Are You Protected?

Are You and Your Family’s Assets Protected?



  • Who will raise your children if both parents die?

Many people say they waited until all of their children were grown to discuss estate planning because they couldn’t figure out whom to name as a guardian. If you fail to name a guardian, then the court will do it for you, based on what it deems to be in the best interest of your child. Unless you have confidence that a judge who never knew you has better judgment than you do about matters involving your children, it is best not to stick your head in the sand for 18 years.

  • Are there any other descendants you need to consider?

Consider a situation where a woman was approached at her mother’s funeral by another woman who was her spitting image. It turns out the women were half-sisters— the newly discovered sibling was the daughter from a prior marriage that the mother had kept a secret. So if your lawyer asks more than once if there are any other descendants he or she needs to know about, it isn’t because the lawyer forgot about just asking the same question. Sometimes the additional questions bring disclosures that cause the estate plan to take on a whole new dimension. When a husband and wife consult jointly, from time-to-time calls are received days later with a revised answer to questions about other descendants. It is critical that, in lawyer-speak, you disclose all of the potential “objects of your bounty.” If you don’t, they will pop-up–if not at your funeral, at some time in the future–and at a greater emotional and financial cost.

  • Have you disclosed all the important relationships in your life?

Charles Kuralt had an intimate companion for 29 years who remained a secret from his wife and children. After he died, they became embroiled in a six-year, public court battle over land in Montana. Whether you are married or single, your lawyer may prod and ask if you are in a relationship with someone and if it has a legal status such as civil union, domestic partnership or even a same-sex marriage. There may be legal obligations that come with these relationships that you need to know about.

Your lawyer can’t educate you about the rights and obligations unless they have the full picture. There are cases where clients are asked for copies of divorce decrees and the client realizes that he or she never actually got around to finalizing a divorce. Again, unless you are leaving everything to the person you are married to, this is information your attorney needs to know or a long drawn-out lawsuit could erupt after your death, consuming your estate in legal fees. You might think that this is what lawyers hope for, but it truly isn’t. It is a hard way to make a living and an even harder way to watch someone’s legacy destroyed.

  • Who is going to take care of your pets?

You may not need to set up a full-blown pet trust, but you may need to set aside sufficient funds to be put in trustworthy hands to take care of Fido. If you have racehorses or animals with long life expectancies, you may need more sophisticated planning, including a pet trust. Or, if you don’t have someone you can rely on to take on your pets, especially if you have 17 cats or even two spiders, you will need to find an organization to take care of your companions for the remainder of their natural lives. Your estate planner can help you do this.

  • What are your end-of-life instructions?

Almost certainly your lawyer will ask you to sign a health care directive concerning the withholding of nutrition and hydration. This is an important decision to think about in relation to timing and under what circumstances. We each have a definite idea as to when quality of life has diminished too far. It is helpful to share that information with your healthcare agent who has to be a part of carrying out instructions. If you don’t share that information, people may let loved ones linger on when if they had had more insight they might have ceased aggressive medical intervention sooner.

  • What are your passwords, user names and security questions?

Until a few years ago, we didn’t really worry about your digital life. Your e-mail and Facebook accounts will go dormant. But some folks have self-published books that are only accessible on line.  Journalists and photographers may have their life’s work on a hard drive or saved in cloud storage. Plus there could be bank accounts for which you only receive e-mail statements. You may also have  blogs, Twitter, photo storage, and countless other financially and emotionally valuable assets accessible only by computer.

Your lawyer can help you figure out what needs to be preserved, what can be left to lapse, and who should be able to access these various accounts. There are a number of cloud storage sites, such as Dropbox, where you can store your passwords, and then you only need to give someone the password to access that information. Alternatively, you can leave the password to access your personal information in a safe deposit box or with your lawyer. Dealing with digital property is still in its infancy, and technology is ever changing, so there are no perfect solutions. But you and your estate-planning lawyer can explore the options and pick the one you are most comfortable with for now.

  • Did you enter into a prenuptial or postnuptial agreement?

