Estate Planning When a Family Member Is an Addict

Opioid addiction has reached epidemic proportions, with drug overdoses now the leading cause of death for Americans under age 50. Families struggling with the emotional and financial damage, are the subject of the article How to leave money to a family member with an addiction” from MarketWatch.

Even good children from loving families become addicted and are driven to steal and lie to get money to support their habits. Parents of children are wracked by guilt and anger. The stories of families spending hundreds of thousands of dollars in an effort to help their children are growing in number—as are the number of families who exhaust their retirement savings paying for rehabilitation and related services.

Trusted family advisors, including estate planning attorneys and financial advisors, find themselves working with families to protect the family finances and the well-being of their addicted family members. The fallout from addiction creates many secondary problems for families.

Estate planning for a family grappling with addiction addresses many different issues, not just inheritance. Guardianship of minor children and protecting the interests of family members are among the issues that estate planning addresses. A mindfully created estate plan can serve as a resource and a means of protecting a legacy.

Lump sum distributions or full bequests to an adult struggling with addiction can be deadly, if the person uses the funds to purchase large quantities of drugs. At the same time, writing someone out of the will completely and withdrawing all support, can be devastating to the addicted adult and the family.

Creating a trust can help to protect assets and ensure that there is some degree of accountability in how the distributions are made. Incentive trusts, where a certain behavior or accomplishment markers are determined, can be used to encourage behaviors.

This may mean that the addicted adult does not receive funds, until after passing a drug test, attending a certain number of treatment sessions or entering a residential rehabilitation program.

Incentive trusts are part of a special area of estate planning. Therefore, it is necessary to work with an attorney who has experience with trusts and with incentive trusts. Ideally, the attorney who helps your family, will be one who is also familiar with the impact of addiction on families.

Creating incentives for positive outcomes includes having consequences when the person fails to meet the terms of the trust.

In this situation, a trustee who is extremely trustworthy and not prone to being manipulated is necessary. They will need to make sure the person adheres to the requirements and while they may be given certain levels of discretion, this person will need to be strong-willed enough to withstand a strong-minded, potentially aggressive, addict.

This kind of trust may require the beneficiary to submit to specific terms and provide access to their health records, which itself requires a HIPAA waiver for the trustee.

Creating an estate plan with an incentive trust presents many challenges for the family and the trustee. It may well become a highly charged, emotional process. However, talking about these issues openly is part of preparing for the future. Concerns about what will happen to an addictive member of the family after the parents are gone, will hopefully create some peace of mind in a turbulent setting.

Reference: MarketWatch (Jan. 14, 2019) How to leave money to a family member with an addiction”

Suggested Key Terms: Estate Planning, Inheritance, Finances, Addiction, Trusts, Incentives, Trustee

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What Do I Need to Know About Estate Planning After a Divorce?

The recent changes in the tax laws created increased year-end activity for those trying to finalize their divorces by December 31—prior to the effective date of the new rules.

The new tax laws stipulate that alimony is no longer deductible by the payor, and it’s no longer taxable by the receiver—this creates a negative impact on both parties. The payor no longer receives a tax deduction, and the receiver will most likely wind up with less alimony because the payor has more taxes to pay.

Forbes’ recent article, “9 Things You Need To Know About Estate Planning After Divorce” suggests that if you were one of those whose divorce was finalized last year, it’s time to revise your estate plan. It’s also good idea for those people who divorced in prior years and never updated their estate plans. Let’s look at some of the issues about which you should be thinking.

See your estate planning attorney. Right off the bat, send your divorce agreement to your estate planning attorney, so he or she can see what obligations you have to your ex-spouse in the event of your death.

Health care proxy. This document lets you designate someone to make health care decisions for you, if you were incapacitated and not able to communicate.

Power of attorney. If you had an old POA that named your ex-spouse, it should be revoked, and you should execute a new POA naming a friend, relative, or trusted advisor to act as your agent regarding your finances and assets.

Your will and trust. Ask your attorney to remove the provisions for your ex-spouse and remove your ex-spouse as the executor and trustee.

