Each week, estate planning attorney Bill Henry spends time educating the community about their estate planning options. This week, we got to hear from estate planning attorney Lucas Frei.
Thursday’s Q&A is dedicated to answering your questions. See what Coloradans asked on July 30, 2020. (A transcript of the event is available below.)
Need help with your estate plan?
Hello everyone. My name is Lucas Frei. I’m fillin’ in for Bill Henry today. Hopefully your day is goin’ great. I appreciate you watching. I’m gonna be answering a lot of estate planning questions today, and hopefully we’ll get y’all some answers. By all means, these are meant to be general, so just as a quick disclaimer, if you have unique situations, which most people do, by all means give us a call. We do case assessments. We’d be happy to talk to ya for half an hour or an hour and just go through what all of your possible options might be. As long as it’s all right with you all, I’m gonna go ahead and dive right in.
What if couples don’t agree on certain portions of the estate plan?
First question is, “What do you tell couples “who cannot agree on certain portions of the estate plan? “For example, if one spouse wants a certain property “to go to one child but the other spouse “has someone else in mind?” So, great question. In a perfect world, of course, husband and wife or spouse and spouse would absolutely be on the same page as to where everything’s gonna go. In reality, we have situations in which maybe this is a third marriage. Maybe you have stepchildren. Maybe there’s other things going on. We wanna make sure that each spouse has say into what property goes where. Worst case scenario, we separate it out, we do two different separate estate plans, one for one spouse and one for the other spouse. Realistically, what we can do is also we can do a trust in which once the first spouse dies, the rules of the trust become locked in, so beneficiaries don’t change, if you’re worried about your spouse possibly disinheriting your child from a previous marriage, something along those lines. Like I said, best case scenario, we end up with our spouses agreeing. If not, it’s not the end of the world. You can come see us. We can talk about having two separate estate plans, separating out some property, making sure that everyone gets treated fair. Ultimately, what I always recommend my clients is, to my clients, is to make sure you have open discussions. Make sure you’re discussing this, not only with your spouse, but also with your potential beneficiary so there’s no surprises down the road.
How do I make sure my land is used how I want after I pass?
Next question. “I want to leave our farm to my boys, “but I don’t want them to sell off the land. “I want the land to continue to be used for farming. “How do I make sure this happens?” So, another great question. Really, a trust is gonna be your best option to achieve that. You can have a trustee there who is instructed to make sure that the land continues to be operated as you’ve operated it. Warnings though, there is a rule against perpetuities. I’m not gonna bore you with what that is. It’s ridiculous. It’s the bane of all law students’ existence. Once you dig into that, I mean there are some limitations there in amount of years, but the other big warning, I would say, if you have two boys and they don’t want to be farmers, you can’t force them to be farmers. You can’t force them to work that land. What you might see is, hey, if you require them to work that land, maybe they don’t wanna do it, maybe the land falls into disrepair, it gets wasted. All of a sudden now they’re sellin’ it for pennies on the dollar in 40 years. Who knows? Again, my biggest recommendation. Make sure you have that open communication. Like I said, a trust could achieve this purpose, but that may not be the best option for ya. It’s important to make sure that, you know, that the incentives and the inheritance you’re leaving your children, it’s important to make sure that’s gonna be used for their benefit for sure.
How and can I include a cannabis business in an estate plan?
Number three here. “How do you include a cannabis business in an estate plan, “and can you since it’s still against federal law?” Yes, it is definitely against federal law. I think it’s up to two-thirds of the states now allow for some sort of cannabis use though. The writing’s on the wall, in my opinion on that. I think you’ll see that in the next five years, that’ll be federally legal. Just my opinion. I can’t guarantee that by any means. But to answer the question, yes, a cannabis business can be included in estate plan. It is a business asset just like others, although, of course, unique and different. In order to operate a cannabis business, you have to have a cannabis license. Here in Colorado, the state of Colorado, their enforcement division operates that. So if you have a child who has a criminal record or a child who’s underage, of course, they’re not gonna be able to inherit that business. The license is likely to be revoked. So, all sorts of issues there as to who is gonna operate that business. A better idea might be to include that in a trust and then have provisions for, you know, some sort of an underage provision or a special needs provisions, in case your actual children or your heirs are not able to inherit that license for whatever reason, then we can put a trustee that operate that business so that at least your children can be the beneficiaries of the money produced from that business. So, like I said, lots of different unique situations we’re talkin’ about. By all means, if you have questions, give us a call. We’re always around. We do answer the phones pretty much 24/7, so we can always schedule with a case assessment with one of our attorneys to go over your unique circumstances.