These documents may be long forgotten and long ignored as irrelevant. But after your death, a disgruntled heir could surface and derail your best estate planning intentions. Even if you don’t consider documents relevant any more, disclose them. If they really aren’t relevant, your estate planning attorney can help you legally terminate them. But to provide that assistance, the lawyer has to know that the documents exist.

  • Have you had any serious or chronic health issues?

You might not think this is relevant to estate planning. No, your attorney isn’t wondering if he or she needs to put off a vacation for your imminent probate. Rather, a lot of sophisticated planning is based on actuarial life expectancies. The reality is that those techniques are only useful if the actuarial tables approximate what is reasonably expected to be true in your particular situation. If you have health concerns or health conditions that could change assumptions of life expectancy, that would be planned for differently.

Whether or not your lawyer concludes with the catchall question, “Is there anything else I should know?” don’t be afraid to speak up. Chances are you’ve covered a lot of territory. Conversations can be circular, rather than linear. Maybe you started to say something and got distracted. Or perhaps you haven’t gotten to something you expected to cover. That additional little detail might not be relevant. Or it might make all the difference.

  • Is your wealth protected from marriage breakdowns?

 Statutory laws protect inheritances in all states. This means that if you receive an inheritance, the law declares that your spouse has no right to it during or after your marriage. However, it is very easy to undo this protection if you don’t handle the inheritance properly. The statutes don’t say that your spouse has no right to your inheritance under any circumstances whatsoever. However, your inheritance is sole and separate property as long as you take steps to segregate it from marital assets.

Or other times, there simply is concern that a child would leave everything—including an inheritance from parents—to a surviving spouse, who could turn around and leave it to a subsequent spouse, effectively cutting grandchildren out of the inheritance. Fortunately, there are several estate planning devices that allow parents to shield assets from those who marry, and may divorce, their children.


  • Do you need a ‘buy sell agreement’ with your business partner to ensure your business continues?

Buy-sell agreements are essential to a business that is to survive the death of one of its owners. Yet many businesses have no such agreement, the agreement isn’t in writing, the agreement isn’t in writing or the price (or price setting mechanism) doesn’t reflect the current value of the business. The consequence is there is no guarantee that the heirs will receive the price they are entitled to – or no assurance that the surviving owners will have the cash they need to buy out the heirs.

As a single example of poor planning that cost heirs an $11 million loss, consider the 2011 New Jersey appellate court case of the Estate of Cohen v. Booth Computers.  Booth Computers was a partnership created by the father of Claudia and James Cohen decades before Claudia died. When the partnership was created, Claudia and James were required to sign a partnership agreement that defined the value of the partnership after the death of a partner with the following language:

 “the full and true value of the Partnership is equal to its net worth plus the sum of FIFTY THOUSDAND ($50,000) DOLLARS. The term “net worth” has been determined to be net book value as shown on the most recent Partnership financial statement at the end of the month ending with or immediately preceding the date of valuation.”

The partnership was valued at $45,000,000 at the time of Claudia’s death and Claudia’s share would have been $11,526,162 had the valuation been based on fair market value. However, the court ruled based on the net book value language in the partnership agreement. The net book value of the partnership was only $128,000. Therefore, Claudia’s heirs were only entitled to $178,000 ($128,000 net book value plus $50,000). The cost to Claudia’s heirs was over $11 million dollars due to a partnership agreement that was poorly structured and should have been updated with the growth of the partnership.


  • Should you put your home and other assets in a living trust?

 There are definite benefits to placing your home and, really, all of your high value assets in a trust. Assets placed in a trust are protected from the high cost and delays of probate and, unlike wills where the terms and list of assets subject to probate become public, assets in a trust remain private. Avoiding probate reduces costs and the length of time it takes to transfer assets to heirs. It may also be desirable to keep the value of assets private. As an example, Bing Crosby had real estate investments worth millions. Those investments were held in a living trust so that when he passed away, the value of the distributed assets remained private.

There are other benefits and considerations when contemplating a living trust for asset protection. And you should be aware that, while trusts can be structured to reduce taxes, they generally will not eliminate federal estate or state inheritance taxes. You should discuss your situation and the ins and outs of a trust thoroughly with your attorney.