Estate Matters
The Klenk Law Blog



Posted on Thursday, December 15th, 2016 by Peter Klenk

Young Man Thinking How Do I Contest A Will In Philadelphia?Our “Ask a Question” mailbag address the question of how and where does one contest a will.

I may contest my father’s Will.  He died recently in Philadelphia. How do I contest a Will in Philadelphia?  Who will hear the case?”

First, Determine if You are an Interested Party.

A Will Contest is serious litigation.  It begins with a Petition, but will likely end with a hearing that may take place well over a year in the future.  To start, you must be an interested party.  In simple terms, you are an interested party if the Will challenged diminishes your inheritance.  Or, in other terms, if a judge finds the Will invalid, your inheritance increases.  Therefore, if the Will in question reduces your inheritance from your father’s prior Will, you are an interested party. If not, the court will dismiss your challenge.

Where do I file a Petition to Challenge a Will? 

If you plan to contest a Will in Pennsylvania, we will file the Petition to start the process with the Orphans’ Court of the county in which the deceased resided.  For example, if the deceased person was a resident of Montgomery County, we file the Will with the Montgomery County Register of Wills.  As a result, we appeal the Will’s validity from the Register’s office, and a Montgomery County Orphans’ Court judge hears the case.

The Venue for Your Will Contest is the Philadelphia County Orphans’ Court.

Owing to your father’s Philadelphia residency, the Will in question should reside with the Philadelphia Register of Wills.  Under these circumstances, we appeal from the Register’s office and a Philadelphia Orphans’ Court judge will hear the case. In conclusion, a Will Challenge is serious litigation.  Consequently, do not lightly enter into a Will Contest.  Let’s speak about your situation and plan your course of action. Feel free to contact our office to set up a free consultation.

Wills, Trusts, Probate, and Estate Litigation It’s All We Do!

Peter Klenk, Esq., LL.M.

About the Author: Peter Klenk

Peter Klenk

Peter Klenk is the founding member of Klenk Law, a six attorney boutique estate planning law firm.  We serve clients in Pennsylvania, New Jersey, New York, Minnesota and Florida.  Peter Klenk received his Masters in Taxation LL.M. from NYU Law School and his J.D. from the University of Minnesota Law School.  He served his country in the Navy JAGC during Desert Storm.  Easy to talk to, feel free to call Peter for an appointment.  We will make the process as easy as possible!


Posted on Monday, December 12th, 2016 by Peter Klenk

Funding Special Needs Trust With Life InsuranceFrom Our “Ask a Question” mailbag: “I want to set up a Special Needs Trust for my son in my Will. Can I fund a Special Needs Trust with life insurance?”

You can fund a Special Needs Trust with just about anything, including life insurance.

A Special Needs Trust formed in your Will is called a Third Party Special Needs Trust. A variety of assets can fund the Trust, including cash, stocks, and life insurance proceeds.  Life insurance is a flexible tool, as you can change the amount you wish to pour into the Special Needs Trust by modifying the beneficiary designation

Life insurance is a flexible tool.  With life insurance, you can adjust the amount you wish to pour into the Special Needs Trust by modifying the beneficiary designation.  For example, if I draft for you a Special Needs Trust crafted to hold life insurance proceeds you can name the trust as the recipient of 1/2 the policy.  But, should you change your mind, you can easily modify the beneficiary designation and name the trust as beneficiary of, say, 3/4 the policy.  You make this change without changing your Will.  I find that clients benefit from a flexible estate plan.

Further, in many states including Pennsylvania, life insurance passes Income Tax and Inheritance Tax-free. Life Insurance allows you to fund Special Needs Trust tax-free.

Funding the Special Needs Trust with life insurance requires specific language which differs from the typical Will.

You may also wish to have other assets pour into the Special Needs Trust, such as a house. You child could live in the house, maintained by the life insurance proceeds.  When a trust owns real estate, special powers need be added giving the Trustee authority to manage the property without court involvement.

