My associates and I were recently working through a complex multimillion dollar estate planning case where the client owned real estate in multiple states. One of the central topics of discussion was how the probate process would work under the current will which we were in the process of revising. Probate is the court supervised process of transferring one’s property at death to his or her rightful heirs. The costs of probating an estate varies according to state law and based on case complexity but can easily be three to seven percent or more of the probate estate. Not all assets go through probate and, with proper planning, probate can be avoided altogether. That’s exactly what we are doing with this client. Since the family has real estate in more than one state, their current will would have required probate in each state that they owned real estate adding to the costs and complexity of settling their estate. In addition to fees, the probate process results in making public some of what was private information. That’s because the filing documents are part of the public record which may include listing of assets and beneficiaries. Finally, the probate process typically takes a minimum of six months and can take several years.
Here are three ways that you can avoid probate:
Create a Revocable Living Trust. With a revocable living trust, you establish a trust and move all of your probate assets into the trust. You can act as your own trustee but designate a successor trustee should you become incompetent or die. This sounds more complicated than it is, for once it’s set up it’s easy to maintain.
Own property as Joint Tenancy with Right of Survivorship. A good example would be to own your home with your spouse under this form of title. At death, your interest in your home automatically passes to your spouse by title rather than going through probate. Some states use a slightly different version known as Tenancy by the Entirety and community property states such as California use Community Property with Right of Survivorship.
Name beneficiaries to your retirement accounts, bank accounts and life insurance. I’ve run into lots of cases where someone named their estate as the beneficiary of their life insurance. This not only subjects the assets to potential probate fees but also potential creditors. For bank accounts and brokerage accounts, you can use a ‘Payable on Death’ designation to direct who gets your account assets at death.
Take a moment to review your own estate situation. If you own property in more than one state or you put a high value on privacy of your financial affairs, consider the revocable living trust. If your estate is simple and will not be subject to estate taxes, the strategies above may simplify the transfer process and greatly reduce the time required to get your assets to your heirs at your death. Care must be taken in executing a plan for avoiding probate for there are many potential pitfalls and tax traps so your best strategy is to seek the advice of a professional experienced in estate planning.
Showing posts with label Estate Planning. Show all posts
Showing posts with label Estate Planning. Show all posts
Thursday, September 16, 2010
Monday, March 1, 2010
Estate Planning: Preparing for the Unexpected
All of us know of someone who has become incapacitated and unable to tend to their financial affairs. However, most people don’t realize that without proper advance planning, this situation can quickly turn into a nightmare. For example, assume that you are married and your husband is left mentally incapacitated as a result of a stroke. You own your home jointly and he owns $250,000 in stocks in his name. You need access to cash for special medical treatments so you plan to sell his stocks, right? Wrong! You do not have the legal right to sell his stocks and since he cannot give you permission, your only alternative is a potentially lengthy and expensive legal process to gain access to his assets…if the court grants you access.
The best defense is to prepare now for the possibility that you may become incapacitated in the future. There are four legal documents that you should consider.
1. Durable power of attorney. With this document, you appoint another person to be your 'attorney-in-fact', giving that person the responsibility of making financial decisions on your behalf. You may choose language that provides very broad or narrow powers. For instance, the document can be drafted to allow your attorney-in-fact to act on your behalf only if you are incapacitated (springing power) or it can allow your attorney-in-fact to act on your behalf at any time (general power). Your attorney or financial advisor can advise you which document will be best for you.
2. Revocable living trust. With this strategy, you set up a trust that is revocable (you can terminate it anytime) and transfer title to your assets to the trust. Typically you will be your own trustee, but will also name a successor trustee should you become incapacitated or die. This allows you, not the courts, to control who will continue to manage your financial affairs should you be unable to do so. The revocable living trust also protects your privacy whereas court proceedings may not. However, because of the cost and complexity of this trust, I only recommend it in special situations. For example, I had a client whose relatives threatened to have her declared incompetent and themselves declared trustee for her money as well as her legal guardian. As a safeguard, we used the revocable living trust to make certain that, regardless of the outcome, my client could decide who took control.
3. Healthcare proxy. Similar to the durable power of attorney, the healthcare proxy allows you to appoint the person who will be responsible for making healthcare decisions for you should you be unable to do so.
