United States: Guide To Wills And Estate Planning

When it comes to making long-term financial decisions, there's a cautionary expression that communicates the importance of planning: if you choose not to decide, you still have made a choice.

Considering what happens to your assets following your death may not be the most pleasant of tasks, but according to experts, it's important. A delay in drafting a will or making estate plans can take the decision making away from you or your loved ones and put it in the hands of the court.

"These are difficult decisions, but if you don't make them the State of New Hampshire will make them for you," says Elizabeth M. Lorsbach, an attorney who works in trusts and estates at Sulloway and Hollis. "If a resident of New Hampshire passes away without a will, state law determines who the beneficiaries of that person's estate are."

The primary message: Don't delay. Taking the time to ensure that trustees are appointed, executors are identified and healthcare wishes are understood can help to ease a trying experience.

We asked experts to identify some of the most important elements of wills and estate planning. Our panel: Thanda Fields Brassard, vice president and trust counsel at Fiduciary Trust of New England; Caitlin McCurdy, an associate in the Trusts and Estates at McLane Middleton; Katherine J. Morneau, Esq., founding attorney at Katherine J. Morneau Law, in Nashua; and Elizabeth M. Lorsbach, of the Trusts and Estates department at Sulloway and Hollis.

Q. Who needs a will?

McCurdy: "Everyone! A will allows you to state who will inherit your assets when you pass away and to nominate a person — called an executor — to be in charge of the probate administration process upon your death. If you have minor children, a will also allows you to nominate a guardian in the event you and your spouse pass away unexpectedly. Additionally, even if you have a trust, it is still important to have a will, typically called a pour-over will, that directs any assets accidentally left out of the trust into the trust."

Morneau: "Everyone! Unless you want the State of New Hampshire to tell your family members or friends how to distribute your belongings and assets after you pass away, you need a will to outline your intended distribution plan. Even if your estate is tiny, a will maps out your express wishes with regard to how you want your things distributed. In addition, if you are a parent, a will is the document in which you name a guardian(s) to care for your children upon your passing."

Q. What can someone expect to occur during a meeting with an estate planning attorney?

Brassard: "In order to draft estate planning documents that accurately reflect a client's wishes, an attorney will first need to determine what assets the client has, and to whom the client wishes to receive them. In addition, the attorney will ask questions about how the assets are titled, the value of the assets and in what form they are owned. The attorney will also likely ask about the client's family in general and whether there are any trusts not created by the client but of which the client is a beneficiary. Some attorneys have clients answer a questionnaire before the initial meeting in order to gather this kind of information."

Lorsbach: "When you meet with an estate planning attorney to begin the process, the attorney will spend time getting to know you. The attorney needs to know about your assets, your family and your wishes regarding distribution of those assets upon your death. In addition, the attorney needs to know whether you have friends or family who can assist you in the event that you become incapacitated, and whether those same friends or family can manage the administration of your estate or trust after you die. Once the attorney has enough information, he or she can prepare an estate plan that is designed to meet your specific wishes and needs."

Q. What documents could be included in my estate plan?

Morneau: "Estate planning documents come in two sets: those documents that take effect and make life more manageable prior to death (collectively known as 'advance directives') and those documents that distribute your assets after death (collectively known as 'dispositive provisions'). Advance directives consist of durable powers of attorney for health care; living wills; and durable general powers of attorney (for financial matters), while dispositive provisions consist of wills and trusts. The following information is centered mainly on dispositive provisions."

Q. What is the difference between a will and a trust, and what are the advantages of each?

McCurdy: "Both a will and a trust allow you to state who will inherit your assets when you pass away and to nominate a person to be in charge of the administration process upon your death. A major difference is that with a will, the executor will have to work with the probate court to administer your estate, whereas the trust administration process does not have to be overseen by the courts. This means wills are typically less expensive to establish, but cost more to administer, while trusts are often more expensive to establish, but less expensive to administer. Trusts can also provide more planning options than wills for people with complex estates."

