In the following presentations, Phil Fish, CFP® and Estate Planning Specialist with Sandy Spring Trust shares his 30 plus years of experience.

  • In the seminars, Phil talks about key issues in relation to estate and financial planning.
  • In the Professional Discussion Series, Phil interviews local professionals in the areas of estate planning, tax, finance and health care.

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Why Estate Planning is so Important for Young Adults with Lindsey Sarowitz, Esq.

 
Philip Fish, CFP<sup>®</sup> and Estate Planning Specialist with Sandy Spring Trust

In this Professional Discussion Philip Fish, CFP® and Estate Planning Specialist with Sandy Spring Trust interviews Lindsey B. Sarowitz, estate planning attorney with Handler & Levine, LLC.  Lindsey and Phil discuss why it is so important for individuals between the ages of 18 and 35 to have strong incapacity and estate planning documents. They discuss Financial Powers of Attorney, Medical Advance Directives, Wills and Testamentary Trusts for young children.  

Guest Speaker: Lindsey B. Sarowitz, Esq. joined Handler and Levine, LLC in 2013. She counsels clients in Maryland, the District of Columbia and Virginia on estate planning, probate and trust administration. Lindsey earned her B.A. in Justice, cum laude, in 2007 from American University in Washington, D.C.  

 50 min. length.  


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  • Question

    Why Estate Planning is so Important for Young Adults with Lindsey Sarowitz, Esq.

    Answer

    Disclosure:

    Sandy Spring Trust does not endorse nor recommend the services of any person or entity not affiliated with Sandy Spring Bank.  

    The opinions and statements expressed by Lindsey B. Sarowitz and Handler & Levine, LLC reflect their own views and do not necessarily represent the views of Sandy Spring Trust.

    This material is provided solely for educational purposes by Sandy Spring Trust, a division of Sandy Spring Bank, and is not intended to constitute tax, legal, accounting or healthcare advice, or a recommendation for any investment strategy or transaction. You should consult your own tax, legal, accounting, financial or healthcare advisors regarding your specific situation and needs. Our staff will work closely with your advisors to coordinate your overall plan.  

    Sandy Spring Trust and the SSB logo are registered trademarks of Sandy Spring Bank. © 2021 Sandy Spring Bank. All rights reserved. 
     

    - Hello everyone, and welcome to Sandy Spring Bank's Real Life Matters discussion series. My name's Phil Fish, I'm a certified financial planner and a state planning specialist with Sandy Spring Trust. I'm the host of this professional discussion series, where I interview local professionals in the areas of law, tax, finance, and healthcare. Today, I'm very honored to have Lindsey Sarowitz with Handler & Levine, an estate planning attorney, joining us for a very important topic. Why is Estate planning So Important For Young Adults? So Lindsey, thank you so much for taking time for joining us today. And before we get underway, could you give our audience a little background on yourself and your firm, and the type of work that you do?

    - Of course, thank you so much for having me. It's so nice to see you. I feel like we haven't connected with many people that we're used to seeing all the time. So my name is Lindsey Sarowitz, as you just said, I'm with Handler & Levine. We're physically located here in Bethesda, Maryland, but we assist people in Maryland, DC, and Virginia with their estate planning, so their wills, trusts, powers of attorney, a bunch of things that we'll talk about today. And then on the back end of it, when a family suffers a loss of a loved one, we assist with the estate administration, whether that's through probate trust administration, or often a combination of the two.

    - Okay. Well, thank you. I know you and I have known each other for many years, and we were talking about our topic and we both decided to talk about estate planning for young adults. We struggle to have older adults do estate planning, wills, trusts, financial powers of attorney, and we'll talk about those things today. But with young adults, we're going to find out from individuals from age 18 to age 35. They might be single, they might be in a relationship, they might be married. They might even have children. And so we're gonna kind of run through why should somebody of that young age be thinking about boring things like wills, and powers of attorney, and legal stuff when you're young and you're invincible. But unfortunately we do see cases where individuals face an illness, or even face a death, and not having these documents can be so traumatic for the family. So why don't we start with incapacity, because I think a lot of times individuals turn 18, sometimes they go off to college, they get a new job, and no one really thinks of what if they become sick? But why don't we start with financial issues? If, let's say John is a young 22 year old, he's out there in the world. If he becomes sick, what are some of the challenges we see, and what are some of the ways we can make sure that his affairs can be handled?

