Where Should I Keep My Estate Planning Documents?

In our estate planning practice, we are frequently asked by our clients where they should maintain their original estate planning documents. In my opinion, the place to keep your original Last Will and Testament, Power of Attorney, Health Care Power of Attorney, Trust, and Living Will is with your lawyer. There are a number of reasons why this is advisable. This article attempts to address some of the major considerations for placing your estate planning documents with your attorney.

If you choose to keep the Will in a safe place at your home, you face a number of possible risks that could frustrate the purpose of your Will or otherwise impede the appropriate distribution under the Will or effectuate other documents related to your healthcare directives. For instance, if your Will is different from the distribution plan written for you by the Florida Legislature under the laws relating to intestate (meaning “without a Will”) succession, then you run the risk of an individual (who might be receiving less under your Will than they would receive under intestate succession) destroying the Will, thereby creating the possibility of argument by the beneficiaries that the previously executed Will was actually revoked by the deceased individual by the physical act of destroying the original.

Another potential difficulty in keeping the estate planning documents at your home is if the documents include an original Power of Attorney, the Power of Attorney could be misused by the Attorney-in-Fact to effectuate “advance planning” with respect to any estate planning or even divorce. By keeping the Power of Attorney at the law offices, it is less likely that a Power of Attorney could be misused by the person given authority under that Power of Attorney.

The third reason to keep your estate planning documents with your attorney is that sometimes situations occur outside your living area that might require a transmittal of estate planning documents. For instance, let us suppose that you are injured in an automobile accident while visiting your daughter in Nebraska. It might be necessary for a Health Care Power of Attorney, Power of Attorney or Living Will to be used at the hospital in Nebraska. A simple phone call to your lawyer results in those documents being faxed to the hospital so that your plans and interests can be protected and effectuated.

Some people have the idea that these important documents should be placed in a safe deposit box owned by the client. As discussed above, one of the difficulties with having the documents in your safe deposit box is that if you were injured outside of Florida and you were not available to access the safe deposit box, your important documents may not be available when they are urgently needed. Also, if you place the original Will in a safe deposit box, it is possible that it would be necessary upon your death to obtain a court order to get access to the estate planning documents. This would entail substantial legal expense, and perhaps, the expense of actually “drilling” out the lock on the safe deposit box if the key cannot be found.

Original documents are extremely important. In order to probate a Will, the court will typically require the production of the original Will. Unlike some states, Florida does not allow for the filing of original Wills before death. Safe deposit boxes can be difficult to access after death and, even after the death, what protection is there from the person entering the box? Additionally, there is a risk from an unscrupulous heir that may choose to destroy a document that does not serve their interest.

Finally, this issue cannot be properly addressed without talking about the tremendous risk associated with a Power of Attorney. A Power of Attorney can be used by any individual that might be designated thereunder to transfer assets in such a way that would effectuate “pre-divorce planning” or “pre-death planning” that would frustrate the estate plan of the client. The procedure followed at the Coleman Law Firm is that the Power of Attorney is not generally provided to the client. Rather, a letter is prepared by our law firm indicating in what circumstances a Power of Attorney will be released to the designated Attorney-in-Fact so that there will be some degree of protection that the Power of Attorney will not be misused to address such issues as the Attorney-in-Fact’s financial difficulties or to otherwise frustrate the intent set forth in the Last Will and Testament of our client.

Coleman Law Firm works to document the client’s intent with respect to the distribution of their wealth and their healthcare decisions. It is critical that the documents prepared by our law firm be effective and enforceable at the time of the death or disability of our client.

© Jeffrey P. Coleman P.A. 2011

Rolling Over Your 401(k): Should You Do It?

When leaving a job, most people automatically transfer, or “roll,” their 401(k) accounts to an individual retirement account. Now, some companies are urging departing employees to leave their savings right where they are – and there could be some good reasons for doing so.

When an employee leaves a job, he or she is generally free to roll 401(k) money into an IRA; such accounts typically offer a much wider array of investment options. But while most employers have historically encouraged departing employees to make transfers, a growing number of companies now say they’re eager to keep former employees’ savings within their plans.

As baby boomers start to retire, “companies are realizing that participants with the biggest balances are going to be leaving the plan relatively soon,” says Katharine Wolf, a senior analyst at research firm Cerulli Associates. When assets decline, companies have less leverage to negotiate with plan administrators and fund companies for lower fees and unique investment options, she says.

In considering whether to keep money in a 401(k), departing employees must consider a range of factors, including fees, investment options and whether they may need protections from creditors or early access to their savings.

Participants in some 401(k) plans may discover that it’s cheaper to stay put. Often, plans with assets of $100 million or more receive access to low-cost investment products, including collective trusts, which resemble mutual funds but generally charge lower fees. (To find out what you’re paying in investment and administrative fees, ask your plan administrator or go to BrightScope.com, which rates plans.)

A 401(k) plan also may offer greater protection from creditors. While federal law shields the assets in 401(k) plans from a variety of claims, it only safeguards IRA assets in cases involving bankruptcies, says Ed Slott, an IRA consultant in Rockville Centre, N.Y.

Some states, including New York, have laws that provide greater protections for IRAs. But “that’s not the case in every state,” cautions Mr. Slott.

After leaving a company at age 55 or older, a former employee also has leeway to take penalty-free withdrawals from that company’s 401(k) account. In contrast, those with IRAs generally must pay a 10% penalty on distributions taken before age 59[frac12], says Keri Dogan, a senior vice president at Fidelity Investments.  (SMARTMONEY, MAY 11, 2011)

Estate Planning Smarts For New Moms

Having a child is often the first time people think about their estate plans. New moms have much on their mind. I highly recommend the second edition of Deborah L. Jacobs’ book Estate Planning Smarts: A Practical, User-Friendly Action-Oriented Guide to help them plan for their family’s future.

