Spring Break Checklist

As winter comes to an end—many of us are ready to make plans for spring break. Here are a few important reminders, whether you plan to travel  or enjoy your spring break at home.

Tips for Traveling

●      Passport. If you plan to travel internationally, you will need a valid passport. If you need a new passport or to renew your existing passport, you should plan ahead: routine processing can take six to nine weeks, although expedited, urgent, and emergency processing is available under some circumstances.

●      Health insurance card. You should bring your health insurance card with you on your trip. If you are traveling within the United States, you should contact your health insurance company to ask if the state you are visiting is within your plan’s network. If you are traveling to a state outside of your plan’s network, you should ask which services are covered. In general, routine care is not covered in states that are outside of a plan’s network, but emergency services are covered. However, plans may differ, so it is important for you to check with your insurance company.

●      Powers of attorney. If you have property, accounts, or a business that needs to be monitored or managed while you are away, you should have a financial power of attorney granting someone you trust the power to take care of your affairs until you return. In addition, you should consider having a power of attorney that authorizes someone you trust to handle emergencies while you are away, for example, repairs and insurance claims in the event of a flooded basement or a roof damaged by hail. The document can specify exactly what the individuals appointed under the power of attorney are authorized to do and the time period during which they may act on your behalf.

●      Auto insurance information. In general, auto insurance policies cover drivers in all fifty states and sometimes Canada and Mexico. In addition, if you have auto insurance, it will cover a rental car. However, there may be some gaps in your coverage if your rental car is damaged or stolen. If you do not have auto insurance, you will need to obtain rental car insurance if you plan to use a rental car during your travels. If you will be driving in a foreign country, you may also need to obtain rental car insurance and an International Driving Permit, which is a document that translates the information on your driver’s license into at least ten languages.

●      Travel insurance. You should also consider obtaining travel insurance, which can include trip cancellations, disruption insurance, or travel health insurance. If your trip is expensive, you could lose a lot of money if you get sick and cannot travel or an incident occurs that prevents the trip from occurring as planned. In addition, if you are traveling internationally, your health insurance may only cover emergency care. Travel health insurance may cover out-of-pocket costs that are incurred for medical care. In addition, medical evacuation insurance is available to cover transportation expenses if you travel to a country whose healthcare is not as good as the care you would receive if you return home or are transported to another location.

Make sure your family and loved ones have your contact information in case of emergency. Although you will likely have your cell phone with you during your travels, some areas, even in the United States, have poor cell phone coverage. As a result, you should provide your family with landline telephone numbers and addresses of the hotels or resorts where you plan to stay during your trip.

Tips for Staying Home

If you are taking a staycation, you can take advantage of your free time by reviewing your existing financial and estate plans. If you have changed jobs, gotten married, had children, or experienced other life changes, it may be time for an update. If your estate plan is outdated, the people who you want to receive your money and property may not receive it as you intend. You should also regularly review the people you have named as executor, trustee, caregiver for your children, and agent under a power of attorney to ensure that they are still willing and able to fulfill those roles—and that you still have confidence in their abilities to do so.

Further, if you have experienced financial changes, such as a substantial increase or decrease in the value or composition of your estate, buying or selling a home or other property, changing jobs, buying or selling a business, or receiving an inheritance, there may be tax and other consequences that could impact your estate plan. Although this may not sound like a relaxing activity for your spring break, you may be surprised at the peace of mind you will gain by ensuring that your estate plan accomplishes your goals and protects your family as you intend.

Give Us a Call

Regardless of whether you are traveling or staying home, if you need to create or update your estate plan, give us a call to schedule an appointment.

Retirement Planning Update

Spring is on its way and it’s important to remember upcoming April deadlines for retirement contributions and required minimum distributions (RMDs). There have also been some recent developments that may impact your retirement planning.

IRS Proposed Regulations for Required Minimum Distributions

In 2020, the Setting Every Community Up for Retirement Enhancement (SECURE) Act created a ten-year payout rule for most inherited retirement assets, such that the account must be fully withdrawn by the end of the calendar year that includes the tenth anniversary of the date of the participant’s death. Although many initially believed that no RMDs were required in years one through nine following the death of the plan participant, in February 2022, the Internal Revenue Service (IRS) issued proposed regulations clarifying that RMDs are, in fact, required each year during the ten-year period under many circumstances. This caught many beneficiaries by surprise, especially those who opted not to take distributions in 2021 or 2022 in good faith based on the information they had.