    - Sure, so yeah, you're so right. When you say it's hard enough getting an adult adult to do or think about their estate planning, or get around to it I should say, and then talking to people who think they're invincible, how do we recognize that we're not, and there's no magic age for that, right? So when you're talking about young adults, like you said, 18 to 35, but let's say John who's 22 and has just gone off into the world, we never know, right? We could be walking down the street and we get hit by a car, or a light fixture could fall on someone's head, or whatever it may look like. If that incapacity, so an inability right, to perform, and to make legal and financial decisions for yourself, that incapacity could last temporarily, right? It could be, maybe John is in an accident and he's okay in a month. Or it could last a long time, perhaps the rest of their life, which, for a 22 year old, absent other physical illness, it could be very long, right? So when it comes to financial things, if someone becomes incapacitated and does not have the power of attorney, that's the document that can name or does name someone to step in and act for you with regard to your legal and financial matters. So again, John is in an accident, his parents or his girlfriend, right, his high school sweetheart, even though they've been together for so many years, they won't have the ability to step in. Even if John is married, right, even if he's one of those youngsters who got married early, a spouse even doesn't have the legal ability to sign documents for you, to access your assets. Now in reality, when talking about a truly young, young adult like that, the parents' concerns may very well be outside of finances, right? So we have plenty of clients that bring their 18 year old children to us before they go off to college for the first time. Now they don't do that because they're worried about accessing their financial, their assets. They do it because they wanna make sure that they can help them, right? And parents are very much under the misunderstanding, I should say, that just because they're paying the tuition check, they can access their kids' grades even, or sign the contract, or even sign up for housing, stuff like that. We don't have that ability without being given it by the principal, or the actual person. Does that make sense?

    - Yeah, so basically the principal in regards to financial powers of attorney is John, is the individual. And then what we're talking about is creating control for if he becomes sick, if he becomes unable to make decisions. 'Cause all of us, as long as we're healthy, we don't need estate planning. We can talk to the doctor, talk to the bank, handle our financial affairs. It's if we become unable to make decisions. And I think a lot of times parents have this kind of idea that they can always step in, and they can, because they've always been used to that. As a minor, if John was 15, a parent has a legal right to step in, and talk to the doctors, and talk to about financial issues, and receive information on behalf of that child. But once they become an adult at age 18, that changes. And so banks, if John has an account or a credit card in his name and something happens and the parents wanna be able to get information on that account or access it, they're not gonna be able to without this legal document, which is a financial power of attorney. So can you talk a little bit about what this financial power of attorney looks and feels like? 'Cause there's a lot of different terms thrown out, powers of attorney, durable powers of attorney, Maryland statutory forms, which is one of the things which we deal with as a challenge, is there's so much terminology out there. So many terms being thrown around that people get very confused.

