Domestic Partners Get Visitation Rights
April 30, 2010
Who would you like to have with you when you are ill or injured in the hospital? Most likely you would hope to have your partner of many years there with you to hold your hand when things get rough. Although many of us take for granted that we would be allowed that luxury, until just recently unmarried couples had no assurance that their partner would be allowed to visit them in the hospital—especially if a “recognized” family member such as a parent or sibling chose to refuse access.
In February 2009, Phoenix passed an important milestone when the City Council adopted an ordinance that gives domestic partners, same sex or not, the right to register as domestic partners and establish the right to hospital visitation until the registration is officially revoked.
Before this ordinance, and in other parts of the state, even if the domestic partners had executed health care powers of attorney and HIPAA releases, the family could still exclude the partner from visitation. Now however, if the domestic partners reside in Phoenix and have registered, they will have established a paramount right to visitation. Area hospitals outside Phoenix are not bound by the registration and as of now the only other Arizona city with a domestic partners registry is Tucson. Mesa’s city council is trying to adopt a similar provision, but opposition forces are organizing against the effort.
The registration conveys no other rights, but might be useful in establishing the credentials necessary to obtain benefits where such benefits are offered.
It appears more opposite sex couples than same sex couples are taking advantage of Phoenix’ ordinance, but the ordinance is hailed as a progressive step toward the recognition of human rights across sexual preference boundaries.
Estate planning for unmarried couples is crucial if property rights are to be inherited and disruption to the survivor’s lifestyle is to be avoided. Traditional tools such as rights of survivorship, POD/TOD, beneficiary deeds, Wills, trusts, and powers of attorney can all effectively be used to provide an estate plan, but the impact on the decedent’s family and the survivor must be carefully considered. Even small estates must be carefully planned if disputes are to be avoided.
7 Fatal Problems of Joint Accounts
April 21, 2010
When fewer than half of all adult Americans have estate plans, you must ask yourself: why? One answer is that many people think they have already taken care of how their assets will pass to their heirs through joint tenancy. Joint tenancy works well if nothing out of the ordinary exists or occurs; but there are many problems that may arise. Here are just 7 of the worst things that might happen if you use joint tenancy to pass your assets on to your heirs:
- No creditor protection is available when property passes by joint tenancy. Creditors come in many shapes and sizes these days. Jury verdicts in even the most common accidents easily exceed insurance limits. Aging survivors are more susceptible to lapses of concentration while driving or otherwise. All of the survivor’s assets are exposed to creditors when assets are in joint tenancy. A trust based plan can provide creditor protection to your spouse or your descendants. This valuable protection can not be purchased at any price if you miss this planning opportunity.
- Defeats an Estate Plan. Property in joint tenancy passes to the joint tenant even if your Will indicates a different result. Heirs other than the joint tenant get nothing. If the joint tenant tries to distribute property to other heirs there will be a gift tax consequence.
- No estate tax protection for post-death appreciation is available if joint tenancy is used. Although the asset will pass to your spouse estate tax free; upon the death of the survivor the entire estate is exposed to estate taxes and the tax exemption normally available to the first decedent will be lost. If your estate (including life insurance) is likely to exceed the Applicable Exclusion Amount (scheduled to return to only $1,000,000 in 2011) then you have unnecessarily benefitted the government at the expense of your descendants. However, if a “credit shelter” trust plan is utilized, the decedent’s estate, will escape taxation no matter how much it appreciates before the death of the surviving spouse.
- Reduced protection from accumulated capital gains. Individually owned or community property receives a “step up” basis to fair value at the date of death and your heirs can sell the property and pay no capital gains. If property is held as joint tenants, the joint tenant avoids probate, but receives the favorable “step up” basis treatment on only one-half of the property.
- Lack of control. A joint tenant has no control over what happens to the property after death. A surviving joint tenant can sell or transfer the property, or can pass it to the survivor’s choice of heirs, including subsequent spouses. Joint tenancy deprives you of the assurance that your property stays in your bloodline. Without any further planning, property owned by a surviving joint tenant will pass automatically to the heirs of the survivor. If the survivor’s heirs are not the same as the decedent’s heirs, an undesirable result may occur.
- Guarantees public probate proceedings. Although there will be no probate administration when the first joint tenant dies, then (unless the survivor creates a new plan) a public probate proceeding will be necessary to complete the transfer of the property upon the death of the survivor.
- May subject you to expensive and potentially devastating results. Joint tenancy property is fair game for your joint tenant’s creditors. Although you may have an opportunity to prove your property was placed into joint tenancy for convenience and that the property really does not belong to the debtor, you are exposed to the expense and uncertainty of litigation.
Don’t let any of these fatal problems befall your family. Call our office today to discuss other, more reliable options for passing on your assets.
Trading Your Chevy in for a Cadillac: Reasons to Update Your Trust
April 13, 2010
(Image courtesy of treehugger.com)
In my last blog post I promised to give some concrete examples of why an updated trust is better than one that simply keeps the “status quo”. I will forgo the obvious examples such as inheriting money or growing your assets so that your original plan will no longer work. I’ll also skip over the obvious changes in family circumstances which make your existing plan unpalatable. These are reasons you already know. This blog post will concentrate instead on the not so obvious reasons to update.
One of the most important (and most common) reasons to update from your Chevrolet trust to a Cadillac trust is a second marriage. A subtle problem may exist when you are in a second marriage and plan to leave your assets to your surviving spouse to use, and then hope that spouse passes them along to your descendants.
A typical estate plan provides for the surviving spouse to be the income beneficiary of a credit shelter trust with the remainder passing to your children. If your estate exceeds the minimum estate tax exemption then the remainder passes to a marital deduction trust, either a limited access trust commonly called a QTIP or outright to the survivor’s trust, depending upon your family circumstances. However in many second marriages, the plan is for the amount that can pass without being subject to estate tax to pass directly to your descendants upon your death. This is fairly common when the spouse may be close in age to your children. Such plans usually satisfy the belief that it would be unfair to make your children wait for their inheritance, yet the inheritance is still shared between your spouse and your descendants.
The way most plans are written, the formula operates to leave as much to your descendants as will not increase the tax. When that number is $1,000,000, in a $2,000,000 estate the surviving spouse would get half and the descendants would share the other half. But as the exemption amount increased to 3.5 million dollars, the surviving spouse would get nothing – not the intended result. Now the reverse is true, this year there is no estate tax and that plan would completely disinherit the spouse no matter how large the estate, but next year, the descendants will share only 1 million dollars no matter how large the estate.
I believe in “modeling” or “back testing” the results to be sure you will achieve the desired result, and it pays to model or back test frequently if a sound estate plan is important to you.
Unintended consequences can arise in many ways, this is just one graphic example.
Call today and arrange for me to review your documents and back test them against your assets and your intentions. You will be glad you did!