Guardianship. If you have minor children, you can still name your ex-spouse as the guardian in your will. Even if you don’t, your ex-spouse will probably be appointed guardian if you pass away, unless he or she is determined by the judge to be unfit. While you can select another responsible person, be sure to leave enough cash in a joint bank account (with the trusted guardian you name) to fund the litigation that will be necessary to prove your ex-spouse is unfit.

A trust for your minor children. If you don’t have a trust set up for your minor children, and your ex-spouse is the children’s guardian, he or she will have control of the children’s finances until they turn 18. You may ask your estate planning attorney about a revocable trust that will name someone else you select as the trustee to access and control these funds for your children, if you pass away.

Life insurance. You may have an obligation to maintain life insurance under the divorce agreement. Review this with your estate planning attorney and with your divorce attorney.

Beneficiary designations. Be certain that your 401K and IRA beneficiary designations are consistent with the terms of your divorce agreement. Have the beneficiary designations updated. If you still want to name your ex-spouse as the beneficiary, execute a new beneficiary designation dated after the divorce. It’s also wise to leave a letter of intent with your attorney, so your intentions are clear.

Prenuptial agreement. If you’re thinking about getting remarried, be certain you have a prenuptial agreement.

It’s a great time to settle these outstanding issues from your divorce and get your estate plan in order.

Reference: Forbes (January 8, 2019) “9 Things You Need To Know About Estate Planning After Divorce”

Suggested Key Terms: Estate Planning Lawyer, Divorce, Alimony, Will Changes, Guardianship, Trusts, Trustee, Asset Protection, Probate Court, Inheritance, Power of Attorney, Healthcare Directive, Living Will, Tax Planning, Financial Planning, Beneficiary Designations, Life Insurance, Pre-nuptial Agreement, 401K, IRA

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Empty Nest? Time to Focus on the Nest Egg

After decades devoted to rearing children, it happens: parents realize that they’ve neglected their own retirement savings. Once the nest empties out, says USA Today, it’s time to refocus on building up savings accounts. How do you do it? The answers are in the article “5 ways empty nesters can boost their savings and turbocharge their 401(k)s.”

Here’s a five-step plan for making this happen.

Up the savings side. Once you’re not spending cash on your kids for clothes, college funds, cars and car insurance, that cash can move into retirement savings. The maximum for a 401(k) in 2019 is $19,000, and if you are over age 50, you can add $6,000 as a “catch-up” contribution. For annual IRA contributions, the limit is $5,000 with a catch-up of $1,000. Increase your paycheck deductions to the percentage, that will get you to the IRS limits. Put savings first.

If there’s a match, don’t miss it. Lucky enough to work for a company that matches all or part of your retirement savings? Do whatever you can to take full advantage of that free money. The most common company match is 50 cents per dollar on 6% of pay, according to Vanguard Group, which says that 70% of 401(k) plans had this match in place in 2017. Let’s say you earn $75,000 and save 6% of your pay. The company would give you $2,250, which means you’d be boosting your savings to $6,750.

Max out savings. The more money that is saved, the faster the nest egg grows. A married couple that socks away a combined $50,000 in pretax dollars every year in their 401(k)s, can find themselves with an additional $250,000 in five years. That’s not counting company matches or any investment growth.

Catch-up as fast as you can. Over 50? The IRS promotes savings by allowing catch-up contributions. An additional $6,000 is allowed in a 401(k). Parents who were paying for summer sleep away camp or riding lessons, can move those dollars into their own retirement accounts.

Control spending. The natural inclination when cash flow loosens up, is to spend more. Many people decide to live it up during these years, feeling like they deserve to enjoy themselves after dedicating so many years to their children. There’s a balance that needs to be found between enjoying and over-spending. Most families increase their retirement savings when the children are gone, but not by enough. Ramping up spending, instead of saving, means years of missed opportunities to build your retirement accounts.