When should someone set up and irrevocable trust?
Next question. “When should someone set up an irrevocable trust. “I know you’ll wanna set it at least five years “before you’ll need long-term care “to avoid the Medicaid look-back period, “but how can you predict when you’ll get sick, “especially if you’re relatively healthy now?” It’s really great question here. Nobody has a crystal ball, right? Nobody knows. I could leave the office here and get in a car accident, and that could be the end of my life. Nobody knows. Nothing’s guaranteed, right? We do have ways of looking up for kind of guidance, right? There are actuarial tables. The IRS releases some actuarial tables. Insurance companies often use those actuarial tables. Finance companies use those as well to see whether or not they would lend money to people to see their chances of getting paid back, right? Beyond that, I always tell people look to family history. If your parents lived until they were 93 years old and you’re 65, ya may be, maybe it’s not the best time to start movin’ things with irrevocable trust. Of course, like I said, qualification. There’s never a crystal ball. We don’t know. Depending on your assets, depending on your unique situation, now may be a great time no matter what those actuarial tables say. For example, you have a million dollars in the bank and I would ask you, “Well, how much do you wanna save “in a savings account out of an irrevocable trust “to make sure you maintain your lifestyle currently?” Right, that depends on your lifestyle. I have clients that, you know, they go out to breakfast once a week, otherwise they’re just at home. I have clients who are out to dinner three times a day, you know, enjoying their retirement with their spouse. How much money do you need to maintain your lifestyle for the next, you know, so many years? What we can do is we can move, say if you had that million dollars, we can move 500,000 now into an irrevocable trust, and in five years, that money can’t be touched by Medicaid, so you’ve effectively saved $500,000 by moving that. Now, you’ve kept the other $500,000, so you’re able to live off that, maintain your lifestyle. That number’s gonna be different for everybody, right? I mean, we can move a hundred thou. We can move $50,000. Whatever you wanted to save, we can go ahead and put into an irrevocable trust now, and that’s gonna help you later on down the road to get those Medicaid benefits, and to also help you leave something for your heirs there, to make sure you have some sort of endowment to leave them. So again, you know, I hate to keep beatin’ a dead horse here, but you know, these facts are always unique. There’s always different little quirks, and there’s a million different things that could change the way in which we draft these things, so it’s really important that you talk to somebody who knows what they’re doin’, that’s experienced, and that can really help ya through these things.
How do you handle a private practice in an estate plan?
Next question. “How do you handle a private practice in an estate plan? “Having a medical practice “is different than owning a retail business is.” Really great question. I actually get this asked quite often. Depending on what your licensure is, there are different rules, right? A doctor may, a non-doctor may be able to own a medical practice, but a non-attorney may not be able to own an attorney practice, right? I know that for attorney regulation, if you’re a solo attorney, you have to have a backup plan for how your clients are gonna get take care of and where is your money gonna go? ‘Cause for example, if I had my own law firm, my spouse could not inherit that law firm once I pass way. She’s not an attorney. She can’t operate the business. You have to be an attorney to practice law. So what do we do? My biggest recommendation, make sure your operating agreement, make sure your startup documents address this situation for your business. If you have partners, make sure there’s a provision in there that says exactly what happens when you pass away. Does your partner continue operating the business and then pay out your spouse? Does your business get purchased, or does your part of the business get purchased by your partner? What are the buyout provisions? What happens when you pass away? And then once we have that, once we look to that, we can tailor your estate plan and make sure it matches. That’s the most important thing. We wanna make sure your estate plan matches your business documents, and that your business documents and estate plan all match any prenuptial agreements or any other kind of contracts that you might be a part of that could affect your inheritance and how things go.
If I have a living trust do I still need a will?
Next question. “If I have a living trust, do I still need a will?” Answer quick and easy on this one. Yes, it’s not gonna be the will you’re thinking of. We call this a pour-over will. The pour-over will acts as kind of a catch-all. In case you haven’t put anything into your trust, if you haven’t funded your trust, the pour-over will is going to act to make sure that your items go to your trust. The biggest example I can use on this is like a vehicle. People change vehicles all the time. You just bought a new vehicle you didn’t put in your trust. Not a problem. We don’t recommend necessarily putting vehicles in your trust anyway. What’s gonna happen to that vehicle if you pass away tomorrow? Well, your heirs are gonna probate your pour-over will, and then the judge is gonna say, “Okay, move that vehicle into the trust.” Now the rules of your trust, which is now irrevocable because you’ve passed away. Now the rules of your trust apply to all of your property, not just what you’ve put in there while you were alive. All of your property ends up in there and the door is shut now that’s an irrevocable trust. In order to get anything outta there, you have to operate and follow the rules of the trust.
