflation
With inflation at a forty-year high, the rising cost of living is affecting everyone. While you may feel some level of distress as you watch the steady decline in your purchasing power, you do not have to sit idly by while it happens. Here are some things you can do to survive this time of high inflation, no matter how long it lasts:
- Reevaluate your spending. Most likely, your income is not increasing at the same rate that your expenses are increasing, so one way to counteract these rising costs is by lowering your expenses. Start by looking at how much you are spending each month. Then, look at what you are spending your money on.
- Are there unnecessary expenses that you can cut out?
- Are there monthly subscriptions being billed to you that you have forgotten about? Are you using that gym membership, or have you subscribed to multiple entertainment services when one or two would suffice?
- Are there ways to reduce the cost of necessary expenses? For example, are there cheaper options for your cell phone service (e.g., a prepaid or a limited data plan) or your auto or home insurance? Often, a simple phone call or internet search can end up saving you hundreds of dollars.
- Consider a side hustle. If you have cut as much from your expenses as you can but you still come up short, you may need to look at ways you can increase your income. The options for a side hustle outside of your nine-to-five job are only limited by your imagination and creativity. You could offer services such as photography, petsitting, or tutoring on any variety of topics, from gardening to laying tile to writing essays. You could sell handmade items online on Etsy or items that you no longer want on eBay or Facebook Marketplace, or rent property that you do not use all of the time, such as a recreational vehicle on sites such as Outdoorsy or RVshare, or even your pool on Swimply. The possibilities are endless. (Note: do make sure you are adequately covered through your liability insurance company before you do this!).
- Use increasing interest rates to your advantage by investing even small amounts of money. If you have money in an account that earns interest at a rate below the inflation rate, consider putting that money in an account where it can earn a higher interest rate. For long-term savings, consider purchasing Treasury I savings bonds. The interest rate for I-bonds is designed to meet or beat inflation, and the current annual rate is 9.62 percent.1 For short-term savings that you may need to access, such as an emergency fund, consider using a high-yield savings account.
While it can be frustrating to watch rising inflation rates eat away at your spending power, you do not have to just sit by and watch. Be proactive, and use these tips to fight back.
We are here to help.
As always, we are here to guide you through the decisions of estate planning. Give us a call if this newsletter has prompted you to consider any changes you may need to make in your own planning: (617) 716-0300 or by sending us a message to schedule a consult.
1 Jason Stauffer, Inflation is Hitting Everyone’s Budget. Here Are 4 Ways to Hit Back, NextAdvisor (May 19, 2022), https://time.com/nextadvisor/investing/how-to-deal-with-inflation/.