Not to be forgotten, the life insurance beneficiary designation must then be completed correctly to name the Special Needs Trust as the recipient.  A designation error may ruin the entire plan.

If the plan is crafted correctly, at your death, the Trustee will quickly and seamlessly collect the life insurance proceeds.  The funds pour directly into the Trust, immediately available to provide care for your son avoiding Probate.

Funding Special Needs Trusts With Life Insurance Requires Selecting The Right Trustee!

Because your son might need funds soon after your death, it is important to choose a Trustee who will quickly collect the funds.

Often family members are not a good fit as Trustee.  There are many excellent trust companies who provide service as Special Needs Trust Trustees.  Another option is to pick a friend or family member who will interview and hire the Trustee after your death.  This “Protector” will have the luxury of knowing the exact circumstances at the time.  Using a Protector allows your trusted friend or family member to pick the best person or Corporate Trustee for the job.  The Protector may also replace the Trustee if they are not doing a good job.  Consequently, the Protector may replace the Trustee without a court hearing, which is much less expensive.

Clearly, with all these options is to your advantage to retain the help of an experienced Estate Planning Attorney. When dealing with a Special Needs Person, you want the process to be smooth, quick and uncomplicated.

I would be happy to brainstorm options with you.  This way I can design a Special Needs Trust that best fits your circumstances.

Contact our office for a free consultation if you have further questions about Special Needs Trusts or any other Estate Planning issues!

Wills, Trusts, Probate, and Estate Litigation, It’s All We Do!

Peter Klenk, Esq., LL.M.

About the Author: Peter Klenk

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Peter Klenk is the founding member of Klenk Law, a six attorney, boutique estate planning law firm.  We serve clients in Pennsylvania, New Jersey, New York, Minnesota and Florida.  Peter Klenk received his Masters in Taxation LL.M. from NYU Law School and his J.D. from the University of Minnesota Law School.  He served his country in the Navy JAGC during Desert Storm.  Easy to talk to, feel free to call Peter for an appointment.  We will make the process as easy as possible!


Posted on Monday, December 12th, 2016 by Peter Klenk

How to Amend a Revocable Trust
Our “Ask a Question” mailbag addresses a question about Amending a Revocable Trust
“Is amending a Revocable Trust difficult?  How do I go about amending a Revocable Trust I formed in 1998, as I have some necessary updates?”

Amending a Revocable Trust, in Most Cases, is Simple.

Revocable Trusts formed during your lifetime are typically designed to be easily “revoked” or modified.  Because a Revocable Trust is meant to replace your Will, it should take into consideration the fact that life brings change.  Over time you may wish to alter your preferences.

I would need to see your Revocable Trust to point out the clause, but there should be a paragraph that states the trust is revocable in full, at that you are free to make amendments.

Amending A Revocable Trust Should be Done Carefully.

Granted that it might be easy to change your trust, but do so carefully.  Modifying the trust is like changing your Will.  If you make a mistake or are unclear, you could unintentionally void a gift, create litigation or create a taxable event.  Further, you must use the correct language to show that your Amendment does not completely void the remainder of the Trust.  I have seen people try to amend a Revocable Trust by adding a gift, but they instead modified the trust so that only the single gift existed.  As a result, all the rest of the assets then passed under the rules of intestacy.  A terrible result!

If Equality is Your Wish, Be Careful About Taxes.

Your death may trigger many different types of taxes.  Take into consideration all Income Taxes, Capital Gains Taxes, Inheritance Taxes, Estate Taxes, and others that affect your estate.  If you fail to consider all taxes, you may unwittingly create an uneven division of your assets.  For example, if you live in a state with an Inheritance or Estate Tax and give a particular gift to one child and the residue to another, the child receiving the residue might be burdened with the tax due on both gifts.  Care must be taken to maintain your wishes.

Consider Your Incapacity (Not Just Your Death).