Can someone make hand written changes to a will?
Again, a bunch of great, great questions. “Can someone make hand written changes “o a will without an attorney?” A really, really interesting question on this. Colorado law does allow for what they call holographic will changes or holographic wills. Basically if you, if it’s in your handwriting, if the main points of your will are in your handwriting, it’s signed and dated and you had witnesses, yeah, that’s a valid will. Do we recommend this? No. I mean, for some people, if you have, you know, very few assets, you have nothin’ really going on, absolutely sure, no problem. There’s not gonna be a contest. Maybe that works out for ya. For the vast majority of people though, these wills tend to cause more problems than does a prepared will by a service or by an attorney. For example, Ted Williams, a famous baseball player, one of the greatest batters of all time. Ted Williams had a valid will, and there was a, when he passed away, his children had this giant argument over what was gonna happen, not over his money, not over assets, but what actually was gonna happen with his remains. In his will, he had purported that he wanted to be cremated. His son then showed up with a signed napkin that said, “I don’t wanna be cremated, I would like to be frozen “in Scottsdale, Arizona, in the Cryo, whatever, company.” Interesting case, right? So, this signed napkin was signed after his will. The children spent hundreds of thousands of dollars suin’ each other over trying to decide which document controlled. Under Arizona law at the time, that signed napkin was law, but hid daughter had always, who had this will, had always said, “No, no, this is what he’d like. “He wanted to be cremated. “This is what he told me.” So now we have these two conflicting documents because one is handwritten, one is prepared nicely. Which one is gonna be upheld by law? They argued over it for I think 10 years, and then finally the daughter ended up withdrawing her contest. We can avoid that. We can avoid that by just having one will, by having one, you know. Any amendments that you make, make sure you do them through an attorney, make sure that they’re accurate and that they’re legal, because ultimately at the end of the day, we want your wishes to be honored. We also don’t wanna leave you open for any kind of undue influence. We don’t want someone who’s maybe not even a member of your family to prey upon you and then yet, the term is they wiggle their way into your will and all of a sudden they’re getting everything, your family gets nothing, when maybe that’s not exactly what you wanted, but they had you sign somethin’ and now all of a sudden there’s this valid document, you’re passed away. You aren’t there to let everyone know that’s not what you wanted, so that’s what’s gonna control. We can avoid all that just by making sure that we have everything accurate. So, short answer, yes you can do that. Is it recommended? No. Come see us and we can talk about what you need to do, and how we can get that set up for ya.
How can I prevent family from contesting my will?
Next question. “How can I prevent family from contesting my will?” You know, my answer to this isn’t necessarily a legal answer. It’s something I’ve already discussed with ya here a couple times. It’s discuss everything with your family, be open, don’t hide things. You know something, if you’re disinheriting somebody, by all means you don’t need to necessarily disclose that. But if you don’t want certain members of your family to have certain things, let ’em know. “Hey, I want my oldest daughter to have my wedding ring, “and you know, my youngest daughter, I’m sorry. “That’s just how we’ve always done it. “We’ve passed along to our oldest daughter.” Let her know, and let your younger daughter know. Let her know so that she doesn’t have an expectancy that you were supposed to leave that ring to her so that she’s gonna be contesting that later on. You know, just be open and honest about things. Show people your documents. Show them exactly what you’re doin’. We can put clauses in the will that say, “If you contest that, you know, you don’t get anything.” Will that be held up by a court? Maybe, maybe not, right? It really depends on the circumstances. A lot of courts rule against those type of clauses. So my best recommendation on this is, you know, just be open with your family. Let everyone know what you got going on, and just have that extra benefit of open communication.
What happens if your beneficiary passes after you have already passed?