    - Definitely. So if you don't mind taking one brief step back, if John's parents do need to help him, right, and it's too late, then as you know, what the parents or whoever the right person, hopefully the right person, we don't know, will basically have to go to court and ask for a guardianship over John, or whoever this incapacitated person is. So just, like I said, to take that step back and say, what happens if I don't have this document? If my kid doesn't have this document, what's gonna happen? Well it's not like, oh, you can't access anything ever, but it's the much more difficult, time consuming, and expensive process of getting a guardianship. I always say, when I talk to people about this, I say the more times I say the word "attorney" in this example, the more the dollar signs should be racking up in your brain, right? I'm not insulted. We all know that attorneys, we charge for our time. And typically our time doesn't come cheap so to speak. So let's say John was incapacitated, his mother or father, whoever the person is without the power of attorney would have to most likely hire an attorney. They would, the attorney would prepare this petition for a guardianship, right, and then they'd go before a judge and asked to become John's guardian. The judge would send some sort of social worker or somebody out to assess whether John is in fact incapacitated, because someone just trying to access his money, or does he really need this help? And then an attorney, more dollar signs, right, would be appointed for the allegedly incapacitated person to be his mouthpiece, right? So this is even if it's an uncontested manner, meaning everyone agrees John needs help. Mom's the right person and so on and so forth. It's still expensive, it's still time consuming. If it becomes contested, forget it. We can't say at all what it's gonna be. So that's just to say, without this document, it's a much more difficult process. But when it comes to those people who listen to these seminars, and speeches, and advice of their friends or whoever have gone before them, what it looks like, the power of attorney document, so it's, let's say a durable general power of attorney. That's one of the magic phrases you hear, right? So let's break that down. Durable means it is good and valid even after you become incapacitated. So that's almost silly to even say because their reason for having one in the first place for most people is in case they become incapacitated. But that's just what that means. Durable is it continues on even upon your incapacity. A general power of attorney is, honestly that phrase is kind of a misnomer, if I may, because you can never say, a one page document saying, I want my mom to be able to do everything that I could do. Sign it, date it, notarize it, witness it, whatever, right? Even though it's called this general power of attorney, you have to specifically list out every single power that you want that person to have. And so when it comes to the 18 year old, the 22 year old, whatever age this young adult may be, their document would or should be geared a little bit more towards what they're going through and where they are in life. So for those young adults just going off to college, we might have, or we typically would have a FERPA waiver. So FERPA is the Family Educational Rights and Privacy Act. So basically your parents, even if they're paying all your tuition, even if they're paying every single bill and all that stuff, they don't even have a right to access your grades or to access certain information. So we put that in this document, whereas the 35 year old doesn't need this piece, they might need something else. So a lot of times, I think of it as like a toolbox, right? So I'd rather have it and not need it than need it and not have it. So yeah, John might not have a safe deposit box, right? He might not have one. But if we have the ability for his agent, whoever he's named in it to access a safe deposit box, it's not gonna hurt, right? So there's a lot of powers that go into this, and again, you can't just say I want them to be able to do everything that I can do. Now, there's other types of powers of attorney. You mentioned a couple, right? The statutory power of attorney. So in Maryland in 2010, they passed this law that was in response to certain institutions or people refusing to accept a perfectly valid, durable, general power of attorney. So now, if you have the statutory form, but we can't make these changes to it. So we can't add a lot, we can't subtract a lot, it's basically a take it or leave it document and a person or institution refuses to accept it, they'll be held liable if you have to get a court order making them accepted. So that's kind of a couple of the types. And then there's also as you know, unlimited power of attorney, maybe John is one of those young married people, maybe he's in the military and he's going overseas. And he wants his spouse to be able to sell their home while he's gone or something like that, we could do unlimited power of attorney as well.

    - So basically it's the ability for an individual to grant powers in advance, basically stating if I'm not available to take care of this financial issue, I designate this person to represent me financially, and then the banks, or the school, or the mortgage company, or whoever will review the document. And if it's set up properly and written properly, and we always recommend individuals work with local estate planning attorneys in the state where the individual lives, who's familiar with the laws of Maryland, or DC, or Virginia, or Florida, or wherever it might be because the laws are different in different states. So you should be dealing with an attorney who's familiar with those areas. Your law firm, which areas does your law firm cover primarily as far as helping individuals?

    - Sure, and that's a great point about working with a local attorney. So we help people in Maryland, DC, and Virginia. That's where I'm barred. We do have an attorney that's barred in Kentucky as well. So if there happens to be a Kentucky person, she can help them. But yeah, and then we do have people that end up retiring to Florida or moving wherever, and then we do recommend they sit down with an attorney in their new state or their new jurisdiction shortly thereafter.

    - Okay, so financial issues very important for, and if somebody's married, then it becomes, or is in a significant relationship, again, very important, just like the parents don't automatically have access to financial information, a spouse, a partner, a boyfriend, girlfriend, significant other is gonna have the same challenges is that they don't have automatic authority to access, things like retirement accounts, 401 s, IRAs, life insurance, all types of different situations that might be in the individual's names. Or if they're in a house, or in a rental agreement that's joint, then you might need two signatures to do anything. And if one person's sick, then we run into that roadblock again. So the financial issues' very important.