The best advice is to take the long view. Savings instead of putting a convertible in the garage or taking lavish vacations, when a more modest approach is equally enjoyable, could change the nature of your retirement.

Reference: USA Today (Jan. 14, 2019) “5 ways empty nesters can boost their savings and turbocharge their 401(k)s”

Suggested Key Terms: Retirement Accounts, Empty Nest, Spending, Catch Up Contributions, 401(k), IRA, Company Match, Savings

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Should I Use an Online Will Service?

More than 50% of Americans don’t have a will, according to a 2017 survey by Spelling out how your assets should be divided, is an essential start to estate planning that can be easily overlooked.

A U.S. News & World Report’s article asks “Should You Make a Free Will Online?” According to the article, before writing your will or using an online service, you need to know the legal requirements in your area. In many instances, this is best left to a legal professional in your state.

There are plenty of online tools that will help you create a will. However, before clicking on a website’s promise, you need to evaluate the available options. There are three main ways to write a will:

  1. Do it yourself;
  2. Use a do-it-yourself program; or
  3. Get help from a qualified estate planning attorney.

If you draft a will on your own, you’ll need to be absolutely certain you understand all of the applicable probate, tax and property laws. People who’ve written their own wills are usually those with very basic estates, like a person with a single piece of real estate and a small amount in investments.

If you use an online service, you’ll have access to software that walks you through the process. In this case, you’ll need to be sure that the software company has all the applicable laws covered, as required for your state. You also want a program that lets you make updates later, if your situation changes.

However, if you engage the assistance of an experienced estate planning attorney, you’ll have the opportunity to have an expert help you think through the details. This result will be a well-drafted will. Yes, it will cost a bit more, but for many situations—like those with blended families, complex investments, or property in several states—it’s worth it.

Remember that the probate laws can vary widely from state to state. For example, the basic form requirements may allow a handwritten will in some states, but in other states the will must be typewritten. Some states require only two witnesses, and others require that the will be witnessed, notarized and typed.

If you have a larger estate or heirs with medical conditions, it may be wise to work with an attorney who can counsel you on the best solutions for your situation. For example, if you have a child with special needs receiving government benefits, you should have an attorney create a trust so their inheritance doesn’t negatively impact their benefits.

You should also use an attorney if you want to reduce your exposure to probate fees. Some people transfer their assets into a revocable living trust, so they are not subject to probate fees. An online service can’t give you this type of attention or personalized service.

If you have a complex situation, you may end up paying less by using an attorney. An experienced estate planning attorney has helped numerous families. He or she can offer insight into setting up guardians for minor children or appointing an individual to be in charge of the distribution of the estate. There are frequently estate and gift tax considerations about which the average person doesn’t know or monitor.

Reference: U.S. News & World Report (January 9, 2019) “Should You Make a Free Will Online?”

Suggested Key Terms: Estate Planning Lawyer, Wills, Guardianship, Online Will, Trustee, Revocable Living Trust, Probate Court, Inheritance, Special Needs Trust

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Farmers, Don’t Make These Five Estate Mistakes

First mistake: some farmers think they don’t have to do anything because the federal estate tax exemption is so high, and their net worth is well under the limit. However, just because the estate tax exemption has doubled until 2025, does not mean they don’t need estate planning. The article “5 Estate Planning Mistakes You Don’t Want To Make” from Ag Web takes readers through some big mistakes that have been made by farm families in the past.

The estate exemption will only be this high for a limited period of time. When the Tax Act expires in 2025, the exemption will be back down to $5.5 million per person and $11 million for a couple. However, there is an election in 2020. There is no guarantee that the limits will remain in place until 2025.

The family is a bigger risk to the future of any family business than taxes. Blended families, stepparents, siblings and half-siblings and how family relationships work or don’t work is the bigger reason why family farmers, ranchers and business owners need estate and succession planning.

Second, people make a huge mistake in trying to treat their children the same. Fair does not always mean equal. Think about who is working on the farm, and who is not. Who is going to do a great job maintaining the family legacy, and who has already left to live in another state? Be mindful of the difference in your children, and talk with them, individually and in a group, so they know what your intentions are.