4. Advanced healthcare directive. With this document, you indicate the level of life-prolonging procedures, pain treatment, etc. that you wish should you be terminally ill and unable to communicate your desires. In Alabama, our legislature has drafted a document that combines the healthcare proxy and advanced healthcare directive. You can receive a copy by visiting the Resource Center at www.welchgroup.com; click on ‘Links’; then click on “Living Will- State by State” .
As you read this column, I urge you to look beyond your own situation and send a copy of this column to friends and family members who may benefit from this advice.
The best defense is to prepare now for the possibility that you may become incapacitated in the future. There are four legal documents that you should consider.
1. Durable power of attorney. With this document, you appoint another person to be your 'attorney-in-fact', giving that person the responsibility of making financial decisions on your behalf. You may choose language that provides very broad or narrow powers. For instance, the document can be drafted to allow your attorney-in-fact to act on your behalf only if you are incapacitated (springing power) or it can allow your attorney-in-fact to act on your behalf at any time (general power). Your attorney or financial advisor can advise you which document will be best for you.
2. Revocable living trust. With this strategy, you set up a trust that is revocable (you can terminate it anytime) and transfer title to your assets to the trust. Typically you will be your own trustee, but will also name a successor trustee should you become incapacitated or die. This allows you, not the courts, to control who will continue to manage your financial affairs should you be unable to do so. The revocable living trust also protects your privacy whereas court proceedings may not. However, because of the cost and complexity of this trust, I only recommend it in special situations. For example, I had a client whose relatives threatened to have her declared incompetent and themselves declared trustee for her money as well as her legal guardian. As a safeguard, we used the revocable living trust to make certain that, regardless of the outcome, my client could decide who took control.
3. Healthcare proxy. Similar to the durable power of attorney, the healthcare proxy allows you to appoint the person who will be responsible for making healthcare decisions for you should you be unable to do so.
4. Advanced healthcare directive. With this document, you indicate the level of life-prolonging procedures, pain treatment, etc. that you wish should you be terminally ill and unable to communicate your desires. In Alabama, our legislature has drafted a document that combines the healthcare proxy and advanced healthcare directive. You can receive a copy by visiting the Resource Center at www.welchgroup.com; click on ‘Links’; then click on “Living Will- State by State” .
As you read this column, I urge you to look beyond your own situation and send a copy of this column to friends and family members who may benefit from this advice.
Saturday, November 21, 2009
“Helping Charities While Reducing Taxes- Part II” - November 15, 2009
Last week, I discussed a strategy for making charitable gifts by using the beneficiary designation under your retirement account instead of a specific bequest under your will and thereby potentially saving hundreds or thousands of dollars in taxes owed by your heirs. Today, I’ll review the various ways to give to charities before the end of the year.
Cash. Cash gifts must be post-marked by December 31st in order to receive a tax deduction for this year. Deductions are limited to 50% of Adjusted Gross Income (AGI) with any excess carried forward for up to five years.
Personal items. Giving clothing and other personal items is a great way to help people in need and do a little pre-spring cleaning at the same time. You’ll need a detailed list of the items along with the fair market value for tax purposes. Be sure to get a receipt of the gift from the charity.
Appreciated property. While the stock market is still approximately thirty percent below its 2007 high, we have seen a remarkable recovery of over sixty percent from this year’s March 9th low. This means that some of you own stocks that have substantial gains. By giving appreciated stock instead of cash, you effectively ‘give away’ the imbedded tax liability as well. If you want to continue to own the stock, use your cash to purchase an equal number of shares. The charity receives their money and you now own the stock with a new, higher cost basis. Gifting appreciated bonds, real estate or other personal assets can also be advantageous. The tax deduction for gifts of appreciated property held for more than one year is limited to 30% of AGI and the transaction must be completed before December 31st.
Retirement accounts. If you are age 70½ or older, you can transfer up to $100,000 of retirement plan assets directly from your retirement account to a qualified charity. While you do not receive a tax deduction for the gift because you already deducted your contributions to the plan, you avoid reporting any income. In the past, an additional advantage of this strategy was that the transfer counted towards your Required Minimum Distribution (RMD). However, for 2009, no RMD’s are required.
Donor Advised Fund. Sometimes people have the money available to make a gift and the desire to do it now in order to reap the tax benefits but have not decided which charities they want to benefit. An excellent solution is a Donor Advised Fund which allows you to give this year, receive a tax deduction this year, but designate the charities sometime in the future. Donor Advised Funds are often administered through the more than 650 Community Foundations across America. To get more information or to find a Community Foundation near you, go to www.cflocator.net. In Birmingham, contact The Community Foundation of Greater Birmingham at 205 327-3800.