Most Revocable Trusts focus only on what happens after you die.  Instead, think what would happen if you had a stroke, suffered from Alzheimer’s or some other disease.  If so, you no longer could manage the Revocable Trust.  Who would step in? Indeed, plan for your potential incapacity!  If your Revocable Trust only names a successor trustee, that trustee cannot take over without proof of your incapacity.  As a consequence, what could have been a smooth transition could evolve into an expensive court hearing.  Instead, consider other alternatives such as naming a current co-trustee.  Other options exist, depending on your specific situation.

Amending a Revocable Trust; We Can Help!

In conclusion, I exclusively focus my practice on estate planning, and I am happy to review your existing Revocable Trust. Moreover, I am glad to walk you through your estate planning options over the phone or in person. We try to make it easy! Please feel free to Contact our office for a free consultation.

Wills, Trusts, Probate, and Estate Litigation, It’s All We Do!

Peter Klenk, Esq., LL.M.

About the Author: Peter Klenk

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Peter Klenk is the founding member of Klenk Law, a six attorney, boutique estate planning law firm.  We serve clients in Pennsylvania, New Jersey, New York, Minnesota and Florida.  Peter Klenk received his Masters in Taxation LL.M. from NYU Law School and his J.D. from the University of Minnesota Law School.  He served his country in the Navy JAGC during Desert Storm.  Easy to talk to, feel free to call Peter for an appointment.  We will make the process as easy as possible!


Posted on Sunday, December 4th, 2016 by Peter Klenk

From Our “Ask a Question” mailbag: “What is a Special Needs Trust?”

what-is-a-special-needs-trust

A Special Needs Trust is a trust designed to hold assets for a person receiving needs-based government benefits. The person who benefits from the trust is the “beneficiary.”  Typically, the beneficiary is an individual with physical or mental disabilities who qualifies for needs-based benefits, such as Medicaid.  Giving this person money or making them an heir would disqualify them.  Special Needs Trusts were created to hold assets for these people without excluding them from the benefits.  A Special Needs Trust allows you to look out for your loved one by providing them with the little extras that will improve their life.

Special Needs Trusts Allow the Beneficiary to Benefit From Trust Assets Without Being Disqualified From Needs-Based Benefits.

The Trust’s Trustee looks out for your loved one.  Because many people with physical and mental disabilities are not able to manage money, they need help.  A Special Needs Trust allow you to pick someone to help.  This helper can be a family member or a professional Trustee.  This person then manages the asset for the Beneficiary.  Think of the Trust providing your loved one a protective wall.  This wall provides shelter from waste, abuse, and theft.  While protecting the assets, the Trustee has the discretion to use the trust’s funds to make your loved one’s life better.

Further, A Special Needs Trust Protects Assets from Theft, Abuse, and Waste.

An additional layer of protection is possible by naming a Trust Protector. This Trust Protector is typically a person who will look out for the beneficiary but does not wish to serve as Trustee.  The Trust Protector can monitor the Trustee with the right to remove and replace the Trustee at any time. The Special Needs Person’s sibling is a good candidate for Protector.  As Trustee the sibling would be in the uncomfortable position of perhaps denying the Special Needs Person funds.  This denial could lead to a rift between the Special Needs Person and the sibling.  Further, the sibling would be responsible for tax returns and investing trust assets.  These are not skills most siblings possess.

Instead, as Protector, the sibling monitors the Trustee.  By monitoring the trustee, the Protector can make sure the Special Needs Person is receiving the proper care.  If the Protector believe the Trustee is not performing well, the Protector may promptly fire and replace the trustee.  As a result, there is no hearing in court; the Trustee is just fired and replaced.  Consequently, Trustees behave better and fees are controlled.

In conclusion, I would be happy to brainstorm ideas for a Special Needs Trust that would best address your loved one’s needs. Contact our office for a free consultation if you have further questions about Special Needs Trusts or any other Estate Planning issues.

Wills, Trusts, Probate, and Estate Litigation, It’s All We Do!

Peter Klenk, Esq., LL.M.

