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The Basics

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Safe Deposit Boxes

Do you have a safe deposit box?  If so, do you know what is in it?  Do you need it? 

In my years of estate administrations, I have seen safe deposit boxes containing very valuable items such as jewelry, coins, silver and cash all the way to empty utility envelopes and the “stuffers” that we used to get every month. 

Thoughts on safe deposit boxes have changed over the years by both the people who rent boxes as well as the financial institutions. 

So, what should you keep in a safe deposit box?  Here are some things to consider:

  • First and foremost, you should only keep items in a safe deposit box that cannot be or would be difficult to replace. For instance, fine jewelry that is not worn very often, collector items and documents that, without an original, would present problems. 
  • Cash held in a safe deposit box does nothing for you except enable you to retrieve cash without any tracing.  However, even with low interest rates, wouldn’t it be better if your cash was in an account that earned at least a little interest?
  • Some of the best items to be protected in a safe deposit box would be birth, death, adoption, military, marriage, divorce, citizenship records; legal documents that are not filed with a county or state office that would be difficult to recreate (deeds and mortgages for real estate are filed with the local counties and once filed, the original is not as important as copies are available from the county); and motor vehicle titles (however, if you lose one, it can be replaced with some patience and persistence). 
  • Sentimental family mementoes may be irreplaceable and you may wish to preserve them in a safe deposit box. 
  • If you are storing valuable items in a safe deposit box, do you have them insured?  The banking institution does not insure them and it is your responsibility to have them insured against theft or casualty loss.

Things that should NOT be kept in a safe deposit box include:

  • Cash
  • Letter of last instruction, living will/health care directive, power of attorney.  If these items are needed, they are not easily accessible if held in a safe deposit box due to the open hours of the financial institution.
  • There is much support and opposition as to whether a Last Will and Testament should be kept in a safe deposit box.  It has been long standing that in the event of a death, the next of kin should be able to access the decedent’s safe deposit box with a death certificate and identification so that a Will, cemetery deed and life insurance policy could be retrieved.  However, some financial institutions now require a court order in order to access a safe deposit box before the appointment of an estate representative.
  • With the need to provide more forms of identification, a passport kept in a safe deposit box may not be as accessible as desired. 

So, what should you do?  First of all, evaluate your situation.  Do you have a spouse?  Do you live alone?  Where is the best location for you to protect your “valuables or important items”?  With regard to estate planning documents – wills, powers of attorney, living wills – some attorneys will offer the added service of keeping the originals.  Many law offices utilize digital memorialization of their estate planning documents and could issue a certified copy of the same if needed.  Where is your safe deposit box located?  Would a fireproof safe/box be sufficient? 

Whatever you decide is the best option for you, make certain that a trusted person is aware of the location of your important documents if access to them is needed. 

Things to Remember When Selling a House

The temperatures outside are hot and so is the current real estate market.  It is a seller’s market.  Just speak with a realtor or a real estate attorney.  Kelly Dugan, real estate attorney at Capehart, has shared that despite her years of handling real estate transactions, she is seeing new situations almost daily.  There are bidding wars resulting in sellers receiving more than the asking price, buyers are taking short cuts and are waiving inspections unless required by lenders, closing dates are accelerated and there are unique terms being part of the deal. 

Kelly’s involvement usually starts when someone has placed an offer on a house and the contract is ready for review.  The contracts are boilerplate but it is important that they be reviewed before the attorney review period expires to protect the interest of either the buyer or the seller.  Sometimes there are added provisions that may benefit one party but not the other.  Having an attorney’s input is highly recommended as this may be one the largest investments you have transacted in your life – buying or selling. 