At a time when official unemployment rate has eclipsed 10% and true unemployment exceeds 50 million Americans, it is more important than ever that those of us who do have jobs and excess funds, give to those charities that touch our hearts.
Cash. Cash gifts must be post-marked by December 31st in order to receive a tax deduction for this year. Deductions are limited to 50% of Adjusted Gross Income (AGI) with any excess carried forward for up to five years.
Personal items. Giving clothing and other personal items is a great way to help people in need and do a little pre-spring cleaning at the same time. You’ll need a detailed list of the items along with the fair market value for tax purposes. Be sure to get a receipt of the gift from the charity.
Appreciated property. While the stock market is still approximately thirty percent below its 2007 high, we have seen a remarkable recovery of over sixty percent from this year’s March 9th low. This means that some of you own stocks that have substantial gains. By giving appreciated stock instead of cash, you effectively ‘give away’ the imbedded tax liability as well. If you want to continue to own the stock, use your cash to purchase an equal number of shares. The charity receives their money and you now own the stock with a new, higher cost basis. Gifting appreciated bonds, real estate or other personal assets can also be advantageous. The tax deduction for gifts of appreciated property held for more than one year is limited to 30% of AGI and the transaction must be completed before December 31st.
Retirement accounts. If you are age 70½ or older, you can transfer up to $100,000 of retirement plan assets directly from your retirement account to a qualified charity. While you do not receive a tax deduction for the gift because you already deducted your contributions to the plan, you avoid reporting any income. In the past, an additional advantage of this strategy was that the transfer counted towards your Required Minimum Distribution (RMD). However, for 2009, no RMD’s are required.
Donor Advised Fund. Sometimes people have the money available to make a gift and the desire to do it now in order to reap the tax benefits but have not decided which charities they want to benefit. An excellent solution is a Donor Advised Fund which allows you to give this year, receive a tax deduction this year, but designate the charities sometime in the future. Donor Advised Funds are often administered through the more than 650 Community Foundations across America. To get more information or to find a Community Foundation near you, go to www.cflocator.net. In Birmingham, contact The Community Foundation of Greater Birmingham at 205 327-3800.
At a time when official unemployment rate has eclipsed 10% and true unemployment exceeds 50 million Americans, it is more important than ever that those of us who do have jobs and excess funds, give to those charities that touch our hearts.
“Helping Charities While Reducing Taxes- Part I” - November 8, 2009
I recently met with a client couple as part of an estate planning review. As is true with so many people, this couple expressed a strong desire to give to charities both during their life and at their death. This week, I’ll focus on a strategy for giving to charities at death.
Often people will make charitable gifts by designating a Specific Bequest in their will. The typical logic is that they want to make sure that all of their assets are available for their support during their lifetime. Then, at the last of them to die, they want to make a gift, typically of a certain dollar amount, to their church, college or other charity. While this is pretty straight-forward planning, there may be an even better way to accomplish the same goal while significantly reducing taxes that will have to be paid by heirs.
Think of your own situation or maybe a family member. Do you (or they) plan to make charitable gifts at death? Instead of making a specific bequest in your will, consider making the same gift by using your retirement account. You see, contributing to a retirement account is one of the best ways to accumulate wealth during your working years because you receive a tax deduction for your contributions and tax-deferred growth until the funds are taken out during retirement. During retirement, people often leave as much money as possible in their retirement account in order to avoid income taxation on their withdrawals. As a result, they often die with money still left in their retirement account. However, a retirement account is one of the worst assets for an heir to receive. This is because not only are retirement accounts potentially subject to estate taxes, the heirs must also pay income taxes as they make withdrawals. For the wealthy, this combination of estate taxes of possibly as high as 55% and income taxes of possibly as high as 39.5% could eat up nearly 70% of your retirement account!