About the Author: Peter Klenk

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Peter Klenk is the founding member of Klenk Law, a six attorney, boutique estate planning law firm.  We serve clients in Pennsylvania, New Jersey, New York, Minnesota and Florida.  Peter Klenk received his Masters in Taxation LL.M. from NYU Law School and his J.D. from the University of Minnesota Law School.  He served his country in the Navy JAGC during Desert Storm.  Easy to talk to, feel free to call Peter for an appointment.  We will make the process as easy as possible!


Posted on Thursday, December 1st, 2016 by Peter Klenk

From Our “Ask a Question” mailbag, a question about Estate Planning before surgery:

“I am going to have some major surgery next month.  Is it a good idea to do Estate Planning before surgery?  What documents do you suggest I have done?”

Estate Planning Before Surgery

Estate Planning Before Surgery.

Certainly, working on your Estate Planing documents can be stressful. But, putting your documents in order before surgery can not only relieve some stress, but a well thought out and planned Estate Planning before surgery could save your life.  Medical emergencies happen all the time, making it vital to nominate the correct person to act for you in that emergency.  Not everyone handles emergencies well.  And, the law picks your medical spokesperson if you fail to nominate someone yourself.  Wouldn’t you rather know who might make your life-or-death choice?

Medical Power of Attorney.

Everyone needs a medical advocate; a person to stand up for them when they are unable.  This person is often called your Surrogate. During surgery, you will be unconscious.  When unconscious, you are unable to make medical decisions.  Further, if there are surgery complications or a newly discovered condition immediate action might be the best answer.  As a consequence, if you are not able to authorize the procedure, it may require a problematic delay. Instead, you should have executed a Medical Power of Attorney authorizing someone to make this decision for you.

Certainly, your spouse or family are logical choices but are not a legal requirement.  At times, a spouse or parent are not the best advocates. Some people do not hold up well under pressure or in the hospital.  Therefore, you should select a Surrogate who is calm under pressure.  Further, you want a person who will ask all necessary questions and, most importantly, will authorize action as you would have yourself.  You are not looking for a Surrogate who will decide what they think is best.  Instead, you are looking for a surrogate who will make the decision that you would have done given the facts and circumstances.

Durable General Power of Attorney.

After nominating your medical power of attorney, make sure you take care of your financial needs.  The surgery might only take part of a day, but it is always possible that your recovery could extend much longer.  If you are at the hospital, who will pay your bills or follow up on a dispute with your insurance company?  You would be wise to select a competent person to manage these affairs.  And, you do so by signing a Durable, General Power of Attorney.

In a Durable, General Power of Attorney you appoint a person (or persons) to serve as your “Agent.”  You can give your Agent power to handle any financial matter.  You could also create a Special Power of Attorney, crafted to give your Agent only one power.   For example, the single authority to oversee the sale of your house.  “Durable” means that your Agent continues to have these powers even if you are incapacitated.

Armed with a well-drafted power of attorney, your Agent can address whatever problems may arise while you are unable to manage your affairs.

Estate Planning; We Can Help!

I exclusively focus my practice on estate planning, and I am happy to help prepare you.  Surgery and estate planning do go hand-in-hand.  I am glad to walk you through your estate planning options over the phone or in person.  Please feel free to Contact our office for a free consultation.  We try to make the process as painless as possible!

Wills, Trusts, Probate, and Estate Litigation It’s All We Do!

Peter Klenk, Esq., LL.M.

About the Author: Peter Klenk

Estate Planning Lawyer Peter Klenk

Peter Klenk

Peter Klenk is the founding member of Klenk Law, a six attorney, boutique estate planning law firm.  We serve clients in Pennsylvania, New Jersey, New York, Minnesota and Florida.  Peter Klenk received his Masters in Taxation LL.M. from NYU Law School and his J.D. from the University of Minnesota Law School.  He served his country in the Navy JAGC during Desert Storm.  Easy to talk to, feel free to call Peter for an appointment.  We will make the process as easy as possible!