However, on October 7, 2022, the IRS issued Notice 2022-53, which states that the IRS will not penalize beneficiaries for not taking those RMDs. However, beneficiaries will have to ask for a refund of any excise tax already paid; the IRS will not automatically reimburse it. This relief applies only for the 2021 and 2022 distribution calendar years. In contrast to the February 2022 proposed regulations, which stated that the final regulations would apply to 2022 and later distribution calendar years, Notice 2022-53 also indicated that any final regulations issued by the IRS regarding required minimum distributions will apply no earlier than the 2023 distribution calendar year.

The proposed regulations also clarify the age of majority under the SECURE Act: the child of an employee with an individual retirement account is considered to have reached the age of majority on the child’s twenty-first birthday. However, defined benefit plans that have used a pre-Secure definition of majority may continue to use that definition.

SECURE 2.0 Act

On December 29, 2022, President Biden signed the $1.7 trillion omnibus spending bill, which included the SECURE 2.0 Act of 2022. SECURE 2.0 increases the age at which individuals must begin taking RMDs from retirement plans from 72 to 73 starting on January 1, 2023, if they reach age 72 after December 31, 2022. Starting on January 1, 2033, for individuals who reach age 74 after December 31, 2032, the date at which RMDs must be taken is increased to age 75. The original SECURE Act, passed in late 2019, increased the age at which individuals must begin taking required minimum distributions from 70 ½ to 72 starting in 2020.

SECURE 2.0 also allows a surviving spouse to elect to be treated as the deceased employee for purposes of the RMD rules, effective for calendar years after December 31, 2023. As a result, if you are a surviving spouse and your deceased spouse was younger than you, you should consider making the election to delay the date at which RMDs must begin, allowing additional time for tax-deferred growth of your retirement account.

In addition, SECURE 2.0 increases the amount of tax-advantaged contributions older workers can make as they approach retirement age and expands opportunities for retirement savings for longer term part-time workers. You may be able maximize the growth of your retirement accounts by taking advantage of these new opportunities.

The retirement planning landscape has been evolving over the past several years, and we are committed to keeping you up to date on the latest developments and how they will impact your estate plans.

Estate Planning Deficiencies Check-Up

Yes No Don’t Know

Do you have a Will or a Trust in place? Without proactive planning, state laws will determine how your assets pass, to whom they pass, and when they pass. This can lead to undesired results, and is perhaps the most costly way to pass assets to loved ones.

Yes No Don’t Know

Has your Will or Trust been reviewed in the last two years? Even assuming that there have been no family or financial changes since your plan was last reviewed, there have been several major tax law changes. An out-of-date estate plan can be worse than no planning at all.

Yes No Don’t Know

Does your current Health Care Power of Attorney permit the person of your choosing (spouse, child, family) to make emergency health care decisions for you in the event you are unable to do so?

Yes No Don’t Know

Does your estate plan contain a customized plan to determine if you are mentally disabled?

Yes No Don’t Know

Does your current estate plan give instructions for your care and the care of your loved ones in the event of disability?

Yes No Don’t Know

Are you certain that your current estate plan will minimize possible federal estate taxes at your death, including taxes on your house, life insurance and IRA’s?

Yes No Don’t Know

If you have a Revocable Living Trust in place as part of your estate plan, is your trust fully funded so that your family can avoid the delays and expenses of probate?

Yes No Don’t Know

Have you taken steps to avoid possible will contests and disputes during the administration of your estate?

Yes No Don’t Know

Does your estate plan protect your children’s inheritance in the event your surviving spouse chooses to remarry?

Yes No Don’t Know

Have you recently checked the beneficiary designations of your retirement plans and life insurance policies, and are you confident that you have not listed your estate or any minor children as either primary or secondary beneficiaries?

Yes No Don’t Know

Does your current estate plan provide creditor and lawsuit protection for assets passed to your surviving spouse?

Yes No Don’t Know

Does your current estate plan provide creditor and lawsuit protection for assets passed to your children’s inheritance?

Yes No Don’t Know

Are you confident that your current estate plan is income tax efficient?

Yes No Don’t Know

Does your current plan protect your children’s inheritance from a divorcing spouse?

Yes No Don’t Know

Are you satisfied with the persons you named as guardians of your minor children in your current plan?