Here’s a strategy for making smarter testamentary gifts. Let’s assume that you and your wife have decided to leave your alma mater $100,000 at the last of you to die. Instead of making a specific bequest under your will, you change the beneficiary designation under your IRA account to reflect your wife as the primary beneficiary and your alma mater as the second beneficiary for $100,000 with the balance going to your children. If your wife predeceases you, your alma mater receives $100,000 and the balance goes to your children. If you die before your wife, she receives your entire IRA account and can ‘roll-over’ the account into her own name. She’ll then need to name your alma mater the primary beneficiary for the first $100,000 of the retirement account while naming the children the primary beneficiary for the balance. As a result, at her death, the charity receives the same amount of money, $100,000, from the retirement account instead of from the personal estate. You have effectively ‘given away’ the tax problem. Another advantage is that if you decide to make changes regarding your charitable contributions, changing beneficiary designations is easy and free while changing specific bequests under your will would require you to engage an attorney.
Often people will make charitable gifts by designating a Specific Bequest in their will. The typical logic is that they want to make sure that all of their assets are available for their support during their lifetime. Then, at the last of them to die, they want to make a gift, typically of a certain dollar amount, to their church, college or other charity. While this is pretty straight-forward planning, there may be an even better way to accomplish the same goal while significantly reducing taxes that will have to be paid by heirs.
Think of your own situation or maybe a family member. Do you (or they) plan to make charitable gifts at death? Instead of making a specific bequest in your will, consider making the same gift by using your retirement account. You see, contributing to a retirement account is one of the best ways to accumulate wealth during your working years because you receive a tax deduction for your contributions and tax-deferred growth until the funds are taken out during retirement. During retirement, people often leave as much money as possible in their retirement account in order to avoid income taxation on their withdrawals. As a result, they often die with money still left in their retirement account. However, a retirement account is one of the worst assets for an heir to receive. This is because not only are retirement accounts potentially subject to estate taxes, the heirs must also pay income taxes as they make withdrawals. For the wealthy, this combination of estate taxes of possibly as high as 55% and income taxes of possibly as high as 39.5% could eat up nearly 70% of your retirement account!
Here’s a strategy for making smarter testamentary gifts. Let’s assume that you and your wife have decided to leave your alma mater $100,000 at the last of you to die. Instead of making a specific bequest under your will, you change the beneficiary designation under your IRA account to reflect your wife as the primary beneficiary and your alma mater as the second beneficiary for $100,000 with the balance going to your children. If your wife predeceases you, your alma mater receives $100,000 and the balance goes to your children. If you die before your wife, she receives your entire IRA account and can ‘roll-over’ the account into her own name. She’ll then need to name your alma mater the primary beneficiary for the first $100,000 of the retirement account while naming the children the primary beneficiary for the balance. As a result, at her death, the charity receives the same amount of money, $100,000, from the retirement account instead of from the personal estate. You have effectively ‘given away’ the tax problem. Another advantage is that if you decide to make changes regarding your charitable contributions, changing beneficiary designations is easy and free while changing specific bequests under your will would require you to engage an attorney.
“Congress Plays ‘The Guessing Game’ With Our Estate Tax Laws” - November 1, 2009
Current law does not impose death taxes unless your taxable estate exceeds $3.5 million. That $3.5 million becomes unlimited for calendar year 2010 unless Congress takes action before year-end. This means that if Bill and Melinda Gates died next year, instead of the government receiving perhaps billions in death taxes, they would receive nothing…nada…zippo! And think of all the wealthy people who are in hospitals on life support. Avoiding millions in estate taxes would give a whole new meaning to 'Pull the Plug'! We all know the government is not going to allow this to happen, but time is fast running out.
Prior to the 2009 trillion dollar-plus deficit, both Democrats and Republicans had arrived at a consensus opinion that the estate tax exemption (the size estate you can own before you are subject to death taxes) should be set at $3.5 million dollars. The combination of distraction over passing healthcare reform and the almost incomprehensible rising national debt has now left the final decisions regarding new estate tax rules up in the air.
To complicate matters even further, the current estate tax law is scheduled to automatically be repealed as of December 31, 2010 and revert back to prior law. This means that if Congress does nothing, anyone dying with an estate exceeding $1 million could be subject to death tax rates as high as 55% on amounts above the $1 million limit. This would include millions of middle-class American families who own a home and have adequate life insurance.
Here’s what I believe will happen:
In November, Congress will extend the current estate tax exemption for one year. Meaning that for 2010, the estate tax exemption will remain $3.5 million. This will buy Congress time to focus on this issue, which will likely be one of the top campaign issues of the 2010 mid-term elections. Politicians running for re-election are likely to feel the pressure of cross-currents of voting for a law that helps the rich avoid taxes (i.e. making the $3.5 million exemption permanent) versus doing nothing and allowing the current law to 'sunset' on December 31, 2010, which will, in effect, cause millions of middle-class Americans to be subject to death taxes.
