Gratia P. Schoemakers, Esq.

Updating Your Revocable Trust

How Many “Tweaks” Are Too Many?

If your life or the law has changed since you signed your trust, it needs to be updated. Updates can be made by way of an amendment – or – a complete restatement. An amendment updates a specific part of the trust, whereas, a restatement, updates the entire trust. You might think that an amendment would cost less than a restatement, but that’s not necessarily true. Let’s chat about which is best for you.

Amendments vs. Restatements: Which Is Better?

Imagine a recipe card you’ve used for years. If one or two provisions have been crossed out and replaced, the card may still be readable. However, if many provisions have been altered, the recipe is likely confusing. If your loved ones can’t read your instructions and determine whether to add a cup of flour or a cup of sugar, your recipe won’t work. You’ve got a 50/50 chance for a great dish – or a complete disaster.

The same can be said about revocable trust. Making one or two amendments is generally acceptable, but when revisions are numerous or comprehensive, your instructions may become confusing, and you may be better served with a restatement.

Although amendments are generally used to make smaller changes and restatements are used for larger ones, there’s no bright line rule when it comes to amending or restating a revocable trust. A general guideline to follow is that anytime you’re making more than two changes, restatements are likely better as they:

Foster ease of understanding and administration
Tend to avoid ambiguity
Reduce the amount of paperwork to retain and provide to financial institutions / parties
Decrease the risk of misplacement
Prevent beneficiaries from discovering prior terms
Provide an opportunity to provide other relevant updates, such as changes in the law

In many cases, a restatement may actually be more cost effective than amendments. This is especially true today as computer software allows estate planning attorneys to create and retain documents easily and efficiently. Fortunately, today, you pay for legal counseling, not typing.

Have Questions About Updating Your Trust? We Can Provide Answers

Before deciding whether to amend or restate, it’s important to determine whether previous changes have inadvertently altered your intent or might adversely affect how the trust is administered. We’ll help make your instructions clear.

Have questions? If you do, that’s normal. We can provide you with answers. Whatever your circumstances, rest assured that we can help you to determine the best way to update your trust. Call us today and we’ll help make your instructions are up-to-date and crystal clear.

Your Estate Planning Binder: Tips for Proper Care and Maintenance

You finally crossed “getting your estate plan done” off your list, and you’ve (rightly) breathed a huge sigh of relief. By tackling this challenge, you’ve not only established protections for your loved ones and legacy, but you’ve also freed up some important “mental space” that had previously been preoccupied.

Once you create the documents that make up your estate plan, your estate planning attorney will prepare a binder containing all pertinent documentation. This estate planning binder is critical because it provides key information regarding your intentions after you pass away or if you become incapacitated. Once your trust is fully funded, your binder should also contain information about your assets. This makes administration easier for your family. This binder should be stored safely, reviewed regularly, and updated, when necessary, in order to avoid confusion when your loved ones need to refer to it.

Before we get into the nuts and bolts about how to complete this review process – to help you stay in control now that you’re there – let’s first take a step back and clarify a point that confuses many clients. Your estate plans and your financial plans for the future are two completely different things. They are both obviously important, and they both should be kept in a safe place and reviewed often. However, the estate planning binder has special importance because it contains your wishes and instructions for what should happen if you become incapacitated and when you die… as well as who should be in charge of what at those times. But this binder is not the same thing as your financial plan. Your financial plan is a comprehensive plan of the assets you have now (and the assets you may need in the future) to help you achieve your goals in life.

Where to Keep Your Estate Planning Binder

Your estate planning binder should be kept in a safe place along with your other important financial information. We recommend keeping it secured in a safe deposit box at your local bank or in a fireproof strong box if you keep the documents at home. You can make photocopies or scans of the documentation for your own use if you wish to refer to them more frequently or have them as a backup. Remember though, the original documents have legal significance, so don’t create a situation where your family is forced to attempt to rely on copies – you need to safeguard your originals!

Who Should Have Access to the Binder?

You obviously have discretion regarding who can access your personal financial information. However, strongly consider retaining direct access yourself until circumstances require someone else to step in to take control. If you keep the binder in a safe deposit box, for example, you could keep a spare key in your home or office and notify your attorney, next of kin, or successor trustee as to the key’s location in case they need to use it. Talk to your bank about what limited access rights to the safe deposit box might be available.

How Often to Review Or Update Your Binder?

Your financial situation is likely to change over time – and perhaps more critically, other powerful and unexpected life events can shift your priorities and necessitate an adjustment to your plan.