If you are selling your home, it is important to remember that your income taxes could be impacted.  Here are some considerations to make:

  • Who owned the home and how was it used?  Was it owned solely, as husband/wife or other joint ownership, or perhaps by a business entity?  Was it a personal residence or a rental property?  If a rental property, was it used for personal purposes at all during the year (i.e., a shore or mountain home)?
  • Why are these important factors to consider?  Well, if you owned a home for five years and used it for at least two years as your principal residence, you may qualify for some or all of a capital gain exclusion.  Sorry, but rental properties or vacation homes aren’t eligible for exclusions. 
  •  If your gain is in excess of an eligible exclusion, you MUST report the gain on your income tax return.  You will receive a Form 1099-S – Proceeds from Real Estate Transaction that should be placed with your income tax information for the current year so it is readily available when it is income tax preparation time.
  • Also, keep your settlement statement with the Form 1099-S for income tax purposes of the deductibility of certain closing expenses. 
  • Additionally, did you make major capital improvements to the house during your ownership?  These may be advantageous for income tax reporting.  Don’t wait until tax time to pull this information together.  You will want to provide your tax preparer with as much information as possible to enable the evaluation of your gains/losses in the sale.

New homebuyers – even though you are a new homeowner, keep the above items in mind during your ownership as it could be to your advantage in the years to come. 

Last Instructions

If something were to happen to you right this very moment, how easy or difficult would it be for your loved ones to step in and take care of your affairs – whether you were temporarily unable to handle your affairs or if you passed suddenly? 

  • Would they be able to find information as to your wishes – medical or funeral?  Keep you alive or let nature take its course?  Cremation or burial? 
  • Who should be notified of your situation?  Where is this information?
  • Where are your documents – power of attorney, health care directive, will – located? 
  • Where are your records with regard to your assets?  Do you have a safe deposit box?
  • If you keep your information electronically, do loved ones know where to find access to these electronic records? 
  • Do you receive benefits from retirement type accounts?
  • If you are working, who should be contacted regarding employee benefits?
  • Where do you keep copies of your income tax returns from prior years? 
  • Where can medical insurance information be located? 
  • Do you have life insurance?
  • Do you have long-term care insurance?
  • Do you have a prepaid funeral or cemetery plot?
  • Where is information about your homeowners and vehicle insurance?
  • Who are your medical professionals?
  • How do you keep track of appointments and are there appointments which need to be addressed?
  • If you are a business owner, who should be contacted to keep the business running?
  • If you have minor children, is there someone authorized to take custody of your children, pick them up from school or other activities?
  • If you have minor children, are their health records and medical providers available?

Be prepared.  Don’t leave your loved ones having to deal with more than your immediate needs.  Get organized.

Birthday Basics

You will never forget your birthday (even though you may want to).

Every time you make another trip around the sun (a year), it is good to reflect on what has changed in your life and what you have accomplished. Estate planning is probably something that rarely is among these thoughts.

Many people think that once they have executed their estate plan, they are done and set for life. Realistically, this is not the case. You, as an individual, are never done growing as a person and your life is never static. Things will always change. Each year, especially throughout 2020, people’s circumstances, financial markets, tax laws, and personal goals all changed.

Since you will never forget it and usually there is some type of celebration to remind you, your birthday is the perfect time to review your estate planning. Think back on the past year and decide whether or not you need to make any modifications to your current plan. Maybe you have no plan in place and want (or more appropriately – NEED) one.

Big life events to think about are: Did you get married? Did you get divorced? Did a spouse pass away? Did you start a business? Did you have a child? Did you move? Did you acquire significant assets? Did you start a new job? Did you start a new hobby that may add some risk to your life?

All these questions and possible changes will affect your estate planning. The changes could be as simple as updating your Power of Attorney or Living Will to reflect new healthcare laws or update your agent. It could be that you want more detailed distribution provisions in your Will. You may need to change your beneficiaries on your non-probate assets such as life insurance policies, annuities, and retirement plans.

This time of reflection on your past year may shed some light on changes that you otherwise wouldn’t think about.

Joint Owner vs. POA

Getting your financials in order is something everyone would like to accomplish. Making sure that the bills are being paid isn’t something that many people want to worry about.

As we grow older, we may need assistance from a family member or a friend. Assistance can be what we consider simple tasks such as getting a ride to a medical appointment, grocery shopping, or fixing things around the house. Another way someone can assist you is by writing your checks or balancing your checkbook.