Third, you cannot simply title your property, so your kids and your spouse own it together and it passes to them when you die. It sounds nice and simple, but it’s a huge mistake. People think they want to do this to avoid probate, but it creates many problems. For one thing, if you just add names on property and there is no bill of sale, you create a taxable gift. What happens if one of your children gets divorced? Their name is on the deed, their spouse may be entitled to a portion of your farm, and suddenly your wife, children, and an ex-wife are all owners of the property.

Fourth, the plan to “sell off the farm, when I retire” plan is a terrible tax burden to place on yourself. If you sell the last crop and auction off the equipment, there will be a big income tax bite. Farmers tend not to pay a lot of income taxes. They sell this year’s grain next year, and they deduct next year’s expenses this year. They buy equipment in December and then depreciate it, but then when you do a retirement sell off, you get all the taxes that you’ve been pushing away all at once.

Fifth is the one that dooms so many families, both farmers and non-farmers. You can’t copy your neighbor’s estate plan and hope it will work. Every family is different, and no matter how small your town, everybody does not know the exact details of everybody else’s business. The farmer down the road may do a lifetime gifting that works for them—and lands your family in an unfixable situation.

Estate planning is very specific, and every family has its own needs. Talk with an estate planning attorney, who has experience with farm families and succession plans.

Reference: Ag Web (Jan. 15, 2019) “5 Estate Planning Mistakes You Don’t Want To Make”

Suggested Key Terms: Estate Planning, Tax Exemptions, Family Farms, Property Titles, Gifting, Probate, Income Taxes

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Market Volatility Has You Worried? Here’s Something You Can Control

When investors are faced with turbulent markets, there’s a human response to want to do something—sometimes, anything. We’re hardwired to try to take control. That doesn’t always help us make the best investment decisions. However, as reported in this Daily Camera’s article, there is something that you can do that may make you feel better: “Freaked out about the market? Resolve to get your estate in order.”

If you care about your health care, financial affairs, minor children and even your beloved pets, this is an important task to take care of. An estate plan includes legal documents that help you, when you are living and helps your heirs, when you die. In addition to a will, powers of attorney that will give your loved ones the ability to manage your affairs, if you become incapacitated. An updated will ensures that your assets go to the inheritors you chose. Don’t forget your beneficiaries.

Your beneficiaries are the people who are named on several accounts and life insurance policies. You may have named people on investment accounts, life insurance policies, IRAs, bank accounts, annuities and other assets. If you have not done a full review of those documents in a while, you want to take care of this right away. Life and relationships change over time, and the people you originally named as your beneficiaries, may no longer be the ones you would select today. Note that any changes must be made while you are living—when you are passed, the beneficiaries receive the asset, regardless of what is written in your will.

If you’re not sufficiently motivated to make an appointment with an estate planning attorney, you should be aware that if you don’t have a will, the laws of your state will determine who gets your assets and even, lacking a will that names a guardian, who rears your minor children. You may or may not be a fan of court proceedings, but if you don’t have a properly prepared will, the court is going to be making a lot of decisions on your behalf.

Contact an estate planning attorney to begin the process of putting your affairs in order. An attorney whose practice focuses in this area of the law, is most likely a better choice than one who does wills on the side. There are many complex laws in estate planning, and there are many opportunities available to make the most out of your assets and grow your legacy. An estate planning attorney will know what will work best for you and your family.

Reference: Daily Camera (Jan. 6, 2019) “Freaked out about the market? Resolve to get your estate in order”

Suggested Key Terms: Estate Plan, Will, Power of Attorney, Minor Children, Guardian, Beneficiaries

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Why Can’t My Husband Go to the Doctor to Help Me?

Health care privacy laws have created situations for many well-meaning people that become really annoying. If one spouse is ill and the other spouse is more than willing to take a ride to the doctor’s office to get a needed document, in many instances they cannot—even if the doctor or physician assistant knows them both.

