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How Do I Plan for Incapacity?

How Do I Plan for Incapacity? With Alzheimer’s and dementia becoming more and more prevalent these days, more and more clients are asking me how to plan for incapacity in case they develop one of these devastating diseases. In addition, you may have your documents in place to plan for an incapacity, but your parents or other loved ones may need to get them done, especially if there are early signs that one of these diseases is setting in. This blog discusses some planning tips for preparing for incapacity, and it really should be part of every estate plan even if you or a loved one has none of these signs, because none of us knows whether this disease will affect us later in life. The Good News – You Can Plan For It! There is good news! In addition to planning for death, well-drafted estate planning documents also plan for incapacity and help you and your family avoid the need for a guardian (i.e., a person appointed by the court to take care of your housing, health care, and personal care needs) or a conservator (i.e., a person appointed by the court to manage your finances for you), and the attorney’s fees and court costs associated with doing so. Moreover, if you or a loved one are starting to slip, it is important to get the documents signed while you still have capacity to sign them. What Documents Need To Be in Place? In order to protect you and your family from having to go through a court process to establish a guardian or a conservator, I recommend having four documents in place: Revocable Living Trust. For many clients, this document allows a trustee to take over your finances without court intervention if you or your loved one ever become incapacitated. Durable General Power of Attorney (Financial Power of Attorney). This document allows your financial agent to make financial decisions on your behalf for all assets outside of your trust if you or a loved one become incapacitated. Some clients opt for a more limited financial power of attorney for this type of power of attorney, rather than a broader, general power of attorney. Health Care Power of Attorney. This document allows your health care agent to make medical decisions for you if you can’t make them yourself. Mental Health Care Power of Attorney. This document allows your mental health care agent to make mental health care decisions for you if you can’t make them yourself. These four...

What Am I Supposed To Do as the Trustee of a Trust?

What Am I Supposed To Do as the Trustee of a Trust? After someone passes away, there are several things that a trustee needs to do to make sure that a trust is administered properly. In order that the successor trustee doesn’t miss any steps, I always recommend seeking the advice of an experience attorney to assist them in the process. In addition, I recommend that successor trustees meet with a trust attorney and his or her other advisors as soon as possible after a loved one passes away. Depending on the type of trust, there may be deadlines to make certain tax and other elections that need to occur within a certain time frame after the trust creator’s death. Obviously, it is important to be sensitive to the family, but, in general, I recommend meeting with the successor trustee within 30 days after the family member’s death. What Will Happen at the Initial Meeting with the Trust Attorney. In the initial meeting with the successor trustee, I educate the successor trustee about the many duties and responsibilities of serving as a trustee. In general, I cover the following items in order to make sure that the successor trustee understands his or her duties: Review Trust Documents. First, I review the trust itself, and any amendments to the trust, carefully to determine who the successor trustee is, what the distribution provisions are, and if there are any other important provisions in the trust that affect the administration of the trust. In addition, I also review the decedent’s will to make sure that it is a “pour-over” will that works in conjunction with the trust. Discuss Fiduciary Responsibilities. Second, I discuss the role of the successor trustee with my client. Often, if the successor trustee is also a child of the trust creator, the child may also be a beneficiary of the trust as well as the successor trustee. It is important to note that the successor trustee acts in a fiduciary capacity for the benefit of all of the beneficiaries of the trust, and cannot act to benefit any one beneficiary or group of beneficiaries to the detriment of other beneficiaries. In addition, the successor trustee is responsible for making sure that valid debts of the trust are paid by the trust if there are sufficient funds to do so. Finally, unless an agreement is reached between the beneficiaries of the trust to the contrary, the trustee is required to follow the terms of the trust, including any amendments...

What is the Best Way to Pass On My Business if I Die?

What is the Best Way to Pass On My Business if I Die? For many of my clients who own businesses, their business is the largest asset in their estate. As a result, it is critical that this asset be properly transferred after their death. For businesses that have two or more owners, a buy-sell agreement can efficiently set forth the way the transfer will occur, and this is typically handled outside of a will or a trust.  However, if the business is owned by one owner or by a married couple, a buy-sell agreement will not work and the transfer is typically set forth in a will or a trust or in certain business formation documents. How Does a Buy-Sell Agreement Work for Businesses That Are Owned by Two or More Owners? A buy-sell agreement is a written agreement that provides a mechanism for the orderly transfer of an owner’s interest to the other co-owners on the occurrence of certain triggering events. Without an exit plan, the owners of an Arizona LLC or corporation are essentially stuck with each other indefinitely even if one of the other owners dies, becomes incapacitated, gets arrested, or files bankruptcy. A buy-sell agreement defines what happens when these triggering events occur, sets forth the buy-out price, and states whether such buy-out is mandatory or optional for each type of event.  Although there can be several triggering events typically built into a buy-sell agreement, including disability, termination of employment, divorce, felony conviction, loss of license, and bankruptcy, this blog focuses on death as a triggering event in addressing the transfer of a business. After a business owner passes away, the buy-sell agreement also sets forth the price for the buy-out. Most buy-sell agreements use the appraisal method for determining the buy-out value, because it is extremely difficult for co-owners to agree upon a value for the business or on a formula to determine the value at the time of the agreement. Plus, over time, the value can go up or down. In addition to the buy-out price, the buy-sell agreement also sets forth the terms of the buy-out, so that the timing of the buy-out payments is locked in when the death occurs. What Happens When The Business Is Owned by One Owner or by a Married Couple? If the business is owned by a single owner or by a married couple, then buy-sell agreements are not appropriate. One way to solve this issue is to have another owner, oftentimes a key employee,...

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