Posted on Tuesday, November 29th, 2016 by Peter Klenk

OurAsk a Questionmailbag addresses Estate Planning for LGBT Married Couples.

“Right after the legalization of gay marriage my husband and I married in Pennsylvania. Since then, we have not updated any documents.  Given the outcome of the Presidential election, we feel like we need to get things done.  What is Estate Planning for LGBT Married Couples?”

Estate Planning for LGBT Married Couples.Estate Planning for LGBT Married Couples Address the Same Issues as Any Other Married Couple.

Though there is no immediate evidence of any attempts limiting recent same-sex marriage gains, several members of the incoming Trump administration have well known anti-same-sex marriage beliefs.  The possibility of adverse change is prompting people to act.

Every couple’s situation is unique.  As a result, I would need to know more about your assets and wishes to provide you detailed estate planning advice.  But, here are the basics.  In almost every case a married couple needs Wills, Durable General Powers of Attorney and Medical Powers of Attorney/Living Will.

Durable General Power of Attorney.

If one of you should become incapacitated, that person’s assets might remain outside the other husband’s control.  For example, if your husband became incapacitated you would have no right to access a bank account in his name.  Further, his tenant in a rental property could stop paying rent, and you would be powerless.  By executing a Durable General Power of Attorney for each other, your husband may act on your behalf financially.

Living Will and Medical Power of Attorney.

Should one of you be unable to make medical decisions the power to act falls to the other. However, HIPPA rules may restrict medical information access, along with other issues that may delay your acting.  By executing a Medical Power of Attorney and Living Will, you grant each other the right to review medical information and broad powers that will enable quick decision making.

Last Will and Testament.

In Pennsylvania, if you die married without a Will with a parent living, your parent receives part of your estate.  Further, if you die married with a child, your assets are divided between your spouse and child.  As a result, if you execute a valid Will, your real wishes are known.  You can avoid the problems an intestate estate presents.

Further, many states allow you to create protective trusts for your spouse.  These trusts allow your husband to enjoy the inheritance but provide shelter from future spouses, creditors, and legal entanglements. None of this protection exists without a well drafted Will.

Get it Done Time.

In conclusion, all married couples need estate planning.  Many estate planning options exist, and some may fit your needs better than others, so I suggest that we set up a phone conference.  My firm focuses on only estate matters. Consequently, we regularly address Estate Planning for LGBT Married Couples. As a result, we are ready to discuss your particular situation. We would be happy to assist you in putting your house in order.

Feel free to set up a phone conference!  Contact our office for a free consultation. We try to make the process as painless as possible.

Wills, Trusts, Probate, and Estate Litigation, It’s All We Do!

Peter Klenk, Esq., LL.M.

About the Author: Peter Klenk

Photo of Probate Lawyer Peter Klenk
Peter Klenk is the founding member of Klenk Law, a six attorney, boutique estate planning law firm.  The firm serves clients in Pennsylvania, New Jersey, New York, Minnesota and Florida. Peter received his Masters in Taxation LL.M. from NYU Law School and his J.D. from the University of Minnesota.  A veteran, he served his country in the Navy JAGC during Desert Storm.  Easy to talk to, feel free to call Peter for an appointment.  We will make the process as easy as possible!


Posted on Saturday, November 12th, 2016 by Peter Klenk

Lesbian couple sitting on the floor and laughing with funny dog

With Trump elected it might be a good idea for LGBT couples to review their estate plans

OurAsk a Questionmailbag addresses LGBT Estate Planning for Married Couples after President Trump’s election.

My wife and I are a same-sex married couple.  We married in New Jersey and now live in Pennsylvania.  Trump’s election makes us nervous, we are afraid that he may strip away some of our married couple rights. What estate planning documents should we sign to make sure that we have the right to make medical decisions for each other should one of us get sick?”

Must-Have LGBT Estate Planning Documents.

I hear this concern from many LGBT married couples.  Of course, at this time there is no known official plan to limit the hard-fought rights obtained over the last few years.  But, the concern rises from the Trump advisors’ well known anti-gay and lesbian backgrounds.  For this reason, people wish to prepare for the worst.