One way to have someone assist you is by adding your Power of Attorney on your bank accounts. This will allow the person you appointed as your Power of Attorney to access your bank records and make sure that the proper bills are being paid and that your accounts stay managed.

When you met with a banking representative, you probably explained what you would like to accomplish and that you have a Power of Attorney. The bank tells you that they will have the Power of Attorney added to the account. They process everything and send you on your way. When the next statement comes, you realize that your Power of Attorney’s name is accompanying your name as an “owner” and the statement doesn’t reflect their status as “POA”.

In some cases, the banks will add your agent as a joint owner on your account instead of identifying that they are your agent under the Power of Attorney. If this does happen, upon your passing this account will not follow your intent under your Last Will and Testament, but will be transferred to your agent as the surviving joint owner. Naturally, this could cause some issues during the administration of your estate. It would also give your agent the legal right to access the accounts as their own, which could cause another set of issues. Your money could be subject to creditor claims of your “agent, now co-owner”.

If you are adding your agent onto your account at your local bank, please make sure that they are being added as the agent and not a joint owner.

Who’s on Your Team?

Team?  Do you really have a team?  Think about it – you certainly do.  In fact, you probably have several teams – medical, financial/legal, family, friends, etc.  In this blog, I am going to address the importance of your financial/legal team. 

In years gone by, we would go to a doctor who would treat us for everything – almost.  Today, we may have a primary doctor, but if there is a specific issue, we get referred to a specialist.  Your primary and the specialist now become a medical team for you. 

Likewise, in the legal profession, many practitioners are focused on specific areas that complement one another, rather than being a general practitioner.  The benefit to specializing is that their services are focused on the matter at hand and they have more expertise in this practice area. 

In our world today, we are all aware of tax law changes and how frequently they occur.  It is wise to utilize the services of a lawyer who specializes in estates, trusts and taxes. Such lawyers must keep up with these changes and, by doing so, are better versed in how to help you plan to meet your specific situations, needs and wants. 

Regardless of the amount of wealth you have accumulated, it is good to have a financial advisor; not a customer service representative in your local bank branch.  A financial advisor is there to provide financial advice on how to preserve your acquired wealth and how to meet your goals – growth, income, or both.  They follow the economy and the securities markets and can strategize how to get the most bang for your hard-earned buck.  Their focus is on money.

Another member of your team might be an accountant or tax preparer.  This member focuses on finance, but differently than the financial advisor. They will try their best to help with the minimization of tax liability. 

So, you probably have a financial/legal team already and just didn’t realize it.  You may see each of them separately, but imagine how effective they might be if they worked together for your benefit.  The team approach has proven to be very beneficial to clients because of the interaction and collaboration of ideas and strategies.  Speaking with each of your team members separately may not enable them to provide services to their potential.  One of them may know about a specific detail in your life and the others aren’t aware of this.  However, this one detail could have an overall impact. 

Introduce your team and allow them to work together on your behalf.  You might be surprised at the beneficial outcome. 

Green Burials

These days, we hear much about “going green”, leaving an “environmental footprint”, “climate change”, etc.  We are all responsible to do our part to preserve and protect our environment while we are alive.  But, what about after we die?  Can you still do your part? Hmmmmm.

Think about how much wood is used to make caskets.  How many tons of steel and/or concrete are used for burial vaults?  And, what about the amount of embalming fluid used? 

The numbers are staggering – 30 million board feet of wood, 90,000 tons of steel, 1.6 million tons of concrete and 800,000 gallons of embalming fluid.  That would be enough metal to build a Golden Gate Bridge every calendar year!

Many individuals are grabbing the idea of eco-friendly funerals and some of the ideas are centuries old for certain cultures.  This has also created new industries for society. 