    - Definitely. Yeah, people often are very surprised when we say, if you own a home jointly with your spouse, you can't refinance, you can't mortgage, you can't sell it on your own if your spouse is incapacitated. And they think what, how is that possible? And one of the ways I sometimes tell people to look at it is, if you've ever sold a home that you owned jointly with another person, say you sold your old house with your spouse, you had to sign that deed, right? You had to appear at the closing. You couldn't say, oh, I don't feel like going. You had to, both of your signatures as the sellers had to appear and it's the same sort of thing. If one of you is incapacitated, the other one by virtue of marriage doesn't just have the magic ability to sign that other person's name.

    - Okay, so financial incapacity, very important. Financial powers of attorney established through a local estate planning attorney or a young adult, especially even more so if they're in a relationship, even more so if they have children, very important. So let's now move on to the medical side, because again, parents, many times are shocked where they're not able to get medical information from on their child who's now a young adult. Same thing with spouses, significant others. We wanna make sure that there's clarity as far as who the individual wants to represent them. Obviously if they're in good health, then the doctors or the hospital will interact with that individual. But if they're unable to communicate their wishes, then we move into the medical area. So what type of documents do we need to see individuals who are young adults have to take care of their medical wishes if they're unable to communicate clearly with hospital staff or doctors what their wishes are?

    - Sure. This is another place, even more so than the power of attorney, that there's all sorts of names for it, right? There's, it's referred to a living will in some jurisdictions, a medical directive, power of attorney for healthcare. There's all sorts of names for it. But basically the same thing that I mentioned for the financial would go here. So instead of not having the document and the loved one having to go through the courts and get a guardianship over you and so on, what happens here is we draft this document, a medical power of attorney, whatever you wanna call it. We say who you want to be in charge, right? You choose today who that right person is. I always suggest for all these documents, certainly having a backup, at least one, but multiples would be lovely. I never have had someone give me too many backups. I'm happy to use the extra piece of paper on their documents. You're gonna say what your preferences are if you're in a certain medical state. So I asked my clients, for example, if you're in a persistent vegetative state with no reasonable expectation of return to a cognitive life, do you want life sustaining procedures given or withdrawn, right? So you tell your person, not just you're in charge if I can't tell the doctors what I want, but in my opinion, it's essential that you go to that next step and say, this is what I want. Because I've seen them before where someone doesn't wanna make the decision, so they'll just name who their agent is. And I think that that is so unfortunate, that is putting your children or your parents, or whoever the person is gonna be in charge in such a difficult spot. It's hard enough to fulfill the wishes in this example of your child to be let go or taken off life support. I just can't imagine making that decision for someone else. So this is really doing your family a favor. The document also should say whether you wanna be an organ donor. If you wanna give HIPAA authority to anyone else. So for example, let's say you're John, he's 22, let's say he's not married in this situation. So he says, I want Mom and Dad, or Mom or Dad, or whatever it looks like, to act for me. If it's not one of them, if they're also incapacitated, or if they've passed away, I want my older sister to act for me. But maybe he has an aunt who's a nurse, right? And she knows the medical lingo, and his parents aren't in the medical field, his sister's not in the medical field. Those are the proper people to act for him. But his aunt, having HIPAA authority, being able to access his information, speak to his doctors and things like that, can really be of tremendous benefit to whoever's acting as his agent, because have you ever played when you were a kid, the game, Telephone, right? So you can only imagine, I'm sure everyone has. You can only imagine Mom talking to the doctor saying, getting all the information face to face whatever after son is in a horrific accident, right? So add on all that difficult emotional stuff, plus all this medical lingo that she doesn't understand. She calls her sister, Aunt so-and-so, right, who's been a nurse for 50 years, and her sister's probably gonna be like, whoa, whoa, whoa. I think you got something wrong here, right, do you want her to have to go back to the doctors and keep playing this game of Telephone? Or do you want the aunt to just be able to call or see the record? So that's kind of how I explain it to my clients. And again, parents don't have this ability, even if they're paying the medical insurance, even if they're paying for college, all that stuff. And unfortunately, a lot of times people start listening when we tell them, again, what happens if you don't have it. So I have a horror story that I'd like to share for what it's worth. So before I moved here, I went to law school in San Diego, and worked at a small firm that was much like our firm but they did estate planning and estate administration, but they also did a lot of guardianship and conservatorship work. So in certain jurisdictions, if it's for someone 18 or above, so a legal adult, it's called a conservatorship. So that's just different. In that case, so I was working as a paralegal there, there was a 19 year old young woman, who was in a drunk driving accident. Her boyfriend was the drunk driver. He was killed at the scene, and she was in terrible shape. She was in a coma for many months, it was horrible. Now I wasn't part of the conversation, I do not know why this happened, but the doctors would not listen to her own mother. So whether her father, maybe her parents were divorced and the father said something different, I don't know. Maybe the doctor was sued the year before for listening to the wrong person. So he's requiring that everyone show him the document, right?