Spouses Are the First to Speak for an Incapacitated Spouse’s Medical Care.

Once you married, you may have felt access to your ill partner was no longer an issue.  Your spouse has medical decision rights when you are in the hospital incapacitated and without a medical directive.  This is a legally recognized right.

These same rights existed for all married couples upon recognition of same-sex marriage.  As a result, many lesbian and gay married couples didn’t bother with creating written authorization for each other to act.  They relied on the law’s protection.

Time for a Medical Power of Attorney and Living Will.

Owing to the background of many in the new administration, there is concern that a campaign to limit same-sex couple rights may begin.  A “death by 1000 cuts” campaign.  Limiting medical access for same-sex couples in favor of other family members might be one of those cuts.

To counter this, utilize your legal right to pick any person as your Agent or Surrogate.  You have the right to nominate anyone as your fiduciary.  Married or not, this is true. Your spouse has no right to overrule your written decision.  Consequently, while there might be some change to the rule covering who speaks for you medically if you have not signed a Medical Power of Attorney, this would be “trumped” by your naming your same-sex spouse in your Medical Power of Attorney.

While it is true that documents vary slightly from state-to-state, you will sign a Medical Power of Attorney and Living Will. By nominating your spouse Agent and Surrogate your spouse may act on your behalf unhindered administratively or legally.

Durable Power of Attorney and Will Also.

You only asked about medical care, but also execute Durable General Powers of Attorney and Wills.  The General Power of Attorney covers financial decisions. Alternatively, the Will addresses who will control your estate after your death.  LGBT Estate planning isn’t restricted to medical issues.

In conclusion, you may have other issues to address, so I suggest that we set up a phone conference. My firm focuses on only estate matters.  As a result, we are ready to address your specific situation. We would be happy to assist you with your LGBT estate planning.

Feel free to set up a phone conference!  Contact our office for a free consultation. We try to make the process as painless as possible.

Wills, Trusts, Probate, and Estate Litigation, It’s All We Do!

Peter Klenk, Esq., LL.M.

About the Author: Peter Klenk

Photo of Probate Lawyer Peter Klenk
Peter Klenk is the founding member of Klenk Law, a six attorney, boutique Estate Planning Law Firm.  The firm serves clients in Pennsylvania, New Jersey, New York, Minnesota and Florida. Peter received his Masters in Taxation LL.M. from NYU Law School and his J.D. from the University of Minnesota.  A veteran, he served his country in the Navy JAGC during Desert Storm.  Easy to talk to, feel free to call Peter for an appointment.  We will make the process as easy as possible!


Posted on Wednesday, November 9th, 2016 by Peter Klenk

Our “Ask a Question” mailbag addresses what happens when a sibling dies without a Will in New Jersey.

My sister died in New Jersey without a will. Our parents are dead, and she never married or had children. Our dad had a daughter out of wedlock when he was very young. It was something that the family didn’t speak of, and we only saw her once in our lives. If a sibling dies without a Will in New Jersey, does a half-sibling receive a share?”

Peter Klenk, Esq, LL.M. Taxation.

When a Person Dies Without a Will in New Jersey, the Rules of Intestacy Apply.

New Jersey law gave your sister the ability to leave her assets to any person.  Similarly, she had the right to exclude any person.  Unlike some countries, an unmarried New Jersey resident has no legal obligation to leave family members anything at death.  Unfortunately, your sister failed to exercise her right to make a Will.  Therefore, her probate assets pass under the New Jersey Rules of Intestacy.

When there is no Will, the New Jersey Rules of Intestacy provide clear rules over how to divide the deceased person’s assets.  The goal is to avoid protracted litigation and quickly allow the estate’s division.

When a Person Dies Without a Will in New Jersey, the Intestacy Rules Treat Half and Whole Siblings Equally.