For instance, the death of a spouse or life partner, a new marriage, an illness or accident that affects your child’s future, a sudden job loss or the surprising success of a business venture that you’ve plugged away at for years, or even a spiritual epiphany can reshuffle what’s important to you.

These events can also limit or constrain what’s possible for your future. Without renegotiating these commitments in a conscious way, you’ll likely feel intangible unease about them. The moral is that your binder should be reviewed periodically and updated to reflect the changes that happen in your life.

As a rule of thumb, we recommend reviewing your estate plan as follows:

A quick review once a year
A thorough review every 3-5 years to ensure the documents reflect your current finances and intentions
Any time you experience a significant increase or decrease in income or wealth
Any time you experience a major life change, such as a birth, marriage, or death in the family
Any time you consider a change in who you want to benefit from your estate plan

Keeping your estate planning binder secure and up to date will reduce confusion and likelihood of disputes when others need to enact your wishes for your estate. As always, we are here to help. For peace of mind, give us a call to review or amend your current plan.

What Sumner Redstone’s Estate Planning Challenges Can Teach Us

Media mogul Sumner Redstone the owner of CBS and Viacom, among other holdings allegedly created quite an estate planning mess, according to a recent report in the New York Times. A June 2^nd article reports that “with a fortune estimated at over $5 billion, Sumner M. Redstone could afford the best estate planning that money could buy. What he ended up with is a mess — no matter the outcome of the welter of lawsuits swirling around him.”

Here are five lessons from the business titan’s problems:

1. Avoid making decisions that could complicate both your public image and your business situation. The New York Times reported that “A lawsuit brought by Manuela Herzer, one of Mr. Redstone’s late-in-life romantic partners, stripped him of whatever dignity he might have hoped to retain by publicly revealing humiliating details about his physical and sexual appetites and his diminishing mental capacity.”

2. Define “incapacity.” Mr. Redstone did (smartly) establish an irrevocable trust. However, his case is also a cautionary tale: if you’re going to tie asset transfers or succession plans to your own mental state, you must define “incapacity.” If you don’t, the state will. A seemingly trivial semantic argument like that could tie your estate up in court for years, pitting family members against one another in an embarrassing public battle.

3. Create a clear succession plan. Leave no doubt. Clarify how your businesses will be managed and by whom. Step down from leadership while you are mentally capable of making that decision and give a safe and clear hand off to your successor. If you can, it’s much better to be deliberate and thoughtful about handoffs of authority, rather than waiting until things become unmanageable.

4. Make crystal clear what role your children will play once you are gone. Disenfranchised or estranged family members can wreak havoc on your fortune if you don’t clarify what roles they will play in your business, your trusts, and your legacy after you are gone. If you don’t spell out those roles, a court will. If you really want to, you can disinherit someone. But you need to make sure you do it the right way for it to be legally effective.

5. Hire a qualified lawyer to troubleshoot your plan and help you game out contingencies. A lawyer with significant estate planning experience can help you deal both with the “known unknowns” and the “unknown unknowns” that can throw your estate planning strategy off course. The more complex your estate is, the more involved your attorney should be.

Estate Planning for Rental Property Owners

In all parts of the country, services such as Airbnb have grown in popularity over the past few years. Indeed, these alternatives to hotel stays are popular among homeowners and vacationers alike. If you have a home or other rental property that is generating income, you should understand the following asset protection and estate planning considerations.

Protecting Owners from Liability

Just like any rental relationship, there is risk for the property owner. If anyone is hurt on the premises during their stay – no matter how short – a property owner could be held legally and financially liable for injuries suffered.

The first line of defense is general liability insurance – assuming there is proper and sufficient coverage on the property. In the case of a lawsuit the insurance company should step in and defend the claim up to the policy’s limits. Any damages beyond that may become a personal liability to the owner, depending upon how the property is titled.

If the property is owned by a limited liability company (LLC) instead of the individual(s), then the individual member(s) of the LLC may have some additional protection if the liability insurance coverage limits are not sufficient to cover the total amount of financial liability. It is important to note that in order to receive liability protection through the use of an LLC, the entity must be formed correctly and managed properly. If the entity is viewed as merely an “alter ego” of the member(s), the court may not uphold the liability protection, placing the property owner(s) back on the hook. To ensure that you have the most protection available, you need to consult with an attorney.

