Estate Planning Milestones for Parents

There’s no question that having kids changes your life. Naturally, your priorities and responsibilities shift, and this should also be reflected in your estate plan. Here are a few checkpoints
throughout your child’s life when you should recalibrate your estate plan, ensuring that, no matter what, your child is provided for if something were to happen to you.


In the midst of adjusting to parenthood and sleepless nights, crafting an estate plan can easily slip down to the bottom of your to-do list.  Without a doubt, it can be a daunting process.  Many new parents would prefer to avoid thinking about such a grim topic during one of the most exciting times of their lives.  Regardless of how much you’d rather push the matter to the back of your mind, this significant development within your family requires that you update your estate plan (or create one if you don’t already have one in place).

When welcoming a new member of your family into the world, there are two important things to address within your estate plan: the care and custody of that child and the management and distribution of the assets you will leave to them.

For most new parents, writing or revising their will is less about leaving their assets than it is about naming a guardian for their child.  This guardian will assume all responsibility for your child if something happens to you.   They will decide where your child will live and attend school, what type of health care your child will receive, and make other day-to-day decisions regarding your child’s upbringing.  If you don’t name a guardian and a situation arises where your child will need one, the Court will choose the guardian. Because the Court isn’t familiar with your family or your child individually, the person they choose may not be in line with your preferences.

In addition to selecting a guardian, you may also want to set up a trust for your child to preserve your assets for your child when they get older.  This trust could include assets such as your home, your life insurance, your retirement accounts, your savings and investments.  These assets and funds can then be used your child’s education, living expenses, and health care expenses.

Age 5

As your child heads off to kindergarten, you will most likely begin to plan for the upcoming years of schooling and how to lay the best foundation for their future.  You may begin to grapple with
the eventual costs of their education.  When you sit down to plan for their college fund or strategize how to pay for their private education, consider including these plans in your estate plan as well.

There are a few options for how to plan for your child’s education, many parents opt to utilize a 529 plan.   Also known as “qualified tuition plans,” 529 plans allow investment earnings to grow sheltered from federal income taxes.  Withdrawals used to pay for qualified higher education expenses are tax-free.

Age 13

As kids grow up, they organically develop their own relationships with family members and loved ones.  Certain relationships may grow stronger or weaker over time.  Due to these shifting dynamics, it is wise to reevaluate who is named as your child’s guardian when they enter their teenage years.  Does your child have a healthy relationship with the person you’ve designated as their guardian?

Also, consider the general health and circumstances of the guardian you had previously selected.  Have they experienced health complications that might prevent them from performing this role?  Have they moved to another state that would mean uprooting your child if they needed to fulfill these duties as the guardian?  Have they undergone any financial hardships?  As a parent, you know that raising a child is expensive, so consider whether or not this role would strain your chosen guardian’s financial resources.  (Find out more about guardianships)

Age 17

All Wills where a minor will inherit should include a trust to hold and manage the assets until the child reaches the age of majority.  However, when your child approaches adulthood, you may want to reevaluate if you want to give them access to these assets at 18 or later to give them time to mature.   Regardless of how mature your son or daughter may be, they may still fall victim to the bad judgment of others.   There are many potential issues that can put your child’s inheritance at risk, but some of these hypotheticals can be addressed if your plan is updated to take your child’s maturity into account as he or she ages.   (Read more about trusts)

Age 18

Once your child turns 18, he or she is considered an adult.  This means that your son or daughter is legally in charge of their own life now.  If a medical emergency arises, health care providers are no longer authorized to discuss or disclose the details of their condition or care with you.  Nor are you authorized to make medical or financial decisions on their behalf – even if you pay their tuition, cover their health insurance and claim them as dependents on your tax returns. Ensure that you can assist your child with decision-making if they suffer a serious illness or disability by having them sign a Medical Power of Attorney and a Durable Power of Attorney before they leave home for college or take the next step in life.

Age 25

Your estate plan should be revisited once your child marries or starts to have kids of their own.   Consider if you would like to include your grandchildren in your plan, and if you would, when they should be added.

Once an estate plan is completed, many people will put it in a safe deposit box and then forget about it.  I encourage you to avoid this “checked-the-box” mentality.  Estate planning isn’t a one-time thing, it’s a lifetime process. Your estate plan should evolve as your life evolves.


Timeshares: Planning for Your Personal Piece of Paradise

A timeshare can be a great opportunity to have a vacation spot every year. It’s your little getaway from the hectic life that comes with living in a city or working long hours at your job. It may be in the Texas Hill Country or a place with a view of the Gulf. It could even be a desert refuge where you can escape the daily grind and recharge. However, you begin to realize as you grow older that escaping to that little slice of paradise isn’t possible anymore due to health issues or a myriad of other situations. What do you do with the property then? How do you pass it on to your children or loved ones? And, what will happen to that timeshare if you pass away?