What you should do now:
Congress’ failure to take action makes it extremely difficult to properly plan your estate. Take a moment to estimate your Estate Net Worth: All of your assets plus all of your life insurance on both spouses minus all of your liabilities. If the net result is greater than $3.5 million, sit down with an estate attorney to review your estate plan.
If the net result is greater than $1 million, watch closely to see what Congress does next year regarding estate taxes. They’ll either do nothing and allow the amount you can pass on free of death taxes to revert back to $1 million or they’ll make a permanent change based on a higher limit. Plan your estate accordingly.
Let your voice be heard. Contact your congressional representative and demand that they address this issue quickly so that you can properly plan your estate for your family. Go to the Resource Center at www.welchgroup.com; click on ‘Links’; then Congressional Representatives Contact List.
Prior to the 2009 trillion dollar-plus deficit, both Democrats and Republicans had arrived at a consensus opinion that the estate tax exemption (the size estate you can own before you are subject to death taxes) should be set at $3.5 million dollars. The combination of distraction over passing healthcare reform and the almost incomprehensible rising national debt has now left the final decisions regarding new estate tax rules up in the air.
To complicate matters even further, the current estate tax law is scheduled to automatically be repealed as of December 31, 2010 and revert back to prior law. This means that if Congress does nothing, anyone dying with an estate exceeding $1 million could be subject to death tax rates as high as 55% on amounts above the $1 million limit. This would include millions of middle-class American families who own a home and have adequate life insurance.
Here’s what I believe will happen:
In November, Congress will extend the current estate tax exemption for one year. Meaning that for 2010, the estate tax exemption will remain $3.5 million. This will buy Congress time to focus on this issue, which will likely be one of the top campaign issues of the 2010 mid-term elections. Politicians running for re-election are likely to feel the pressure of cross-currents of voting for a law that helps the rich avoid taxes (i.e. making the $3.5 million exemption permanent) versus doing nothing and allowing the current law to 'sunset' on December 31, 2010, which will, in effect, cause millions of middle-class Americans to be subject to death taxes.
What you should do now:
Congress’ failure to take action makes it extremely difficult to properly plan your estate. Take a moment to estimate your Estate Net Worth: All of your assets plus all of your life insurance on both spouses minus all of your liabilities. If the net result is greater than $3.5 million, sit down with an estate attorney to review your estate plan.
If the net result is greater than $1 million, watch closely to see what Congress does next year regarding estate taxes. They’ll either do nothing and allow the amount you can pass on free of death taxes to revert back to $1 million or they’ll make a permanent change based on a higher limit. Plan your estate accordingly.
Let your voice be heard. Contact your congressional representative and demand that they address this issue quickly so that you can properly plan your estate for your family. Go to the Resource Center at www.welchgroup.com; click on ‘Links’; then Congressional Representatives Contact List.
End of Life Decisions” - October 25, 2009
One positive result of the national healthcare debate is that it has Americans talking about many facets of healthcare. Even such red hot topics as ‘death panels’ have encouraged conversations about end of life issues among folks who before would never breach the subject.
In last week’s column, I offered a five-question quiz that would help you decide if you need estate planning. The first question was, “Do you have an Advanced Directive for Healthcare?” With current advances in medical science, doctors and hospitals have the ability to keep someone’s heart beating way beyond the point where there is any quality of life. Without specific directions from the patient, the physician and hospital face the awkward dilemma of deciding to what extent to allow medicine and machinery to keep a patient alive. The decision to continue life-sustaining treatment can literally devastate families from a financial perspective. Current medical insurance policies typically have provisions for both co-pay and lifetime limits which can quickly exceed a family’s ability to pay.
The best solution? Decide now, while you’re healthy and of sound mind, exactly what level of care you wish if you were to end up in a vegetative state, terminally ill or in a coma with little chance of recovery. Fortunately, every state government has made this easy for you by developing a fill-in-the-blank form for making these types of healthcare decisions. It’s commonly referred to as an Advanced Healthcare Directive and consists of two directives:
Living Will. The Living Will portion walks you through a series of situations and allows you to say what level of care you would prefer. For example, if you are unable to feed yourself, would you want a feeding tube? Or, if you cannot breathe on your own, do you want to be on a respirator?