Estate Planning Considerations

Beyond liability in the event of an incident, deciding how an asset will be passed from generation to generation is an important part of estate planning. This is particularly true if such property is lucrative – like income-generating rental property. If the real estate is held in an LLC, you have options. You may choose to divide up the membership interest of the LLC among the multiple beneficiaries. With an income producing asset, such as a rental property, it is important to consider your family’s situation and your ultimate goals for the property.

Using an LLC is also helpful for estate planning because you can gift some of the membership interests during your lifetime without losing control, transfer it at the time of your death to the beneficiaries, or have it held by a trust for the benefit of the beneficiaries. Regardless of your personal situation or goals, there is a solution for everyone.

Determining whether or not to use an LLC for rental property is just one aspect of the overall estate planning process. We can guide you through your legal options and help ensure your property is protected and distributed at your death according to your wishes. Do not leave this to chance, contact us today to learn more.

Did Whitney Houston Leave Too Much Money To Bobbi Kristina?

Whitney Houston’s estate was worth approximately $20 million when she died – plenty to meet the needs of her only daughter – Bobbi Kristina. Sadly, only a few years after Houston’s death, Bobbi Kristina died as well.

Although Bobbi Kristina’s previous boyfriend, Nick Gordon, is still a suspect in her murder, many say that having access to so much money at a young age was a contributing factor. Sadly, Houston’s estate planning mistakes are all too common.

Aunt & Grandmother Says The Will Did Not Depict Houston’s Intentions

Houston’s aunt and grandmother filed a lawsuit to re-write the will as they say it didn’t accurately depict what Whitney really wanted for Bobbi-Kristina. They claimed that she was too young to handle so much money.

Although they likely had the best of intentions, probate courts must follow the terms of the actual will or trust documents, not what the person who died might have otherwise intended.

Whitney Houston’s will was created in 1993, specifying that a trust would be created after she died for any children she may have (so before Bobbi-Kristina was even born). Unfortunately, she never updated her will before she died.

Inheriting Money at a Young Age is Never a Good Idea

Whether this tragedy could have been adverted if Bobbi Kristina’s distributions were delayed until she was older is anyone’s guess. The bottom line is that inheriting large sums of money at a young age is generally never a good idea. Although the young beneficiary might be responsible, young people can be easily manipulated by others.

While it’s clear that Houston could have better protected that money with a stronger estate plan, she’s certainly not the only one guilty of not following through. In fact, many of us have the best intentions, but simply don’t make the time to create – and update – proper estate planning documents that can help beneficiaries.

Set Your Beneficiaries Up For Success!

You do have the power to set your young beneficiaries up for success. In most cases, that means creating a trust that allows them access to money over time and can be managed by someone you trust and has their best interests at heart.

We can provide you with the tools you need to protect your loved ones – whatever your situation may be. As Houston’s case shows, ignoring estate planning issues can have tragic consequences. Call or contact us today and let’s get started protecting you and those you love.

A Powerful Exercise to Surface the Values You Want to Pass on to the Next Generation

Every one of us receives and passes on an inheritance. The inheritance may not be an accumulation of earthly possessions or acquired riches, but whether we realize it or not, our choices, words, actions, and values will impact someone and form the heritage we hand down. — Ben Hardesty

Successful estate planning is about far more than simply passing your wealth to the next generation— it’s also about passing on your values. No matter which financial or legal structures you choose to contain and manage your assets, these instruments only preserve your wealth until it reaches the hands of your beneficiaries. What happens then? Your values enabled you to accumulate wealth and persevere in spite of obstacles and long odds. If your children and grandchildren don’t share and cherish those values, they could lose their inheritance as quickly as they received it.

But our values can be hard to capture in language. They seem second nature to us only because we live them every day. Here’s an exercise to help you identify your (perhaps) rarely spoken moral code and communicate it to the next generation.

The Science of Surfacing Your Subconscious Values

In Chapter 3 of his bestselling book, Getting Things Done: The Art of Stress-Free Productivity, productivity author David Allen discusses what he calls vertical project planning— that is, identifying the “why’s” and “what’s” of any project before engaging with its details. To reveal the standards that you have regarding any task, just finish the following sentence:

“I would give others totally free rein to do this as long as they…”

For instance, if you’re planning a dinner celebration for your dad’s 70^th birthday, you could fill in the blanks as follows:

…as long as they created a budget for the party and got buy-in from both of my sisters to contribute.

…as long as they made sure to double check the guest list with mom.

…as long as they booked a restaurant within 30 minutes from my parents’ home.

