Estate Planning Bits

What is a dumb question?

It’s amazing how often I’m speaking with a client or potential client, or sometimes even another professional who asks, “May I ask you a dumb question?”

There is no such thing! Any question someone doesn’t have the answer to is legitimate and deserves an appropriate answer. Actually, some questions only require simple answers, but are nevertheless deserving of an appropriate response.

Then there are other questions that are virtually impossible to answer, such as, “When should I retire?” “Will I have enough money?” “At what ages should I have funds distributed to my children?” “What stocks should I buy?” “Do I have enough life insurance?”

Many of these questions can be quantified into specific dollar amounts, but there is no blanket right or wrong answer appropriate for all. When it comes to managing finances or determining amounts for life insurance, many financial advisors have formulas that will determine, or at least provide sufficient information to make an informed and intelligent decision. However, many decisions are based on what is perceived to be the right answer without sufficient attention to analyzing all of the factors that should be considered before making the final decision.

So, when a person asks a question, the advisor should prepare the most appropriate answer, possibly after requesting more information from the client before answering.

There is the old adage that if you ask ten different advisors the same question, you will probably get fourteen different answers! This only goes to show that there is rarely only one correct answer. Because of this, often second and third opinions are obtained from advisors, similar to obtaining a second or third opinion before a medical procedure.

So every time you ask a question, don’t be shy or feel embarrassed. If you don’t ask, you won’t have sufficient information to make your decision, so keep asking all of those questions.

By: Hyman G. Darling, Esquire

Jointly held assets- beware potentially negative consequences

The addition of someone’s name to an asset held by you can be performed quite easily. However, the implications of this simple action can be profound. It is imperative that you understand the potential issues involved, which include, but are not limited to, estate, gift and capital gain taxation, creditor protection, probate avoidance, long term care and Medicaid (currently known in the Commonwealth of Massachusetts as MassHealth.)

A carefully drafted estate plan can take advantage of placing assets in a jointly held account. Jointly-held property is inherited by the surviving joint-owner(s) and, hence, eliminates the need for that particular asset to go through the probate process. Additionally, any joint owner can write checks on a jointly-held bank account, even after the death or disability of the other owner.

Assets, other than bank accounts, that are held in joint names can sometimes be considered inaccessible by MassHealth, and therefore not subject to the spend-down process. However, a haphazardly drafted estate plan that improperly places assets into a co-owner’s name can have disastrous results.

At the time of death, jointly-held assets are inherited directly by the surviving joint owner(s,) and a Will typically does not take those jointly-held assets into account when the total inheritance is divided amongst the beneficiaries. Therefore, inheritances are often skewed toward the surviving joint-owners.

In addition, on many bank accounts, each joint owner(s) has the right to withdraw everything from the account without the other joint-owner’(s) permission. Furthermore, jointly-held assets are exposed to lawsuits by creditors and divorcing spouses of each joint-owner. On the real estate side, adding another to a deed can have significant capital gain consequences.

Therefore, it is advisable to speak with an experienced estate planning attorney to verify that your assets are owned properly, as the consequences of an improper ownership can be considerable.

By: Todd C. Ratner, Esquire