Morneau: "We like to describe the difference between a will and a trust as follows: A will is like a ruler or straight edge — it gets your assets from point A to point B, but your assets will have to pass through the often lengthy and costly probate process to get to your intended heirs. However, a will is often times less costly than a trust. A trust is more like a rubber band or elastic — it stretches and also gets your assets from point A to point B, but in a more flexible way by bypassing the probate process. That flexibility can really help the families we work with because it allows your loved ones the ability to distribute your assets according to the terms of your trust and not by the court's strict guidelines."

Lorsbach: "A will allows a New Hampshire resident to control who receives his or her assets after death rather than allowing state laws to make that decision. The will must go through probate in order to allow the executor of the will to pay bills, sell assets and make distributions to the will beneficiaries. A revocable trust also allows a New Hampshire resident to control who receives his or her assets after death. However, if all of the individual's assets are retitled so that they are owned by the revocable trust during the individual's lifetime, and if beneficiary designations are updated to name the trust or individuals as beneficiary, the successor trustee of the trust does not need to go to court to receive authorization to pay bills, sell assets and make distributions to the trust beneficiaries. A revocable trust also allows a greater amount of privacy than if probate occurs, because court records regarding the terms of the will and the assets owned by the deceased individual are public records. A revocable trust is often more expensive to prepare than a will, which may lead some individuals to choose a will over a trust."

Q. What should I consider when choosing an executor or trustee?

Brassard: "There are a few important things to consider when choosing an executor or trustee. First, the company or individual being named should have a clear understanding of what the fiduciary office entails. In both roles there are many reporting, accounting, tax and other obligations that need to be taken care of. Often there are deadlines associated with these tasks and a good executor or trustee will have experience handling these important reports and filings. The fiduciary also has to be responsible and trustworthy, as these are both very important roles and involve handling of client assets and making filings such as tax returns with government authorities." 

Morneau: "When making these important decisions, you should ask yourself two important questions: 1 — do I trust the person with my financial matters?; and 2 — will they honor my intentions as outlined in my estate planning documents? It's also important to note that your choice of executor or trustee may change as you progress through your life, so we always recommend that you review your estate planning documents annually and, certainly, at the time of any life changing events like birth, marriage, divorce, death, etc."

McCurdy: "You should think about who among your family and friends is responsible, organized and has a good working relationship with the people who will be inheriting under your estate plan. The skills needed to be an effective executor or trustee include the ability to manage and distribute assets, follow deadlines, communicate clearly with an attorney and/or the court, and promptly notify beneficiaries and respond to their questions. You can also name co-trustees or co-executors in the event you have more than one qualified person or you have children who bring different strengths to the table."

Q. How can I best minimize estate and inheritance tax?

McCurdy: "Stay in New Hampshire! In New Hampshire, there is no state estate tax regardless of the size of your estate, and under the newly passed tax law, a married couple can pass $20 million (indexed for inflation) without incurring any federal estate taxes. Most people are under this limit, so a bigger focus now is income-tax planning to make sure your beneficiaries receive a step-up in basis on the assets they inherit and therefore do not have to pay potentially large capital gains on appreciated assets. If you are over the federal exemption amount, then New Hampshire offers progressive credit shelter and asset protection trust structures which can provide additional safeguards for your assets."

Q. When and how often should I change my estate plan?

Lorsbach: "Most estate plans are written so that minor changes in assets will not require updates to the plan. However, if you leave specific dollar amounts or specific assets to named beneficiaries, and the value of your assets changes or you no longer own the specific assets listed, you need to update your estate plan. If your total asset level increases significantly, you may want to update your estate plan to avoid tax issues that did not exist when your estate was smaller. Even if your estate value does not change significantly, you should update your estate plan if other life changes occur, such as the birth, death, marriage or divorce of beneficiaries, or changes in your circle of friends and family that change who can help out if you become incapacitated or die. Even if none of these circumstances apply to you, and it has been more than five years since you had your estate plan prepared, you should review it to make sure you are still happy with the choices you made when your plan was created."