As it pertains to communicating values, we could reword it like this:

“I would give a total stranger free rein to guide the people I care about most about how to live a great and moral life as long as they…”

…as long as they make sure to communicate my core values of creativity, compassion and integrity.

…as long as they give many concrete examples of these standards being met and not met to demonstrate exactly what I mean.

…as long as there’s some mechanism to remind my family of these values in an ongoing way, so that they don’t forget.

…as long as they make inheritance from the trust, I establish conditional on whether my beneficiaries live these values.

Estate planning is ultimately not only about passing along your tangible wealth and deciding how to distribute assets. It’s an opportunity to ensure your legacy into the next generation and beyond. Clarifying your values and working to effectively pass them along can be a profoundly liberating experience. Please contact our team for insight about how to get started with this process.

Four Easy to Avoid Mistakes People Make at Tax Time

It’s that time of year again: tax season. No one enjoys doing their taxes, and that is likely why many of us leave this tedious task to the last…possible…moment. As Tax Day approaches, millions of Americans are likely scrambling to track down all of their important documents to meet the April 15 deadline. But as with anything in life, the more you rush, the more likely you are to make mistakes. When it comes to your taxes, these mistakes can result in monetary penalties, delays in getting a refund, and even an increased chance of being audited. Below are four easily avoidable mistakes people make at tax time.

Not filing when you could get a refund: No matter what your income levels, filing your taxes is important. This is particularly true if you are a low-income earner, as you may be entitled to a refund from the government through the earned income credit.
Not taking advantage of professional advice: Our tax law is complicated. That’s why speaking with a tax professional can help ensure you are maximizing your tax refund or minimizing your tax bill. Whether it is itemizing expenses or taking advantage of tax credits, do not leave your taxes to chance.
Not taking the time to organize paperwork: Getting all of your important documents together is not only important because it ensures you are properly filing your taxes, but it particularly comes in handy in the event you get audited by the IRS. Instead of doing this at the last minute, take the time to save documents throughout the year so you are ready when April 15 arrives.
Not handling other “legal” matters: Since you are getting your financial house in order for tax season, it is a great opportunity to assess your other legal needs – like estate planning. Wills, trusts, life insurance, healthcare proxies, and powers of attorney are just some of the valuable tools available to you. Planning for your incapacityand your family’s future when you are gone is just as critical and leaving the results to chance can cause more stress on already grieving loved ones.

Getting ready for tax season is important, but so is estate planning. Do not leave this important task for later, as life is unpredictable. If you have questions about how to get started on your estate plan or need assistance updating an existing plan, contact us today.

Wills Vs. Trusts: Take Control of Your Wealth Distribution

You work hard for your money and want to ensure that your wealth distribution goes according to your wishes upon death. Sadly, many people simply don’t understand the difference between wills and trusts and how they can affect inheritance. Don’t be one of them! Take control of your wealth distribution by understanding what wills don’t control and the benefits of a trust.

5 Things a Will Does Not Control

Most people believe that a will encompasses and controls all of your assets. That is simply not the case. Proper asset ownership for will-based plans can be confusing. However, the bottom line is that a will only controls assets in individual names; it does not control:

Trust assets
Retirement accounts / pension plans
Life insurance
Annuities
Employee benefits

While having a will allows you to avoid having a court decide who gets what, a trust can generally protect you even further.

5 Benefits of a Living Trust

There are many benefits to a living trust, including these five:

Avoiding the public, costly and time-consuming court processes at death (probate).
Avoiding the same regarding incapacity (conservatorship or guardianship).
Providing for spouses without disinheriting children.
Saving estate taxes in some cases.
Protecting inheritances for children and grandchildren from the courts, creditors, spouses, divorce proceedings, and irresponsible spending.

Many types of assets can be funded into your trust, such as real estate, bank accounts, investment accounts, and intellectual property rights. Others might include:

Notes payable to you
Life insurance – if you don’t have an irrevocable life insurance trust
Business interests
Oil and gas interests
Personal effects – artwork, jewelry, collectibles, antiques

It’s important to work closely with your estate planning attorney to make certain that all of your assets are distributed according to your wishes – and done so with the least amount of cost and time delay. Contact us today! Call our office at 832.408.0505 or schedule your appointment right now for more information about wills, trusts, and other financial planning issues and let us help you decide what’s best for your situation!

Gratia P. Schoemakers, Esq.

Where to Keep Your Estate Planning Binder

Who Should Have Access to the Binder?

How Often to Review Or Update Your Binder?

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