Medical Power of Attorney. As you might imagine, a single document such as the Living Will cannot address every situation that might occur. You’ll need someone to speak for you in situations that are less clear. In your Advanced Healthcare Directive, you will appoint someone to fill this role known as your Attorney or Agent for medical decisions. Choose this person wisely and be sure to have a detailed conversation about the level of care you want. They’ll need to be strong enough to stand up to doctors, hospital administrators and family members who may have a difference of opinion. You’ll also need a successor agent should your first choice be unable to serve.
I realize that end-of-life planning is not a typical topic for dinner conversation and most people would rather avoid it altogether. But to do so, may very well put your family at risk of financial ruin and create a divide between family members who have a difference of opinion about the level of care they think you would want. My recommendation is to deal with the issue now and commit to revisit it periodically. To download the Advanced Healthcare Directive fill-in-the-blank form for your state of residence, visit the Resource Center at www.welchgroup.com; click on Links, then Living Wills- State by State.
In last week’s column, I offered a five-question quiz that would help you decide if you need estate planning. The first question was, “Do you have an Advanced Directive for Healthcare?” With current advances in medical science, doctors and hospitals have the ability to keep someone’s heart beating way beyond the point where there is any quality of life. Without specific directions from the patient, the physician and hospital face the awkward dilemma of deciding to what extent to allow medicine and machinery to keep a patient alive. The decision to continue life-sustaining treatment can literally devastate families from a financial perspective. Current medical insurance policies typically have provisions for both co-pay and lifetime limits which can quickly exceed a family’s ability to pay.
The best solution? Decide now, while you’re healthy and of sound mind, exactly what level of care you wish if you were to end up in a vegetative state, terminally ill or in a coma with little chance of recovery. Fortunately, every state government has made this easy for you by developing a fill-in-the-blank form for making these types of healthcare decisions. It’s commonly referred to as an Advanced Healthcare Directive and consists of two directives:
Living Will. The Living Will portion walks you through a series of situations and allows you to say what level of care you would prefer. For example, if you are unable to feed yourself, would you want a feeding tube? Or, if you cannot breathe on your own, do you want to be on a respirator?
Medical Power of Attorney. As you might imagine, a single document such as the Living Will cannot address every situation that might occur. You’ll need someone to speak for you in situations that are less clear. In your Advanced Healthcare Directive, you will appoint someone to fill this role known as your Attorney or Agent for medical decisions. Choose this person wisely and be sure to have a detailed conversation about the level of care you want. They’ll need to be strong enough to stand up to doctors, hospital administrators and family members who may have a difference of opinion. You’ll also need a successor agent should your first choice be unable to serve.
I realize that end-of-life planning is not a typical topic for dinner conversation and most people would rather avoid it altogether. But to do so, may very well put your family at risk of financial ruin and create a divide between family members who have a difference of opinion about the level of care they think you would want. My recommendation is to deal with the issue now and commit to revisit it periodically. To download the Advanced Healthcare Directive fill-in-the-blank form for your state of residence, visit the Resource Center at www.welchgroup.com; click on Links, then Living Wills- State by State.
“Take the Estate Planning Quiz” - October 18, 2009
“I’m often asked, “Do I need estate planning if I don’t have a lot of money?” The answer is, most often, yes. Estate planning is definitely not only for the wealthy. Take our estate planning quiz to see if you need your own plan:
Do you have an Advance Health Care Directive? In cases where you can’t speak for yourself because of incapacity, an "Advance Health Care Directive" allows you to designate someone to be your voice regarding critical healthcare decisions. This document also lets you specify the level of care you want when death is imminent. Such decisions include your desire for life sustaining treatment including feeding tube, hydration, life-support equipment, and ultimately, organ donation. Failing to document your wishes places your family in the unenviable position of ‘guessing’ what level of care you would want.
Do you have a Durable Power of Attorney that’s less than 5 years old? The Durable Power of Attorney gives legal authority to another person to make financial and legal decisions on your behalf should you be unable to do so because of your incapacity as a result of illness or accident. Without this document, should you become incapacitated, someone will have to hire an attorney, go to court, and get a limited power of attorney—which can be an expensive and time-consuming process. This document should be re-signed about once every 5 years.