Here are but a couple of eco-friendly ideas for consideration:

  • If you are firm with a ground burial, you could consider a coffin made out of seagrass, bamboo or woven willow.  These materials decompose naturally.  Also, certain burial garments are made out of materials (such as mushrooms) which will decompose naturally.  Kosher caskets are made of soft pine or poplar wood, with no metal parts – totally biodegradable.  Likewise, Muslim burial traditions are naturally green.  Jewish and Muslim rituals allow for the preservation of a body for a couple of days to give time for families to gather for a funeral, as embalming is avoided.  This keeps formaldehyde out of the ground and the deceased is gently washed and dressed in cotton or linen which will biodegrade naturally.
  • If you prefer cremation, biodegradable urns come in a wide range of materials, including handmade paper, sand and gelatin, cornstarch, bamboo and recycled paper. A biodegradable urn in the earth will decompose over time; the rate depending on the material chosen and environmental conditions.  If you wish to be cremated and have your remains scattered, scattering tubes made from recycled paper ease the process from opening a plastic bag.  These scattering tubes are allowed for placement in carryon luggage for airline travel. 
  • If you would like to have a part in regeneration of our environment, you might want to explore an Italian burial pod, which focuses on the life cycle.  A biodegradable egg-shaped burial container has been designed for cremated remains and full bodies folded in a fetal position. The Capsula Mundi project has created burial pods meant to be paired with a live tree in a natural burial ground with the pod being buried as a seed planted beneath a tree chosen in life by the deceased.  It is hoped that family and friends would continue to nurture the tree as it grows.
  • If you love the ocean, cremains can be cast to the sea in a seashell or turtle-shaped urn that floats for a few moments, then gracefully sinks under the surface. Biodegradable urns for water are made of a variety of natural materials, including recycled paper, rock salt, gelatin and sand.

Regardless of your preference for disposition of your body/remains, it is vital that you have a conversation with your loved ones to let them know your wishes.  Without having what may seem to be a difficult conversation is really a conversation that will relieve your loved ones of trying to decide what your preferences would be.  In fact, you can make the task easier by doing some pre-planning and telling your loved ones that you have done so and exactly where to find the details when that time comes. 

Don’t delay.  It would be a great burden off of your loved ones, whatever choices you make.

Estate Planning and Religion

When engaging in estate planning for individuals, attorneys must be diligent in asking the right questions, not only for financial purposes and the objects of one’s bounty, but also for religious beliefs and practices and to complete the planning by honoring the wishes of the individual doing their planning.  If you are doing your estate planning, don’t be intimidated or shy when stating your wishes to your attorney. 

So, what are some areas that are important to be recognized in estate planning, according to religion? 

First of all, the selection of fiduciaries is important to anyone doing their estate planning.  Deeply religious individuals may wish to have trustees, executors and agents under powers of attorney and health care directives who are strong in their religious beliefs and who share the same faith.  However, this person may not be the choice for investing and other responsibilities that come along with the role.  Selection of persons to fulfill these fiduciary roles is extremely important. 

Next, let’s look at a few important considerations impacted by religious beliefs:

  • Are there provisions for specific priority of distribution of one’s assets based upon relationship?
  • What are the beliefs with regard to end-of-life matters?  Be kept alive regardless of the prognosis or allow nature to take its course, and, if so, what comfort measures are permitted? 
  • Is organ donation permissible?  If so, are there limitations on the allowable organs for donation? 
  • Funeral arrangements and timing?  Is embalming allowed?  Is cremation permitted?  Manner for interment or disposition of cremains?

These are but a few very important matters which should be addressed in your estate planning.  To ensure that your beliefs and wishes are carried out, there should be a form of a statement of last wishes prepared and left, not with your Last Will and Testament, but where your fiduciaries can easily locate the same and be informed to carry out your wishes. 

While estate planning is done between the client and the attorney, it is important that once you have completed your planning, you let your fiduciaries know where to find documentation for guidance and perhaps consider having a conversation with them as to your wishes.  You want to avoid something being done against your wishes when it is too late. 

Please do not assume that your attorney knows what your beliefs are.  Within any religion, practices range from very conservative to very liberal and the only way to ensure that your practices are fulfilled is to be open with your attorney.  Ask them for their suggestion on how to make your wishes known to your loved ones. 

Communicating with loved ones with regard to estate planning is so important.  While your fiduciaries may be very much loved and respected, why would you want to place the burden on them to know what your wishes are without you sharing the same? 