    - Yeah.

    - I don't know. But what happened there was that this poor woman, this mother had to come to our office, again, where I used to work, pay who knows how much in attorney fees, go in front of a judge, tell the judge why she's the right person to make medical decisions for her 19 year old daughter, right? And all of this while she should have been sitting at her daughter's bedside.

    - Yeah. = So just so terrible. I just can't imagine how awful that would have been. And again, as much as I hate sharing horror stories, that's one that really pulls at a lot of people's heartstrings and makes them realize, wow, okay, I really do need to get this document for my child going off to college for example.

    - This is really about control, and the HIPAA, which is medical privacy act, I think you've mentioned FERPA which deals with college financial privacy. There's a lot of laws. Banks don't allow somebody who's not the client access to an account because they don't, they're not on the account and they don't have the legal authority. They can be the spouse, the parent, it doesn't matter. We have rules to follow to protect the privacy and the personal information of individuals, both financial and medical. So the reason we need these documents is the laws are set up to protect the individual from the release of private information to somebody else. So what these documents are doing is for the individual to state, I understand you have these rules in place to protect my privacy, but I'm giving you the bank, the mortgage company, the doctor, the hospital, permission to speak to this individual because I've given this authority when I was alive and healthy, because many times when we become sick, we don't have the capacity to sign the documents to grant the authority, to give access. And then the hospitals and the financial institutions review the documents, and if they're completed and done properly by local estate planning attorney familiar with the laws, and if there's an issue, the family can call that attorney, and the attorney can call the hospital or the bank and go, oi, look, I'm a lawyer. This document's legit. Get your act together, or let me talk to your lawyer and we'll sort this out. So that's one advantage of having a lawyer working with you is if there is a problem, the family have someone to go to to say this bank's not listening to us, this hospital's not listening to us. And we can kind of raise the heat level a little. But it's about control, and it's about protecting your wishes and honoring your wishes. So these are very important. Next topic is wills, which is the loss of a loved one, a young adult, which is horrific. I lost a brother. He was 32 when he passed away in a car accident, I was 28, and he left behind a wife and two young kids. So it is, and my parents were alive, so they had to bury their son, which you never want a parent to have to do, but it happens a lot more than we would like. But a will is very similar to the financial and medical side is the state where you live in will sort things out eventually if somebody dies without a will. There are laws to step in and disperse assets, but it can be very messy. A will is a way to kind of, again, state the individual's wishes. They may not have many assets, but even if they have a few assets, having somebody with the power to take care of the estate cleanly, efficiently, rather than, thinking of baring a son or a daughter, and then being faced with all these messes, and delays, and frustration to clean up a $10,000 account, or a $20,000 account, but you've got to go through this lengthy process to do it, where a simple legal document could have made it a lot less stressful. So can we talk a little bit about a will? And then we'll wrap up today on a very important topic, which is protecting children of young adults, because many individuals from age 18 to 35 are parents. And that becomes a very, another level of estate planning, which is protecting the young child who is a part of that young family. So let's talk about wills a little bit and the importance of wills and protecting individuals.