It seems illogical that the person who is named as another person’s agent under an Advanced Care Directive can’t take on these tasks, says the Monterey Herald in the article “Senior Advocate: Can my health care agent help me now?” After all, if they can make decisions for you when you’re incapacitated, why can’t they do something as simple as get a copy of your medical records for a second opinion?

However, the Advance Health Care Directive isn’t the document that gives someone access to all of your medical information. The Advance Health Care Directive is usually the document that gives your named agent the power to make decisions about end-of-life or life-saving decisions. It’s the document that is used if a decision must be made about taking a person off of a respirator or a heart machine.

If you want to give someone the ability to run health-related errands for you or speak with your healthcare providers, it is possible to have an Advanced Health Care Directive prepared, so it becomes immediately effective, regardless of your capacity. This can be used to give a spouse the ability to have access to all your medical records and information.

If you are ill and want to have your spouse involved in your medical care, even if you are not incapacitated, the “effective immediately” option will let your spouse act on your behalf. You won’t have to wait for a physician to state that you are incapacitated, before an Advanced Directive can take effect.

Since an Advance Directive usually names an alternate agent, you can have the document prepared so your spouse is able to be effective anytime, but the alternate agent can be limited to when your spouse is not able to help, and you are unable to speak for yourself because you have become incapacitated.

Keep in mind that the Advance Directive, whether effective immediately or only upon incapacity, has nothing to do with your finances. That requires a different document, or documents, depending upon your estate plan and your unique situation.

An estate planning attorney will be able to craft Power of Attorney documents for finances, trusts or other assets. All these documents should be prepared, while you are still competent to understand how the documents work and what powers they give to your spouse or another named agent.

Reference: Monterey Herald (Dec. 22, 2018) “Senior Advocate: Can my health care agent help me now?”

Suggested Key Terms: Advance Health Care Directive, Power of Attorney, Incapacity, Alternate Agent

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Why is Succession and Estate Planning a Process?

If you hear of someone heading off to her attorney to do their succession planning, it’s really just one of several meetings that are necessary to draft a sound succession plan, says Dairy Herd in the article “Estate Planning Is A Process, Not An Event.”

In fact, succession planning is a process. Ten years of time can fly by very quickly, so the earlier you can start having these conversations with your attorney, the better.

The amount of time needed to draft a solid succession plan is different for every family. If things are fairly straightforward, it may take only six to nine months. However, it’s not uncommon for this process to take a year or more.

That’s especially true in the ag sector, because once the good weather arrives, this process slows down to a halt—good weather means that everyone is focused on crop production.

There’s no magic age to start the process, but again, sooner is better.

You can spend your entire career building your business. However, very few people have really spent  much time thinking about how they will effectively exit from it.

You may not be thinking of retiring or transitioning the farm operation for 15 or 20 years but having an idea of where you’re trying to get, gives you a better track on which to run.

Succession planning should happen well before retirement, so that’s why the best plans are flexible and adaptable.

Every plan is unique to each family’s particular farm operation and circumstances.

The best plans are dynamic and draw on the expertise of an entire team of professionals. That way you’re seeing all of those issues and changes along the way.

Reference: Dairy Herd (January 15, 2019) “Estate Planning Is A Process, Not An Event”

Suggested Key Terms: Estate Planning Lawyer, Asset Protection, Business Succession Planning

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How to Handle the Finances When You Remarry

Before you enter into a second marriage after a divorce or the death of a spouse, you need to sit down and have a frank talk with your intended about money issues. Finances are more complicated, if this is not your first trip to the altar.

You might have children from the previous relationship. You might have built up a retirement account or other assets. You also do not want to find out after you say “I do” that your new spouse is drowning in debt. Here are some suggestions on how to handle the finances when you remarry.

Separate or Together

Some people throw all their money together when they marry. However, for a second marriage you might want to handle things in a different manner. Many people keep their existing accounts separate and open a new joint account for the household expenses. Each person deposits an equal amount into the account every month, and they pay the household bills and living expenses out of this account.