In-Home Paid Health Care

Today, many people are planning to age in their homes, which may result in the need for in-home paid health care.  There are many considerations to be made for the protection of the person being cared for, the caregiver, and the family of the aged. 

Are you hiring a companion or a health aide?  The definitions are quite different, with a companion providing transportation, social interaction, and small simple domestic chores.  However, a health aide is responsible for providing hands-on care according to a care plan under the supervision of a medical professional.  A certified health aide is licensed through an agency having medical supervision.  If they are not through an agency, then they are considered to be only a companion. 

Compensation payment is a HUGE consideration.  When you have engaged the services of an aide through an agency, you will be billed by the agency, the aide will be covered by insurance and you will have no income tax consequences.  However, if you opt to hire someone and pay them “under the table”, then you could be faced with some potential problems.  What are the income tax implications to you or to the person providing “services”?  Are you considered an employer responsible for employment taxes and filing certain employment returns?  Are you ethically responsible for reporting the amount paid to that person via a Form 1099?  What happens if you don’t?  What happens if that person becomes injured while caring for the aged – after all, back problems are very common with caregivers. Who will pay the medical bills?  Who could be sued? 

Let’s say that you are using someone that is not through an agency.  What will happen if the caregiver is unable to provide services?  Do you have someone as a backup?  When using an agency, there would be backup available should the need arise.  Not to mention the income tax, insurance possibilities mentioned above would be non-existent. 

If your loved one does not require assistance, but merely is in need of companion services, there is no licensing requirement for this type of service.  Perhaps transportation is all that is needed.  Or maybe social companionship.  This is considered a direct-hire arrangement, allowing you to dictate the terms of employment – as needed, etc. 

Regardless of engagement of companion or health aide services, it is best to check with an attorney regarding what could be needed for the protection of all.  You would not want to find out later that you may have been deficient in tax reporting or could be the defendant of a legal action due to injuries. 

Safekeeping Original Documents

Where are your original estate planning documents?  In a safe place – right?  That safe place could be a safe deposit box at a bank, a fireproof box or safe in your home. Hopefully, not in a container that could burn or perhaps suffer water damage if there was a fire.  There are certain documents such as a Will that only one copy is signed and therefore, the only original.  If that document were destroyed, what would happen? 

There is the likely possibility that, if there is a photocopy, the photocopy could be processed through the Courts as the original Last Will and Testament.  However, that can be an expensive process. 

You feel comfortable knowing that your Will, life insurance policies, deed and other important papers are in your safe deposit box at a bank.  You have been told that, upon your passing, your executor can enter the box to retrieve the original Will to file the same with the Courts and be appointed as the executor.  However, there are some banking institutions that are not allowing entry to the safe deposit box to retrieve the original Will.  The executor will be told that they need a short certificate – the certificate issued by the Court to evidence the appointment of a representative of the estate, which can only be obtained by presenting the original Will.  That sounds so contradictory.  So, what happens now?

You can be firm with the bank that you should be able to retrieve the Will, but you may be told that you need the short certificate.  You can argue that you can’t get a short certification without the Will.  It can become a vicious circle.  And, unfortunately, a battle you most likely will not win.

We have had the experience that the executor has had to file documentation with the court to get permission to retrieve the Will.  This incurs legal and court costs and takes time.  In the meantime, there may be matters pertaining to the decedent’s estate that need immediate attention by an authorized representative. 

So, where is the best place to keep your original Will?  In the past, we would have said in a safe deposit box, but with some financial institutions restricting access after the death of the owner of the safe deposit box, we now do not necessarily feel that way.  If the owners of the safe deposit box include the name of the executor, there should be no problem.  But, if the executor is only listed on the box as an agent under a power of attorney, that authority dies with the box owner. 

Check with your financial institution as to what their policy is regarding the retrieval of a Will after a box owner’s death.  Maybe you really don’t need a safe deposit box.  Most paper contents can be replaced.  Perhaps your estate planning attorney offers the service to clients to keep the original Will as does Capehart.  Think about it and determine what is best for you.

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