    - Sure, definitely. You know, my outlook on wills changed a little bit. Not that I didn't already know that everyone needs a will, right? Of course, I'm an estate planning attorney, I say it every day. But I will tell you a few years ago, I was working on a matter where someone passed away in Maryland and the next of kin, the person with the legal right to not only inherit, but serve as the personal representative or the executor, those terms are interchangeable here in Maryland. The person with the legal authority to act was not given that legal authority. I'm still in shock about it, it's been about four years. Basically we had to go to court and the judge kind of threw the rules out the window and said, nah, I think you should be the personal representative instead. So, whereas before, of course I always said you need a will, everyone needs a will from the time they turn 18. At that point, I kind of lost faith that the default rules would even step in at all, right? So again, people listen a little bit more when they have the horror story, so take that for what it's worth. But the last will and testament is not a living will. So I often have people say a living will, they think it's the same thing. So the living will is what we just talked about, a healthcare directive. Again, lots of different terms for that, so it can get confusing. A last will and testament is like you said, it springs to existence, it becomes important when you pass away. So the other documents we talked about up until now were lifetime documents. And now we're talking about the document that is effective when you've passed away. So what you do in your will is you're gonna appoint who's in charge. So you would say whoever you want to be in charge of your estate, like we were saying for the other documents as an agent, now you're saying you want this person as personal representative or executor. Now that doesn't automatically make them the personal representative. There's other rules, right? They need to be a US citizen, or if not closely related in a green card holder. So that goes back to what you were saying about having someone do the documents who knows what they're doing. They're gonna need to be capable of being bonded, all these, they can't be a felon, they can't be convicted of killing you. So you nominate the person you want to be the personal representative. They're ultimately going to be appointed by the probate court though. You say how you want your assets distributed at your passing, including creating any trusts, maybe for minors. Like I know you wanna talk about them in a few minutes. You name guardians of your minor children. Again, very important when there's anyone under the age of 18 involved. And you'll say how you want your tangible personal property to be distributed, your jewelry, your stuff that doesn't have a deed for instance, and everything else. So you'll kind of lay out everything that you want that person to do from start to finish basically. And then once you pass away, there are certain documents they need to file with the court and so on.

    - So again, it goes back to control. I think in Maryland, we find that wills work very well in certain jurisdictions. We won't talk much about trusts, but there are revocable trusts, which in some jurisdictions, depending on, the reality is some young adults who are between 18 and 35 have established significant assets. They might be entrepreneurs, they might get involved in the flipping real estate, or the rental real estate markets, or who knows. The young generation, many of them are thriving and being extremely successful. So they might have significant assets that they might wish to protect and direct. And so trusts are just another way to control assets, but it's a little beyond the scope of today's discussion. But attorneys like Lindsey and others can certainly get more involved based on each individual's situation, where they live, the type of assets they have, their personal wishes along those lines. So a will, and one thing is if there are any parents watching today's program who have young adults, it is a very boring gift, but a wonderful gift to make is to go to your young adult children, go, for Christmas, I'm gonna buy you a set of estate planning documents. Yay.

    - I would suggest it as a wedding gift, but I say maybe get them a little something tangible.

    - Exactly. And so, but it is, because a lot of times, young adults doesn't wanna spend the money, but as a parent, it can give you great peace of mind to know that your children are protected, and if they have a health issue, you could step in and you could represent their affairs and make sure that they're safe. But the last thing I wanna talk about today is we've talked about financial powers of attorney handling incapacity during an illness, handling financial affairs during an illness, medical documents, to handle medical decisions, a will to disperse assets per your wishes, 'cause a lot of times the state law, if you have a child and you don't have a will, sometimes assets get split up in real strange ways, where if you're married with a child, maybe your spouse owns half the property, and your child owns the other half. So it can really get messy. So if you're in a significant relationship, or married, a will becomes very important to make sure assets are distributed the way you want. But if you have children, a child, or children, and you're a young adult, then a will with the assignment of the guardian for your young children, and some form of trust to protect those assets if you, or you and your spouse or significant other are not there to protect that loved one becomes critical. So the final thing I'd like to talk about a little bit today is, how do we young children who are part of a young family?