Communication is the Key

You are not a kid anymore. If you had a financial setback in your 20s, you had plenty of decades ahead of you to work hard and bounce back. In your subsequent marriage, you are older and wiser, but you might not know how to avoid some of the financial challenges that marriage can bring.

You should not set a date for the wedding before you both know each other’s financial picture. Many people maintain an image of affluence, by living beyond their means. You should each disclose your income and how much debt you have. Debt includes financial obligations, like being a co-signer on someone else’s lease, student loan or other debt.

You should also tell each other how much money you have in investments, retirement accounts and savings. Discuss the market value of your homes and how much it will take to pay off the mortgages.

Prenups Are for Smart People

While none of this sounds romantic, talking about these subjects can save you from a decision you will regret. Once you have both put your financial cards on the table, go to a lawyer and get a pre-nuptial agreement.

It might seem obvious that each of you will leave with what you brought into the marriage if things do not work out, but that is not what always happens in divorce court. Investing in this document can protect your future and the inheritance you plan to leave for your children.

Children and Inheritance

Make sure you address the issue of how the marriage will affect the children’s inheritance, then go to a lawyer to put it in writing. Few things will sour a person’s relationship with a stepchild, like the child thinking that the new step-parent is going to steal the child’s inheritance.

Money Mindsets

People with extremely different attitudes about money have a low likelihood of long-term happiness. If you are a person who works hard, follows a budget and saves for the future, you should not marry someone who spends every cent he makes, runs up debts and refuses to save money. Both of you will be miserable.

You should also talk about when you both expect to retire and what you want to do then. You might want to retire at full retirement age and do things that you enjoy, like traveling, volunteering and learning new skills. He might plan to work, until he falls over at his desk.

You should never enter into marriage lightly. However, when it is not your first marriage, you have more variables to address. Failing to talk about and reach agreement on the financial issues, can ruin a great relationship.

Your state might have different regulations than the general law of this article, so you should talk with an elder law attorney near you.


AARP. “4 Money Tips for Second Marriages.” (accessed January 1, 2019)

Suggested Key Terms: money management for second marriages, how to handle the finances when you remarry

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What Exactly is Long-Term Care Insurance?

Some people confuse Long-Term Care (LTC) with Long-Term Disability Insurance. The disability insurance coverage is designed to replace earned income in the event of a disability. Others think that LTC is a type of medical insurance.’s recent article entitled “The benefits of long-term care insurance” explains that long-term care insurance isn’t meant to be disability income replacement, and it isn’t medical insurance. LTC insurance covers the varied personal needs of persons who are ill and (even temporarily) incapacitated. This includes feeding, clothing, bathing, and driving to appointments and doing the extra washing.

Some people consider LTC insurance as what was once called “Nursing Home Insurance.” This evolved to include either care at home or care in a rehab or nursing home facility.

Married couples are especially susceptible, when one spouse becomes ill or injured because the extra costs of long-term care can eat up all their savings and bankrupt the caregiver spouse. For that reason, those in their 50’s should start to look at LTC insurance for several reasons:

  1. Annual premiums are lower when acquired at younger ages; and
  2. Aging may bring health issues in the future, which may prohibit the opportunity to buy LTC insurance coverage altogether.

There are many ways to tailor LTC coverage to make it affordable. The most critical components of an LTC insurance policy include the following:

  • The average period of need for most is three years.
  • The daily amount of coverage varies by geographical area.
  • Home care should be the same as that for care in a facility.
  • The waiting period, which determines when the coverage actually starts after the date the incapacity began.
  • Married individuals can get a combined policy with a discount.
  • An inflation rider: The daily cost of coverage will naturally increase over time with inflation, selecting a rate of inflation will ensure keeping up with rising costs in the future.

Every family should have an open discussion about potential illness or incapacity of family members, and LTC should be a part of that.

Reference: (January 6, 2019) “The benefits of long-term care insurance”

Suggested Key Terms: Elder Law Attorney, Long-Term Care (LTC), Elder Care

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