The intestacy rules state that if a person dies unmarried, without children or living parents, assets pass equally to siblings. There is no difference in the New Jersey Intestacy Rules between a full or half sibling.  In your case, your sister died with two siblings; yourself and your half sister.  You each will receive one-half the estate.  It does not matter if your sisters never spoke or met.

Opening the Administration.

To secure your sister’s assets, someone must open her estate with the County Surrogate.  If your sister had a Will, she could have named Personal Representative.  Because she died without a Will, New Jersey as a set of rules that dictate who can now open the estate as an Administration. This person’s title is Administrator.  Once appointed, the Administrator has the power to gather your sister’s assets.

The rules require that to open the Administration, you must notify your half-sister.  You must provide her the opportunity to participate in the process. You both have equal rights to serve as the Administrator. If you wish to serve as Administrator, your half-sister must either agree or be given the right to disagree in a hearing.  Consequently, it will be less confrontational and less expensive if you both were able to cooperate.

Life has now given you the chance to get to know your long lost sister!

In conclusion, you may need legal representation as both a beneficiary and Administrator.  My firm focuses on only estate matters.  Further, we have attorneys who focus on Probate and attorneys who regularly represent clients in estate litigation.  We would be happy to assist you

Feel free to set up a phone conference! Contact our office for a free consultation. We try to make the process as painless as possible.

Wills, Trusts, Probate, and Estate Litigation, It’s All We Do!

Peter Klenk, Esq., LL.M.

About the Author: Peter Klenk

Photo of Probate Lawyer Peter Klenk
Peter Klenk is the founding member of Klenklaw, a six attorney, boutique estate planning law firm.  The firm serves clients in Pennsylvania, New Jersey, New York, Minnesota and Florida. Peter received his Masters in Taxation LL.M. from NYU Law School and his J.D. from the University of Minnesota.  A veteran, he served his country in the Navy JAGC during Desert Storm.  Easy to talk to, feel free to call Peter for an appointment.  We will make the process as easy as possible!
*Editor’s Note:  This Post is revamped and updated for accuracy and comprehensiveness, originally published in February of 2016.


Posted on Sunday, November 6th, 2016 by Peter Klenk

Our “Ask a Question” mailbag addresses the question, how much life insurance should I have?

How Much Life Insurance Should I Have as Part of my Estate Plan“I recently had a baby, and it is time to buy some life insurance.  But, I feel like I am being sold rather than advised.  How much life insurance should I have?  Lastly, is there a general rule about how much life insurance I should have as part of my estate plan?”

Life Insurance Rules of Thumb.

From years of working with life insurance professionals and wealth advisors, I have come across a few “rules of thumb” about the amount of life insurance a person should own. The most common general rule bantered about is having a policy equal to 10x your salary.  For example, if you gross $60,000 a year then you should purchase a $600,000 policy.

Life Doesn’t Often Fall Into a Rule of Thumb.

While a fast rule is helpful, life often doesn’t fall into “quick and easy” rules.  Luckily, the factors I will discuss can be addressed and calculated by your insurance professional or your financial advisor.  These days there is an app for everything!

Factors to Answer, “How Much Life Insurance Should I Have.”

Life insurance is a tool.  You don’t want to use a screwdriver to drive a nail, and you should take the time to make sure the policy you are purchasing is addressing your need.  We are all different, but then most of us have similar concerns.  In your case, you are examining life insurance do address your child’s arrival.   But, are you planning to only address your child’s needs through age 18 at a public high school?  Would you like to guarantee there is enough money to pay for college, medical school or a wedding?  Is the other parent sharing in these costs, or does the life insurance also have to pay for your spouse’s care?

If you also are concerned with leaving your spouse financially unburdened, then other factors apply.  Are their debts you wish paid off?  What are your spouse’s income and lifestyle? If you die, will your spouse be able to continue working?

Identify the Concerns, then Calculate the Need.

Once you have defined life insurance’s purpose you have the information for calculating your need.  For example, if you want a policy adequate to pay for your child’s four-year college education, but your spouse can provide for the cost of raising the child until age 18, then it is a quick calculation to determine that future cost given your child’s age.