    - Sure. So at the outset, I just wanna say one important thing to remember is minors cannot inherit. People with minor children sometimes don't realize that, right? So I'll tell you, basically, I'd say, I'd venture to say 100% of the time, rarely is anything 100%, but 100% of the time, when a young couple comes into my office, and this is often the reason people come because they have young kids, people are relying on them now, they know they've got to do something, they don't know what. Maybe their parents gave them this as their Christmas gift or whatever. So they know they have to do something. So when I say to them that we're gonna update their beneficiary designations, which should be a part of an estate plan, the attorneys should talk to you about that, oftentimes the couple will say, oh no, they're all good. We don't need to update those, right? So beneficiary designated assets, as you know, life insurance, retirement assets, things like that, they go outside of probate, outside of your will. But I know that they're wrong. The reason I know they're wrong is because, yes, the first, the primary beneficiary designation is most likely right because it'll say the spouse. But the backup for those people, with say three little kids, will name the three little kids. And what's gonna happen if we leave it like that, unfortunately I had a case just like this in DC, to your point of, the state law may split things up in a weird way. In this particular case, this young woman passed away. She didn't have a will, she didn't fill out her beneficiary designations. For a life insurance policy, you should remember, or know if you don't know this already, these are contracts. So whereas the federal government, if you're a federal employee, there's an order of precedence who inherits from you. That's not the same across the board for other companies, right? So life insurance, retirement, one might say that the default is that asset, whatever it may be, let's say life insurance policy goes to your spouse. Fine, if you're married, no problem, the spouse sends in a claim form. In this particular case, a life insurance policy default was your estate. So in her case, we had to not only open a DC estate, but we also, because DC rules say, if you pass away with a minor child and a spouse, they split your estate. No, they don't split it 50-50, there's a different percentage. But what we had to do there was we had to open up a guardianship for this four year old boy, not to take custody, not taking him away from his dad, but to handle this $40,000 worth of life insurance he was set to inherit. And I know you know, Phil, the time and the expense of a guardianship for $40,000 from the time someone's age four till they're age 18. Now let's say for the young entrepreneur that you mentioned, right, they might have millions of dollars worth of life insurance. If their child is going to inherit millions of dollars at age 18, that's usually not a good idea, right? Even forgetting about the guardianship issues and the expense and time, all of that, it's typically not what parents want, to have all the assets or whatever's gonna go to their kids, go to them at age 18. So, what we do for those people is we create some sort of testamentary trust. This can be created in their last will and testament, or in their revocable living trust, which like you said, is beyond the scope today. Happy to come back and talk to you about that another time. But unlike a revocable living trust, which is a separate entity from the time you create it, what's important to know about a testamentary trust, and we can do these for minor children, for spouses, for parents, what's important to remember is a testamentary trust springs to existence at some triggering event. So maybe both you and your spouse have passed away, and your child is under the age of 35, for example. Then this testamentary trust that we've created in your will will spring to existence. The trust will say, who's in charge of the money, right, that would be a trustee. So that's someone still here, right? We always need primary and contingent. Maybe it's the person you've decided should take custody of your children, right? Maybe you have the same child-rearing techniques and ethics and all that stuff, and it just happens to coincide that that's also the person that should be in charge of the money. That doesn't have to be the case though. So you name the person that's going to take control of the money for your children's benefit. They can use the money for health, education, maintenance, and support at any time. So while your kids are kids, or upon their adulthood, right, reaching age 18, the trustee can use your money to send them to school, to pay for extracurricular activities, whatever it might look like. And then in the actual trust, we lay out when distributions will be made, cash payouts, for example, to your kids to use for whatever they wish, right? So we don't really wanna say at age 18, they get a million bucks, right? We don't want them to go buy a Ferrari and forget to pay the taxes on it, right? So what we say is, in a typical minor stress that we might do, say we would do age 35 if the kids are pretty young. We might say, these staggered distributions might say, they'll get a 5% at age 22 or when they graduate from college, 10% at age 25, 25% at age 30, and the remainder at 35. So if they're gonna be a dumb kid, right, they're gonna do that with the 5% hopefully, and learn their lesson. We also say, because again, the trustee is boots on the ground. By definition, if this trust springs to existence, it means typically both the parents are gone. And unless it's a single parent household, of course, that's fine too. But both the parents were lost at a very young age. We don't really know how the kids are gonna turn out. We hope for the best and plan for the worst, right? So we would also say that in addition to those distributions that I just said, we would say that the trustee can distribute larger amounts for in earlier ages for what we would call maybe a worthy objective. So I might say in one of my documents, some examples of a worthy objective might be the down payment on an appropriate home. By appropriate, I mean they can pay the yearly taxes, they can pay homeowner's insurance, et cetera. Helping them purchase an appropriate business. A wedding ceremony, for example. Child expenses of their own, right? And then on the backend, if the trustee sees some sort of behavior that is worrisome, right, like drug use, alcohol abuse, spousal issues, creditor issues, things like that, the trustee, excuse me, can choose to withhold distributions.