Do you have a properly executed will? If you have accumulated any assets, you should consider having an attorney draft a will directing who will receive your assets when you die while also minimizing taxes and settlement costs. If you don’t have a will state law determines who will receive your property. If you have minor children, you’ll want to designate a guardian for them in your will should you and your spouse die unexpectedly. Without a guardian election, the courts must decide who will have custody of your children.
Do you have adequate life insurance? If you have minor children or other dependants, you’ll want to make sure that you have adequate life insurance to provide for their financial support including college tuition. Once you have your life insurance in place, you’ll need to consider setting up a trust through your will. A trustee is someone charged with managing money for your child so choose someone who is good at handling money or choose an institutional trustee such as a bank.
Are you certain of your beneficiary designations? Not all assets pass through your will. In fact many, if not most, of your assets are likely to pass “by contract”. This includes life insurance policies, retirement accounts and jointly titled property such as your home. You’ll want to make certain that these assets that will pass outside of your will are going to whom you wish as well as in the form you wish, whether it be outright or in a trust.
These are just a few areas of estate planning that most everyone should consider implementing now. If you answered, “No” or “I’m not sure” to any of these questions, it’s time to take action. To help you think through these important decisions, contact your attorney or financial advisor. Go to the Resource Center at www.welchgroup.com and then click on ‘Links” for more information about Advance Healthcare Directives (see Living Wills), Life Insurance Needs Estimator, free Life Insurance Quotes, College Costs Estimator and State by State Intestate Laws.
Do you have an Advance Health Care Directive? In cases where you can’t speak for yourself because of incapacity, an "Advance Health Care Directive" allows you to designate someone to be your voice regarding critical healthcare decisions. This document also lets you specify the level of care you want when death is imminent. Such decisions include your desire for life sustaining treatment including feeding tube, hydration, life-support equipment, and ultimately, organ donation. Failing to document your wishes places your family in the unenviable position of ‘guessing’ what level of care you would want.
Do you have a Durable Power of Attorney that’s less than 5 years old? The Durable Power of Attorney gives legal authority to another person to make financial and legal decisions on your behalf should you be unable to do so because of your incapacity as a result of illness or accident. Without this document, should you become incapacitated, someone will have to hire an attorney, go to court, and get a limited power of attorney—which can be an expensive and time-consuming process. This document should be re-signed about once every 5 years.
Do you have a properly executed will? If you have accumulated any assets, you should consider having an attorney draft a will directing who will receive your assets when you die while also minimizing taxes and settlement costs. If you don’t have a will state law determines who will receive your property. If you have minor children, you’ll want to designate a guardian for them in your will should you and your spouse die unexpectedly. Without a guardian election, the courts must decide who will have custody of your children.
Do you have adequate life insurance? If you have minor children or other dependants, you’ll want to make sure that you have adequate life insurance to provide for their financial support including college tuition. Once you have your life insurance in place, you’ll need to consider setting up a trust through your will. A trustee is someone charged with managing money for your child so choose someone who is good at handling money or choose an institutional trustee such as a bank.
Are you certain of your beneficiary designations? Not all assets pass through your will. In fact many, if not most, of your assets are likely to pass “by contract”. This includes life insurance policies, retirement accounts and jointly titled property such as your home. You’ll want to make certain that these assets that will pass outside of your will are going to whom you wish as well as in the form you wish, whether it be outright or in a trust.
These are just a few areas of estate planning that most everyone should consider implementing now. If you answered, “No” or “I’m not sure” to any of these questions, it’s time to take action. To help you think through these important decisions, contact your attorney or financial advisor. Go to the Resource Center at www.welchgroup.com and then click on ‘Links” for more information about Advance Healthcare Directives (see Living Wills), Life Insurance Needs Estimator, free Life Insurance Quotes, College Costs Estimator and State by State Intestate Laws.
Michael Jackson - King of Estate Planning? - July 19, 2009
Love him or not you have to admit Michael Jackson ‘had the moves’. He is the undisputed King of Pop and his dance moves are the stuff of legend. For all his bazaar personal behavior, it turns out Jackson also had the right moves when it came to his estate plan. Here are the key elements and what you can learn from his example:
Revocable Living Trust. A revocable living trust is a trust that you establish during your lifetime while retaining the right to make changes including terminating the trust. At your death, the trust becomes irrevocable, meaning all the provisions of the trust become non-changeable. The primary purposes of a revocable living trust are two-fold:
Privacy. All assts held in a revocable living trust avoid probate and therefore remain private and out of the public eye. Had Jackson not done a revocable living trust, his assets would have gone through probate whereby a personal representative compiles a detailed list of all of his assets and post the list with the probate court…all of which is open to the public for viewing.