Number nine here. “Here’s a scenario. Let’s say you forget to update your beneficiary of your retirement account, you pass away, and the beneficiary of the account is also deceased. “What happens to the funds in the account?” Well, great question. In this situation, probate’s gonna have to happen. You’re gonna have to go in front of a judge. You’re gonna have to, whoever your next of kin is, or whoever opens this probate is gonna have to go in front of a judge and say, “This is the situation.” A judge is gonna have to sign off on whatever happens, and your entire, the amount of that account, your history with that account, how you made this mistake, it’s all gonna be a matter of public record. So, how can you avoid this? Really, it’s just important to make sure that you’re addressing these different accounts in the ways that we’re supposed to, right? Your retirement account, whether it be with whatever retirement company you have: Fidelity, Vantage, The Hartford, whomever, there is a process in which you change the beneficiary, and it’s just, it’s up to us to make sure that we make sure that beneficiary is who we want it to be. That’s the long and the short of it. To answer that question, “What happens to the funds?” You’re gonna go through probate. It’s gonna go to your heirs. Maybe you wanted that to go to one specific heir and that’s not gonna happen. It’s gonna be split amongst your heirs. Whatever the judge signs off on, whatever the best case scenario is there, that’s what’s gonna happen. If you come see us, we can do retirement trusts. We can do things to which, you know, we can protect minor children, we can hold those funds for their education, for their health, safety, maintenance, whatever. But if you don’t do that planning before you pass away, like I said, end up in front of a judge, your privacy is no longer a matter. They’re going to put everything as public record, and it’s gonna be costly for your heirs. It’s gonna be, it also, whenever you go to court, there’s a possibility for a contest, right? When you open a probate matter, you have to inform certain people and other creditors of that probate matter, and people tend to come out of the woodwork. So, we can avoid that situation with a trust, we can avoid that situation with estate planning, and making sure that we fund those things and make sure that those accounts are listed properly with the proper beneficiaries.
What documents should I include in my estate plan if I have a special needs adult?
“What additional documents should be included in an estate plan if you have a special needs adult child?” Really great question. This gives me the opportunity to tell you all that estate planning is, there’s two sides to it. The first side is, of course, after you pass away, that’s what everyone knows. There’s wills, there’s trusts that take affect. How are your assets gonna be divvied up among your heirs, so on and so forth? The other side to estate planning is what happens during life. Right now in the United States, over half of Americans at some point in their adult life will experience some form of incapacity. That ranges from they were in a car accident and they’re in the hospital, to, hey, they’re in, they’re elderly and they have dementia related illness, and they’re living in a nursing facility for 10 or 15 years. So there’s a huge span of what we call incapacity, and really whatever your incapacity, and whatever timeframe it is, it’s important to have people there that can make those decisions for you. So the other half of estate planning includes during life documents. Those include a general durable financial power of attorney and a medical power of attorney. Really those are the two most important. So I’d recommend for your special needs adult child, getting those, you know, if they’re lucid and able to sign those powers of attorney for you, get those documents, absolutely. Have them sign off so that there’s no gap in care. Put the medical powers of attorney on file at the hospitals and where your child goes to. They go to primary care physician, that kind of stuff. Make sure that the doctors know that if your child’s unable to answer those questions, they need to call you and you’re gonna be taking care of your child in that situation. The general durable power of attorney, that’s a financial power of attorney. Make sure that you’re able. That just makes them make sure that you’re able to pay your child’s bills in the event it’s necessary. Having those documents on file and having them signed while the person is lucid and able to give that power away, is super important. If you wait and then now that person’s no longer able to sign those documents, they don’t have the capacity to sign those documents, then we’re talking about a guardianship, which means we’re talkin’ about going to court, we’re talking about having a judge look into your background, into your credit history, your criminal history, all those things to see if you’re a qualified guardian to watch over your special needs adult child. So, a lot of things can be done in advance, and that’s our recommendation. Come see us. Let’s talk about it. Let me know what your situation is, and we can decide and design a plan that is perfect for you to make sure that your children get taken care of. As far as other additional documents, I mean, those during life documents are great, making sure a will is there, making sure also that your documents, right? Not necessarily just the estate plan for your special needs adult child, but your estate plan. Making sure that we have the possibility of a special needs trust, something like that set up so that your money doesn’t necessarily hit that person’s bank account and then their creditors can take it right away. That’s really of the upmost importance as well. So, two sides to that. What is your estate plan and what does that look like? And then what is your child’s estate plan and what does that look like? And do we have documents for both during life and after death? So, great question again.
That’s really it for me today folks. Again, Lucas Frei fillin’ in for Bill Henry, attorney at Robinson Henry, P.C. I’d love to hear from ya. By all means, please give me a call. I’d love to give ya a half an hour, an hour of my time and discuss your unique situation, and talk about what we can do for ya. So thank you so much for watchin’ and I’ll see ya next time. Bye.