Because you do not purchase life insurance often, you are unfamiliar with the process of identifying your concerns and assigning them value.  Therefore, it is important that you find an insurance professional or financial advisor with whom you trust.  Ideally, this is a person with whom you can brainstorm.  Understandably, you might not yet have sharply focused concerns.  Your professional can help determine what is important and what not.  Using any one of several existing programs, your professional can then calculate a dollar amount to address your concerns.  This number will be much better than any Rule of Thumb.

Document Your Process.

Over the years you should reassess your insurance.  Concerns change, and new issues arrive. Keep a file that explains how you arrived at your insurance cost.  These notes will refresh your memory and give you a starting point. Then you can add the new information, such as your child’s determination to attend an Ivy League School vs. State College, and determine if more or less insurance is needed.

In conclusion, I would be happy to brainstorm about life insurance needs or any other estate planning issues. How much life insurance should I have is a question with an answer. Feel free to set up a phone conference! Contact our office for a free consultation. We try to make the process as painless as possible!

Wills, Trusts, Probate, and Estate Litigation, It’s All We Do!

Peter Klenk, Esq., LL.M.

About the Author: Peter Klenk

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Peter Klenk is the founding member of Klenklaw, a six attorney, boutique estate planning law firm.  We serve clients in Pennsylvania, New Jersey, New York, Minnesota and Florida.  Peter Klenk received his Masters in Taxation LL.M. from NYU Law School and his J.D. from the University of Minnesota Law School.  He served his country in the Navy JAGC during Desert Storm.  Easy to talk to, feel free to call Peter for an appointment.  We will make the process as easy as possible!
*Editor’s note:  This post was originally published in April of 2016 and has been completely revamped and updated for accuracy and comprehensiveness.


Posted on Thursday, November 3rd, 2016 by Peter Klenk

From Our “Ask a Question” mailbag:  “After being diagnosed with early-stage Alzheimer’s, I have been thinking about forming a Revocable Trust.  Who pays the income tax on a Revocable Trust?”

Who pays income tax on a Trust

A Revocable Living Trust can be a reliable tool in helping you manage your assets while suffering from Alzheimer’s. But, you should plan carefully and implement checks and balances.

Revocable Living Trusts Can Help Those With Alzheimer’s Safely Manage Their Assets.

A Revocable Trust is a trust that can be “revoked.”  This way you can place assets into the trust where a “Trustee” manages them, but you can always take the property back.  The Revocable Trust is set up with you being the beneficiary.  So, even though the trust owns the assets, these assets can only be used for your benefit. Because you can revoke the trust and you are the beneficiary, Revocable Trusts are “Grantor Trusts.”  The Grantor is the person who creates the Trust.  The Grantor recognizes all income from a Grantor Trust.  Therefore, if you form a Revocable Living Trust you pay any income taxes due from trust assets.

For example, let’s say that you put your checking account and stock account into the Revocable Trust.  The Trustee will open a new checking and a new investment account using the trust’s name, but using your social security number. Your social security number reports all interest and dividends, and you pay taxes due on income as if you owned the assets under your name.

Who Pays the Income Tax on a Revocable Trust? You!

When using a Revocable Trust to plan ahead for Alzheimer’s, consider these ideas.  First, you can name a trusted person as your co-trustee given the right to act independently.  This way you can currently manage your assets but, as your condition worsens, your co-trustee can seamlessly take over.  Second, appoint a Protector.  The Protector is a person (or persons) who can watch over your co-trustee and remove and replace them.  This check-and-balance helps ensure your assets are safe and that you are receiving the proper care.

We regularly draft Revocable Trusts as part of planning for Alzheimer’s.  I would be happy to talk to you about your particular situation.

Contact our office for a free consultation if you have further questions about Revocable Trusts or any other Estate Planning issues.

Wills, Trusts, Probate, and Estate Litigation it’s all we do!

Peter Klenk, Esq.