    - Okay.

    - So we give the trustee a lot of discretion. Again, it's someone you trust, it's someone who's still here after you've gone. You need to entrust somebody with that role.

    - And I think that's where some young adult, young couples do struggle. Well, all individuals struggle. Who do you name these important roles? But it is something that needs to be done, because at the end of the day, having a plan, and it is a process going through it, but with the guidance of professionals like Lindsey and other estate planning attorneys, they can guide you through the process. But it gives you peace of mind, especially if you have children, or if you're in a significant relationship where you have a partner, or a boyfriend, or girlfriend, or a spouse, and you wanna protect them, and you wanna protect their ability to step in and take care of you. And it really is about control. It's about taking care of loved ones, honoring your wishes, making sure that families aren't stressed out having to go to court, having to hire lawyers to handle things that could have been handled much more efficiently. So, go ahead.

    - Sorry, I was just gonna say, we can figure out ways. We've become very good as attorneys at figuring out ways to justify anything, right? So, well, I want my parents to be named as guardians of my kids, and my spouse, let's say wants his parents to be named. And if we're both on the same page, which I see all the time too, right, both spouses agree that they want the same person, but they just feel really bad about not naming the other one. We can come up with all sorts of reasons. Hey, Mom and Dad, I know you love to travel. I don't wanna burden you, whatever it may be. I recently heard of a couple that, and I didn't do this, but it was an interesting idea. They truly had two equally excellent people to be guardian of their minor children. And what they did was they said in the document, if the second to die, the second to die of the spouse passed away in an even year.

    - Oh wow, okay.

    - Then X is the guardian. And odd year, then Y. And that solely leaves it up. Of course, that only works if you're equally comfortable, they're both gonna do a great job. But I just thought that that was interesting. So a lot of times we can help the client to ease that worry because we can suggest things that they might not have ever thought about before.

    - Okay.

    - Lindsey, thank you. We have covered a lot today. So we've talked about financial powers of attorney for handling the affairs of a young adult during an illness, medical documents to handle medical decisions for a young adult during an illness, we talked about wills, the distribution of assets, and just the ability of family members or loved ones to step in and take care of the affairs, not minimizing, but it's a horrific event to lose a loved one. We don't wanna just make it worse by making the process of settling the estate, a second horrific event. And we talked about the importance of the establishment of trusts for young beneficiaries. So if a young family have children, we need to assign guardianship, guardians for those children if something happens. We need to establish trust so the money is protected until they reach a certain age. So we've covered a lot today. So before we wrap up, are there any final words that you'd like to share with our audience?

    - No, I just wanna thank you so much. I was so honored that you invited me here today. I know that you have so many wonderful resources and so many wonderful people to speak with, and I'm just, again, honored that you took the time to talk with me. So thank you so much, Phil.

    - You are welcome. And audience, thank you for joining us. My name's Phil Fish, I wanna thank Linsey Sarowitz with Handler & Levine. Our contact information will be on an exit screen. And for those of you, please feel free to look around the professional discussion library. If you notice when you logged on to watch the video, we did not even ask for your name, or no contact information. This is a community educational program hosted on the Sandy Spring Bank website. So please let people be aware of it. You do not need to bank with us to access the educational information. So spread the word with family, friends, coworkers, both locally and around the country. If you do bank with us, thank you. Sandy Spring Bank was founded in 1868. We're the largest, oldest community-based bank in the greater Washington region, and we are who we are because of your choice to bank with us. If you don't bank with us, we'd love for you to consider Sandy Spring Bank to be your partner. So I hope you're all safe during these difficult times, and on behalf of Lindsey and myself, thank you for joining us. I hope you're safe, and have a wonderful rest of your day.

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