Yes No Don’t Know

Are you satisfied with the persons selected as executor and trustee in your current estate plan?

Yes No Don’t Know

Are you confident that your executor, power of attorney, and successor trustee are prepared to act on your behalf when asked to?

If you answered No or Don’t Know to any of the questions, you can sign up for a no cost, no obligation estate planning consultation. Complete the bottom of this form and we will contact you to schedule the complimentary consultation.

Estate Planning Issue Spotting For Professional Advisors

Things You Need to Know as Successor Trustee

Being named as a successor trustee in someone’s revocable living trust document can be considered a great honor. But with that honor comes responsibility. Whether you were appointed to this role due to someone’s death or incapacity, we are here to assist you with understanding your role in the trust administration process and to offer you support each step of the way.

What is a revocable living trust?

A revocable living trust (RLT) is a formal relationship in which the trustmaker names a trusted individual (a trustee) to hold and manage accounts and property for the trustmaker’s benefit and the benefit of others (beneficiaries). When people talk about a trust, they are usually referring to the legal document that puts this relationship in writing. This document is effective during the trustmaker’s lifetime, during any period of disability, and after death. Because the trust is created during the trustmaker’s lifetime, it is referred to as a “living” document, and because the trustmaker can change or terminate it at any time, it is called “revocable.”

What is a trustee? How is this different from a successor trustee?

A trustee is the person or entity responsible for managing, investing, and handing out the money and property owned by the trust. When a revocable living trust is created, the trustmaker is usually named as the initial trustee. This allows the trustmaker to maintain the same amount of control over and enjoyment of the trustmaker’s accounts and property as the trustmaker had before the trust was created, just in a different role. 

A successor trustee is a person or entity that has been named by the trustmaker to take over as trustee when the trustmaker can no longer act as trustee, whether due to disability, death, or a voluntary desire to have someone else manage the trust’s accounts and property.

What are my responsibilities and duties as the successor trustee?

As previously mentioned, a trustee is responsible for managing, investing, and handing out the trust’s accounts and property to the appropriate parties at the appropriate times. There are several responsibilities you may need to carry out when acting as successor trustee:

• Locate the relevant estate planning documents. These documents will be important to prove your authority to act and to understand what the trustmaker has instructed you to do.

• Collect important documents such as insurance policies, real estate deeds, car titles, bank and investment account statements, and tax returns.

• Meet with your loved one’s professional advisor team (estate planning attorney, tax professional, financial advisor, etc.) to plan the strategy for administering the trust and to prepare the legal documents needed to carry out that plan.

• Create a list of debts, creditors, and current expenses. Now that you are managing the trust account, you must ensure that all bills get paid.

• Make a list of the trust beneficiaries and heirs-at-law and their addresses. Work with an attorney to determine what type of notice each person is entitled to, as well as how and when this notice will be given.

• Prepare a list of all of your loved one’s property, accounts, jewelry, and other valuables. The items owned by the trust are now your responsibility. You must know where they are, how much they are worth, and adequately protect them from loss or damage.

• Maintain the trust accounting—that is, keep a record of all deposits, expenses, and transfers from the trust (even if they are to or for the benefit of your loved one).

A trustee also has some important duties that you should be aware of:

• Duty to administer the trust. The trustee must follow the terms and purposes of the trust document and act in good faith.

• Duty of loyalty. The trustee must administer the trust solely in the best interests of the beneficiaries unless the trust document allows for something different, or unless a  specific transaction is approved by a court or consented to by the trust beneficiaries.

• Duty of impartiality. When there is more than one trust beneficiary, the trustee must act impartially with regard to each beneficiary’s interest in the trust property; and although “impartial” does not necessarily mean “equal,” a trustee must still carefully avoid showing favoritism between beneficiaries.

• Duty to control and protect trust property. A trustee has a duty to secure real property, change locks, and take similar protective measures. The trustee must physically secure personal property to avoid damage or loss. A trustee must also inform financial institutions of the trustee’s authority to control the trust assets titled in the name of the trust.

What if I need help?

Accepting the role of successor trustee can seem a little intimidating when you look at the job description. However, you are not alone. Your advisor team (trust administration attorney, certified public accountant (CPA), financial advisor, and insurance agent) can guide you through the various steps of the administration process. If you are feeling overwhelmed, you may want to consider delegating trust administration tasks to another person with comparable, more advanced, or specialized skills such as an attorney, CPA, or financial advisor. Also note, services completed on behalf of the trust can be charged to the trust, not to you personally.