The short answer is: it’s complicated.

The laws and regulations concerning timeshares vary from state to state, jurisdiction to jurisdiction. This is why you need to be cautious when determining what to do with your timeshare. We advise you to seek the counsel of a lawyer when dealing with these assets so that you and y
our relatives are protected, regardless of what happens.

In this blog, we’ll review three different issues concerning estate planning and timeshares. First, how do you ensure the timeshare is inherited by your family? The second issue is what happens if you fail to make preparations for your timeshare being passed down. The final issue we’ll discuss is what to do if the family doesn’t want the timeshare that they’ve just inherited.

So, first, how do you ensure that your timeshare is inherited by your family? This depends on a few variables. The first is what type of timeshare it is. There are two different kinds of timeshares. The first is real property. Is your timeshare a home in a fixed location with a deed that outlines what fees and other obligations you must uphold? Or is your timeshare a contract that you pay maintenance and other fees for ‘points’ to use toward any of the timeshare company’s properties?

The second variable is where the property is located. As mentioned earlier, each jurisdiction has its own regulations for handling the transferring of property. You also have to consider the ramifications of how you’ll transfer property because it could affect the amount of taxes your family pays for the timeshare.

When these variables are considered, you have a few choices about how you want to set up your timeshare to be transferred. The first is ‘gifting’ timeshare property to the relative in question. However, be aware that the gift may be subject to a federal gift tax. If the value of the property is greater than $14,000 per donee, you are required to file a gift tax return. You can also gift your relatives a timeshare interest, but they need to be aware that the giftee will have the same tax basis as you in regards to the timeshare interest.

The other method of transferring your property is to declare who will inherit it in your will. In regards to the timeshare interest, this could help your beneficiary save money on capital gains taxes as they’ll receive a step up in the tax basis. But your relatives must be aware that the maintenance fees and other dues you owe for the timeshare simply do not cease when you pass away. The estate or beneficiary will still be responsible for paying what’s due until the end of the timeshare contract.

Finally, you can create a trust or LLC in which to place the timeshare property or interest. This will allow you to continue owning the timeshare while avoiding gift taxes. This transfer will also allow the asset to bypass probate which is helpful if your loved ones wish to sell the timeshare immediately upon receipt or if it is located in another state.

What if the timeshare you want to pass on is out of state and you are not interested in a trust or LLC? We suggest studying the laws regarding timeshares in that jurisdiction or hiring a lawyer local to that jurisdiction to help you determine the best path forward for planning for the future of the timeshare.

Let’s move on to the second issue: what if you fail or forget to make plans for the future of your timeshare before you pass away?

This depends on where the timeshare is located and the probate court involved. It’s not uniform across the nation. Again, we suggest you speak to an attorney about resolving probate issues so that the timeshare may be moved along, instead of sitting in limbo. And, as mentioned recently, the fees and dues associated with a timeshare do not end when you pass away. Even if you forget to plan for the future of your timeshare, your estate is still required to pay the bills on the timeshare until it is transferred to the proper heir or beneficiary.

If you pass away and your timeshare is located in a different jurisdiction, this may require a second probate to determine ownership. The probate court in your area can only control what is within that jurisdiction. Anything outside of it is outside its power. This is why it’s imperative to plan for your timeshare. You can’t just kick that can down the road. It will save your family time and money if you have a plan in place for what happens to your timeshare after you pass away.

As for the final issue: what if your relatives simply don’t want the timeshare?

They have a few options. First, they can sell the timeshare interest or property. However, they need to be aware of any regulations concerning the sale from the timeshare management company. When you first enter into a timeshare, you sign a rather long contract. Part of that contract will likely discuss the conditions for selling the timeshare. Some timeshare companies may require that you discount the interest or property. Others might need it to be sold back to them. Before your loved ones decide to sell, they need to read through that contract to determine if there are any stipulations.

Another issue arises if your relatives cannot afford to keep making the payments required by the contract. The best option they have is to choose not to inherit the property. The timeshare management company will likely, in the end, just recover the timeshare and sell it on to someone else.

When it comes to estate planning for your timeshare, there is a lot for you to consider before determining how to proceed. Obviously, you’ll want to make a plan for the timeshare instead of leaving it up to the probate court in order to save your family the money and anguish of having to deal with that. But, before you do anything else, talk with your lawyer about your options and how they can help you set up your timeshare to be passed along in a way that causes the least friction for your loved ones — it will save everyone time and money in the long run.

Know the Difference Between Your Medical Power of Attorney and Living Will

I am often asked — what is the difference between a Medical Power of Attorney and Living Will? There are several differences between these two documents, but the primary difference lies in the scenario where each is used.