Caring for yourself. Contrary to what many think, estate planning is not just for millionaires and billionaires. Everyone should have at least a basic plan that provides for what will happen in the event of disability or illness. Failing to have an estate plan can hurt the people you love.

The first chapter of Estate Planning Smarts is titled, “Nothing Lasts Forever.” The subtitle suggests to “[r]ead this chapter even if you are hearty and clear-headed.” This chapter defines and discusses documents that everyone needs in their estate plan – a power of attorney, HIPAA release, living will, and health care proxy.

Once you have these basic estate planning documents, you will need a place to store them. The second edition of Estate Planning Smarts has a new and very informative section on organizing financial records. Jacobs discusses various options that you have, including keeping your records in loose-leaf binder, on a computer, or on an online storage site.

Providing for your children. Jacobs informs that estate planning entails providing for your children’s future and making “sure someone will care for them if you suddenly perish.”

Estate Planning Smarts has an entire chapter devoted to anticipating the needs of young or disabled children. Chapter 5 gives tips about choosing a guardian to take care of your child in the event something happens to you. This chapter also discusses how to leave sufficient funds for your child and how to put money in good hands. The to-do list at the end of the chapter can help you avoid potential legal and economic pitfalls.

Chapter 8 discusses a topic that many think about only after they become parents: life insurance. Jacobs discusses how life insurance can serve your estate planning goals, how to avoid tax traps, and finding the best way to fund the premium.

Chapter 9 is also essential reading for a mother. It discusses how to pay for health care and education. This chapter begins by discussing custodial accounts for minors. It then discusses funding Section 529 plans and Coverdell Education Savings Accounts, and financing heath care and education by using a trust. There are many choices to consider and the to-do list at the end of the chapter asks some questions and tells you the action to take if your answer is “yes.”

Your assets. Estate Planning Smarts has advice on deciding who gets what (chapter 2). It also has chapters devoted to specific assets – retirement accounts (chapter 7) and houses (chapter 11).

Business owners. Today, many mothers are also business owners. Some women are mothers, business owners, and the bread winners in the family. These entrepreneurial mothers will find the advice in chapter 12 invaluable. As the subtitle states, “Read this chapter if you have your own business or share in a family-held enterprise.”

Taxes. Jacobs discusses estate and gift taxes in plain English. Chapter 3 (Understanding the Tax System) is up-to-date and “covers all the ramifications of the 2010 estate tax overhaul.” As the subtitle to the chapter informs, “Read this chapter even if you think estate taxes won’t affect your heirs.” If saving taxes is a high priority for you, then chapter 15 is also invaluable: Give Now, Save Tax Later.

Giving. If you want to give to your family, chapter 13 is key. Many new moms take motherhood as an opportunity to turn the table and celebrate their own moms and families. Chapter 17 discusses philanthropic giving and gives tips on how you can support the causes that you care about.

Why Estate Planning Smarts? You can’t afford to neglect estate planning. Estate Planning Smarts is, therefore, a must-read. It is written with you in mind. 

  • Chapter previews. Each chapter begins with topics that you will learn about. 
  • Great writing. Jacobs has the rare talent of discussing complex issues in a way you can understand. Jacobs is an award-winning business journalist and a lawyer. Her writing is clear and concise.
  • Informative charts and graphs. Estate Planning Smarts uses charts and graphs that provide perspective and insight.
  • Life-changing to-do lists. Each chapter ends with a very useful to-do list. Estate Planning Smarts is not just for reading; it is for taking action.
  • Handy glossary. There is a very useful glossary at the end of the book. 
  • Detailed indexEstate Planning Smarts has a 26-page index that will allow you to find the information you are looking for.

The perfect gift. Tell new moms you know happy Mother’s Day and give them a copy of Estate Planning Smarts as a gift. It is a great way to show them you care, and they will appreciate it. I gave the first edition ofEstate Planning Smarts to new mothers that I knew and they were always grateful for the gift. This year, I will give them the second edition ofEstate Planning Smarts. Jacobs has revised the book by bringing it up-to-date, and she has added helpful new information. For example, on pages 289-291, Jacobs gives tips on how to start the estate planning conversation with family members. On pages 291-292, she emphasizes her objection to DIY estate planning.

For all mothers. Estate Planning Smarts has useful information for all mothers. For example, grandmothers would especially find interesting chapters 14 (What You Can Do for Grandchildren), 13 (Subsidize Friends or Family) and 9 (Pay for Healthcare and Education). Anyone who has done an estate plan before should read chapter 19 (Keep Your Plan Current).

For all women. Jacobs is on a mission to educate women about estate planning. Tomorrow, May 9, she will give a talk at Barnard, Estate Planning Is A Women’s Issue. Here is the description of the talk:

Estate planning is important for both sexes, but for various reasons, it affects women more profoundly. As a group, women live longer than men, earn less than them, and are more likely to spend their final years without a spouse or partner. Therefore women need to be especially vigilant about providing for their financial security. Whether you’re doing an estate plan for the first time, or revising a plan to reflect changes in your life, this program will cover the key issues, including:

  • Caring for yourself
  • How the new tax law affects estate planning for couples
  • How to start a conversation about estate planning – with your spouse or partner, with adult children, with aging parents
  • Should your plan be equal or fair?
  • The impact on planning of subsidizing adult children and grandchildren
  • What are non-probate assets and key pitfalls that surround them

This talk will address estate planning issues for women, but of course, the men in their lives are also welcome. Jacobs will adapt this talk and speak to other audiences around the country during the year ahead. (Forbes, May, 8 2011)