Give us a call

If you have questions about your current or future responsibilities as the trustee or successor trustee of your loved one’s trust, give us a call at 714-451-5766. We can help you navigate the necessary tasks and lend a hand when you are overwhelmed. We are available for in-person or virtual appointments, whichever is more convenient for you.

What is Undue Influence?

Undue Influence is when someone pressures another in such a way that the person being influenced is not acting by their own free will; they are being coerced into taking a certain action.  Undue influence often arises when a friend family member falls ill.  For example, mom has been diagnosed with cancer and her boyfriend influences her to change her estate plan so that all mom’s assets go to him instead of to her kids.  The plan is oftentimes carried out in secret and others don’t know about what has been done until after the one being influenced passes away.

Undue influence is an argument that can be brought up in court to undo what the bad actor has done. Continuing the above example, mom’s children can file a petition to have the boyfriend’s actions undone if the court finds that the boyfriend was guilty of undue influence on mom.  A will can be thrown out, property transfers can be undone, and the bad actor’s name can be taken off accounts.  In order to win a case for undue influence, one must prove not just that the decision maker was persuaded by another to take a certain action, but that the person was coerced.  Meaning, either the influenced person didn’t have the capacity to make the decision, or they were tricked into doing so. 

When analyzing the case, the court will look at all kinds of evidence, including:

·       Was the action in line with, or opposed to, recent decisions before the person fell ill?

·       Is the new act in line with previous decisions regarding that property?

·       Did the bad actor have authority or control over the person making the decision?

·       Was the bad actor physically involved in carrying out the decision?  For example, did the bad actor drive the person to the appointment, arrange for the decision to be carried out, or physically help guide the person’s signature?

·       Was the act kept a secret?

·       Did the bad actor keep the decision maker from contact from family and friends?

·       Was the decision maker in a vulnerable position?

·       Had a physician made a determination of capacity?

In many cases, undue influence arises when the decision maker lacks capacity.  Capacity means that the individual knows what is happening and understands the consequences of their decision.  When someone falls ill or has a disease like dementia, they are in a vulnerable spot and can be taken advantage of because they become unaware of the actions that are being taken or the full effect of what they mean. 

If an individual lacks capacity, then hopefully they had executed a power of attorney while they were healthy and now their agent can act on their behalf.  An agent has a duty to act in the incapacitated individual’s best interests.  If proper planning was not done, then a guardianship may be needed.  This is where a court process is initiated so that a judge can appoint someone to act on the incapacitated person’s behalf.

There are always two sides to every coin.  In some situations, the decision maker intends to be favorable to one person over another.  For example, one child is a caretaker to the parent and the parent’s will is more favorable to that child.  If the child called the lawyer to set the appointment and drove the parent to that appointment, that could look like undue influence when in fact, it wasn’t.  The parent could have had the intent that the caretaker child receives more inheritance.  A situation like this might lead to litigation if the parent didn’t plan in advance, while they were healthy and obviously had capacity.  Some elder law attorneys might also suggest that the client talk to the other children and explain what the will says and why one child will receive more.  Sometimes it isn’t the best surprise after the parent has died to learn that a sibling will receive more inheritance. 

Many people need to look out for undue influence and capacity issues, including attorneys, financial advisors, bankers, notaries, and medical personnel.  Things to look out for:

·       Does the decision maker appear coherent and aware of what is going on?

·       Do you see any signs of physical abuse, such as bruises or scrapes?

·       Do you see any signs of emotional abuse, such as the bad actor putting the decision maker down or calling them names?

·       Do the decision maker’s actions seem out of the ordinary for them?

·       Are there ever any other friends or family members with them, or only just the two of them?

·       Does the bad actor let the decision maker speak, or does the bad actor control the conversation?

·       Has the bad actor refused to let you speak to the decision maker alone?

Undue influence can cause an individual to take actions that they normally wouldn’t.  These actions can have adverse consequences on friends and family.  But most importantly, the individual’s intent is not carried out.  Instead, the bad actor’s intent is carried out.  It is important that each individual gets to decide what happens with themselves and their belongings during their life and at death.  It is important to have legal documents in place to best protect yourself from being unduly influenced in the event that your health deteriorates.