A medical power of attorney allows a trusted friend or family member to act on your behalf regarding your medical decisions. This only arises in situations where you are unable to make medical decisions for yourself. Medical powers of attorney can be used by your family members or friends even when you are not considered near death. Your medical power of attorney should include language compliant with HIPAA and gives the person named the right to speak to your doctors about your health, access to your medical records, the right to consent to treatment on your behalf, and the right to determine your course of treatment.

A living will only comes into play under very limited end of life circumstances. If a doctor determines your condition is terminal or irreversible, the living will becomes the decision making document. The living will is an expression of your desire to have life support removed so that you may go gently or continued and all possible measures continued. The purpose of a living will is to ensure that your wishes are honored during this phase of life even if you are no longer able to express your wishes.

In summary, powers of attorney can be used by an agent at all times, whereas a living will only involves your end of life decisions.

Planning for Non-Traditional Families

While the need for proper estate planning is the same for both traditional and non-traditional families, some of the planning techniques used are different.  Same sex couples are not treated the same as traditional married couples for many purposes and while these differences in treatment present challenges, they are not insurmountable with proper planning.

Same sex couples, just like opposite sex couples, must have the four key documents.  The four documents include a will, a medical power of attorney, a durable power of attorney and a living will.  These documents are the foundation of any estate plan, whether for traditional or non-traditional families.

Non-traditional families must pay special attention to several key areas.  Who will make decisions for you if you are unable?  What are the tax implications of transfers now and at death?  When can beneficiary statements solve the problem?  Each of these questions is touched on below and will be covered in depth in a future blog post.

What can same sex or unmarried couples do if they want their partners, instead of their biological relatives, to make decisions on their behalf? This question frequently arises during medical emergencies.  Preparing before the emergency strikes will arm your partner or the person of your choosing with the tools necessary to ensure your wishes are honored.  A variety of planning techniques are available to meet the needs of your family.

Same sex and unmarried couples are treated differently for tax purposes.  They are not eligible for the marital deduction at the death of their partner.  They have no community property rights.  There is no tax protection for property transfers during life between partners.  There are planning tools available to help overcome these hurdles.

Finally, the importance of beneficiary designations cannot be stressed enough.  Properly completed beneficiary statements in various financial documents, including life insurance policies and retirement plans can aid in property transfer at death.  Beneficiary designations are critical and should be considered in conjunction with the entire estate plan.

Same sex and unmarried couples need to work with an attorney to develop an estate plan that anticipates challenges and delivers the intended results: to honor their relationship with their partner, ensure their partner can make decisions on their behalf if necessary, and to designate their intended beneficiaries.

What is a Living Will?

Directive to Physicians is the legal name for the document known as a living will.  This legal name is appropriate because the purpose of a living will is to provide direction to medical professionals and loved ones on the type of care you wish at the end of your life. A list of specific procedures that should or should not be performed can be included. A person can be named to make decisions for you if you are unable to make decisions for yourself.

This document works hand in hand with your medical power of attorney.  The medical power of attorney is effective until a doctor’s decision about your condition triggers the living will into power. A living will only becomes effective if a doctor determines you have a terminal condition with less than six months to live or an irreversible condition.

This document is important because it addresses medical decisions specific to end of life choices and serves a different purpose than a medical power of attorney.  Many people will make different decisions if their life expectancy is short.  A living will allows you to provide clear direction about your treatment decisions even if you are unable to voice them. Additionally, some people feel the person that is best suited to make day to day medical decisions is not the best person for end of life decisions.  In this instance one person is named as decision maker in the medical power of attorney and a different person is named in the living will.

Four Documents Every Estate Plan Needs

The four documents that create the foundation of a good estate plan are a willmedical power of attorneydurable (financial) power of attorney and a living will.  Each of these documents provides protection for specific issues associated with death or incapacity.

A will details your wishes after you pass away. A will allows for a smooth transition for the loved ones you leave behind.  It will designate someone to take control of your estate, care for your dependents, distribute your property and make the transition as painless for your loved ones as possible.

A medical power of attorney appoints a person to make medical decisions if you are unable. A medical power of attorney can also include a list of specific procedures you do or do not want allowed.

A durable (financial) power of attorney appoints a person to make financial decisions if you are unable. This is a flexible document that can be used to give limited or unlimited power over your financial affairs.  It can become effective immediately or only if the named individual becomes incapacitated.

A living will express your wishes for end of life decisions and can appoint a person to make decisions if you are unable.  This document differs from a medical power of attorney because it is only effective if a doctor has determined you have a terminal or irreversible condition.

The requirements relating to the validity of each of these documents are found in state law.  As a result, an attorney should be consulted to ensure your documents are valid in your state of residence.  If you have a job that requires you to relocate regularly a trip to a local attorney should be on your to do list any time you move.