Continuity of management. Another reason for setting up a revocable living trust it that it allows for smooth transition of financial management should the beneficiary become incompetent. For example, had Jackson lapsed into a coma, this would have triggered provisions allowing his appointed financial managers to take over. Without the revocable living trust, an expensive and time consuming legal battle could have ensued. An alternative strategy he could have used was to have General and Durable Power of Attorney whereby you nominate who will be in charge of your financial affairs should you become incompetent.
Will. In addition to the revocable living trust, Jackson had a will. While your first reaction may be, “So what?” realize that the majority of Americans don’t have a will. In this case his will directs that any assets not held in his revocable living trust be transferred into the trust. Through this ‘pour-over’ will he made sure to tie up any loose ends.
Competent trustees. For his trustees and personal representatives, he chose two business associates, one of whom is an attorney and the other an astute businessman. Your goal should be to choose people who are good at handling money.
Guardians. Jackson was very explicit when choosing the guardian for his three children. His 79-year-old mother is their guardian, with long-time friend 65-year-old, Diana Ross as back-up guardian. I would have encouraged him to choose a guardian closer to his own age, perhaps a sibling, but he did make his wishes clear.
Specificity. In his documents, Jackson wisely anticipated certain problems and included language to protect his estate from challenges. For example, he included a ‘no contest clause’ that would automatically ‘disinherit’ anyone who challenges the estate thereby removing any financial incentives for would-be treasure hunters. He was also careful to include the names of each of his three children and to specifically exclude his ex-wife, Debbie Rowe, making clear his intentions.
You don’t have to have a $500 million estate to take away valuable lessons offered by Michael Jackson. Consider, now, whether this is a good time to review your own estate plan. It turns out that the King of Pop was also the King of Estate Planning!
Revocable Living Trust. A revocable living trust is a trust that you establish during your lifetime while retaining the right to make changes including terminating the trust. At your death, the trust becomes irrevocable, meaning all the provisions of the trust become non-changeable. The primary purposes of a revocable living trust are two-fold:
Privacy. All assts held in a revocable living trust avoid probate and therefore remain private and out of the public eye. Had Jackson not done a revocable living trust, his assets would have gone through probate whereby a personal representative compiles a detailed list of all of his assets and post the list with the probate court…all of which is open to the public for viewing.
Continuity of management. Another reason for setting up a revocable living trust it that it allows for smooth transition of financial management should the beneficiary become incompetent. For example, had Jackson lapsed into a coma, this would have triggered provisions allowing his appointed financial managers to take over. Without the revocable living trust, an expensive and time consuming legal battle could have ensued. An alternative strategy he could have used was to have General and Durable Power of Attorney whereby you nominate who will be in charge of your financial affairs should you become incompetent.
Will. In addition to the revocable living trust, Jackson had a will. While your first reaction may be, “So what?” realize that the majority of Americans don’t have a will. In this case his will directs that any assets not held in his revocable living trust be transferred into the trust. Through this ‘pour-over’ will he made sure to tie up any loose ends.
Competent trustees. For his trustees and personal representatives, he chose two business associates, one of whom is an attorney and the other an astute businessman. Your goal should be to choose people who are good at handling money.
Guardians. Jackson was very explicit when choosing the guardian for his three children. His 79-year-old mother is their guardian, with long-time friend 65-year-old, Diana Ross as back-up guardian. I would have encouraged him to choose a guardian closer to his own age, perhaps a sibling, but he did make his wishes clear.
Specificity. In his documents, Jackson wisely anticipated certain problems and included language to protect his estate from challenges. For example, he included a ‘no contest clause’ that would automatically ‘disinherit’ anyone who challenges the estate thereby removing any financial incentives for would-be treasure hunters. He was also careful to include the names of each of his three children and to specifically exclude his ex-wife, Debbie Rowe, making clear his intentions.
You don’t have to have a $500 million estate to take away valuable lessons offered by Michael Jackson. Consider, now, whether this is a good time to review your own estate plan. It turns out that the King of Pop was also the King of Estate Planning!
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