Q. How have New Hampshire's trust laws evolved over recent years?

Brassard: "In the last 10-15 years, New Hampshire trust laws have evolved significantly, making New Hampshire one of the best jurisdictions to administer a trust. For example, through concepts like virtual representation (which allows certain beneficiaries to represent the interest of other beneficiaries), trustees often can resolve administrative issues such as the interpretation of ambiguous trust provisions without having to seek court involvement. New Hampshire law permits the use of non-judicial settlement agreements (NJSAs) to modify and clarify trusts. New Hampshire law allows for investment and administrative responsibilities to be clearly divided among trustees and third parties (called 'directed' or 'divided' trusts). In addition, as of 2013, New Hampshire trusts are generally no longer subject to state income tax. This allows the trust funds to grow more quickly because the trust assets are not depleted by
payment of income tax."

Q. How is life insurance utilized as an estate planning tool?

Lorsbach: "Estate planning means more than just having a will. If you have family members who depend on you for support, life insurance may be an important part of your overall estate plan to provide support to your family members in your absence. Life insurance can also be a tool for payment of debts or taxes after your death, so that your beneficiaries can receive your assets debt and tax free."

Q. What are some of the potential pitfalls to drafting your own will without the assistance of an expert?

McCurdy: "In New Hampshire there are strict formality requirements for executing a will. In order to be valid, a will must be in writing, signed by the testator, and properly attested to and signed by two or more credible witnesses. Common pitfalls include having interested persons (family members) serve as witnesses, not having both witnesses sign in the presence of each other and the testator, and/or not having the minimum number of witnesses. Additionally, even if the formalities are met, it is easy to forget to include secondary beneficiaries in case the primary beneficiaries pass away before the testator or to forget to include a rest, residue, and remainder section in the event you acquire assets after signing the will, which were not otherwise provided for. The time and expense spent administering and litigating a self-drafted will almost always exceeds the money that would have been spent to consult with an attorney in the first place."

Morneau: "One of the biggest pitfalls to drafting your own will, or using purchased software for that purpose, is that your will may get discarded by the court which could result in your distribution plan not being honored. This could happen for various reasons: maybe you did not follow the correct protocols and rules required by New Hampshire law for the drafting and execution of a will; or maybe your will contained confusing or contradictory terms. In any event, it is wise to have an expert help you to be certain that your will is compliant with the law and able to be honored."

Q. What is your best piece of advice about wills and estate planning?

Brassard: "My advice would be three-fold. First, provide your estate planning attorney with as much financial and personal information as you can, because it will help he or she to better advise you and draft documents that reflect your wishes. Second, always take into consideration the tax consequences of your plan, but remember not to let the 'tax tail wag the dog.' Make sure your plan reflects your personal wishes as well as your desire (if any) to minimize transfer taxes as much as possible. Finally, your estate plan may last for years to come so provide your trustee with as much flexibility as you are comfortable with to carry out your wishes. As history has shown, the world changes pretty quickly."

Morneau: "Meeting with an Attorney is really the only way to ensure that your intentions are being expressed legally and properly. This is important. Additionally, making sure your named executor or trustee knows your intentions and the location of your documents now in the event they need to act under your estate planning documents can be crucial."

Lorsbach: "If you are hesitant to start the process because you can't decide who will receive your assets when you are gone, or who you can trust to make decisions regarding who will handle your affairs if you become incapacitated or die, stop procrastinating. These are difficult decisions, but if you don't make them the State of New Hampshire will make them for you."

Q. How do I get started?

McCurdy: "You should call and schedule an appointment with an attorney to get the process started. Committing to the idea is the most important step, and a qualified estate planning attorney will walk you through the process and help you make decisions that are right for your family. Even if you have an estate plan in place, you should review the documents to make sure they still reflect your wishes and comply with the current law. Typically, an estate plan should be reviewed and updated every 5-7 years, or more often if family and financial circumstances have changed."

Morneau: "Meet with a local, licensed attorney to discuss an estate plan tailored to your specific needs and to set you on the right path toward getting your documents drafted and then finalized. After all, the uncertainties of life can leave your loved ones reeling, and having your estate planning document in place can often ease some of that concern for them."

Lorsbach: "Ask your friends, family, coworkers, or trusted advisors such as CPA's or financial advisors who they would recommend to handle your estate plan.  Then call the attorney's office to schedule a meeting to put your own plan in place."

Originally published in NH Magazine

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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