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Your Vacation Checklist

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You’ve packed sunblock and a beach novel.  You’ve planned your itinerary and bought plane tickets.  But have you ensured that your estate plan is up to date?

Don’t leave home without making sure your financial health and the future of your loved ones is provided for.  It’s even more crucial than getting a pet sitter and locking the front door.

Creating an Estate Plan

If you don’t have an estate plan yet, don’t panic.  Now is a great time to connect with a qualified estate planning attorney who can sit down with you and get you started with an appropriate plan for your financial future.beach vacation

Here are some questions to begin the process:

  1. Do you have a will?  An attorney can help you create an accurate and intentional will if you do not already have one.
  2. Have you considered using a trust?  Trusts have considerable benefits, from keeping assets safe from creditors to dividing an estate equally without worrying about the status of individual assets.
  3. Are your children protected?  An attorney can help you designate a guardian to care for your minor child in the event you are unable to.  An attorney can also help you name an adult who will manage your minor child’s inherited property if you pass away.  These may or may not be the same people.
  4. Have you considered life insurance?  If you anticipate leaving behind significant debt or hefty estate taxes, or if you have small children, you may want to consider a life insurance policy.  Knowing your dependents are provided for will give you peace of mind.
  5. Is your business protected?  If you own a business, have you named a proxy to manage your interest if you cannot?  Do you have a business succession plan?  If you co-own a business, have you drawn up a buyout agreement?  An attorney can help with that as well.

Pour-Over Wills: A Useful Tool

Considering a trust-based estate plan?  It’s a great way to ensure that your assets are divided and protected in exactly the way you want.  It can also help your beneficiaries avoid the expensive and lengthy process of probate, when an estate must be organized and distributed through a probate court.  But as you may know, gathering the needed documents may be time-consuming.

If you need to complete an estate plan before leaving on a vacation and are unable to fully fund your trust, you may want to consider using a pour-over will in the interim.

A pour-over will stipulates that all assets that have not yet been funded into your trust will be put there when you pass away.  Your trust becomes the beneficiary of any assets that you may not have had time to transfer there.  In a crunch, it can serve as a stop-gap measure while your trust-based plan is being funded.

Trust, but Verify

Have you already created an estate plan?  That’s great!  It’s still important to verify that all provisions made in the estate plan are exactly as you want them.

Here are some items to confirm before leaving town:

  • Are your assets accurately inventoried?  Have you left out any important assets or neglected to report changes?
  • Are your beneficiary designations accurate?  Are your assets going where you would like them to?
  • When was the last time you reviewed your selection of fiduciaries?  Being named as someone’s Personal Representative, Successor Trustee, Agent under a Power of Attorney, etc.  can be a time consuming job.  It is important that you review your selections periodically to ensure that those people are still the best choice to act on your behalf.

Contact Us Today

Estate planning with a trusted attorney is an important part of ensuring your financial health and preserving the legacy you’d like to leave to your loved ones.  As you’re preparing for summer travel, don’t neglect your estate plan.  We can help you put a plan in place that will reassure you and your family.  Contact us today to plan for your tomorrow.

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The More You Know: Reverse Mortgages & Estate Planning

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You have likely seen several advertisements for reverse mortgages if you have spent any time watching television or surfing on the internet. The concept and sell is a simple one: as long as you own and live in your home, you can supplement your retirement income with a loan that you do not need to pay off. The trade-off when it comes to a reverse mortgage is that you are using your home’s equity to receive that extra retirement income. Even if a reverse mortgage is right for your circumstances, entering into a reverse mortgage is something that should be understood fully before signing any paperwork.keys to house

Reverse Mortgages Explained

How they work: Most reverse mortgages are federally insured and have several requirements including: (1) at least one borrower is aged 62 or older; (2) the home must be the primary residence; (3) the borrower must have financial resources to keep up with the home (taxes, insurance, maintenance); and (4) the borrower must own the home outright or have a low enough “regular” mortgage.

Impact on your estate plan: If you plan on leaving your home to your heirs, understand that a reverse mortgage will reduce the value they receive. Depending on when you pass away and how long the reverse mortgage was in place, your home’s equity may have been exhausted meaning that there is nothing of value to leave your heirs. In that case, your heirs may need to pay off or refinance the mortgage to keep the house.

Retirement income: The positive trade-off of a reverse mortgage is that you will have an additional source of retirement income, which can be received in several different ways including: (1) an upfront lump-sum, (2) a monthly payout, or (3) a line of credit. Each scenario has its own tax, borrowing costs, and home value implications. If you’re considering a reverse mortgage, talk to your financial advisor and estate planning attorney first, to make sure you select the best payout option for your circumstances.

Buyer beware: It is important to make sure you avoid scams that are pretending to be legitimate reverse mortgages. One way to help avoid being tricked is to make sure you work with a reputable provider. You should also make sure that a reverse mortgage is a good fit for your financial needs before signing any documents. Finally, consider the estate planning impact entering into a reverse mortgage may have on your intended wishes once you are gone.

The Implications of Reverse Mortgages

There are several factors to take into consideration when you are contemplating a reverse mortgage. Specifically, the effect it will have on your estate plan, the type of retirement income you are trying to obtain, scams to watch out for, and anything unique to your circumstances. There are several questions you should address before deciding whether or not a reverse mortgage is right for you. These include:

  • Can the life insurance you have in place pay off your reverse mortgage?
  • Will your reverse mortgage exceed your home’s value when you pass away?
  • What will happen to others living in the home if you die without paying off the loan?

Seek Advice

In addition to shopping around to find a reverse mortgage lender with terms that are most favorable to you, you should also determine whether a reverse mortgage is right for you and your needs. We can help you learn more about the options available to you and your family when it comes to your applying for a reverse mortgage and the impact it will have on your estate plan.

Call or contact us today, we are here to help.

Do your parents have an estate plan?

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parents estate plan
Happy family watching television on sofa at home

If you find yourself in the “sandwich generation” (someone who is caring for both your children as well as your parents simultaneously), you need to know whether or not your parents have put together an estate plan. While it is still your parent’s choice to make estate planning decisions, having a plan — no matter how late in life it is created — is an absolute must.

The thought of speaking with your parents about their finances and estate planning probably makes you want to run as fast as you can in the opposite direction. Nonetheless, having this conversation is the key to helping make sure your parents are able to live their golden years without financial worries and that their wishes are carried out after their death.

Estate Planning for Your Parents

Talking about the future with your parents — including their estate matters, finances, and memorial wishes — is one of the most important conversations you can have with them. And, the earlier you address this, the better off all of you will be. Below are some key topics you need to discuss with your parents to make sure their estate planning is in proper order:

  • A team effort: If your parents have legal and financial professionals that help with their matters, make sure to get a full list of these individuals’ contact information. You should also have the contact information of your parents’ doctors, in the event end-of-life decisions need to be made for them.
  • Last will and testament and a trust: If your parents do not have a will written up, they likely do not have any other estate planning documents. If they do have wills in place make sure to confirm how long ago they were drafted, who the executor will be, and where the original documents are located. A trust may also be appropriate depending on your parent’s circumstances and wishes. Stress to them that you do not need to read the terms, but that you should know where they are so you can help ensure their wishes are carried out.
  • Advanced directives: Make sure your parents have living wills and powers of attorney so that someone will be able to make decisions on their behalf if they are unable to do so. Also ensure you understand their respective feelings about end-of-life decisions, such as life support, and how their financial and medical affairs should be handled should they become incapacitated.
  • Insurance policies: Find out what insurance policies your parents have and where the policies are located in the event one or both become incapacitated. This includes knowing about health insurance (private or Medicare), life insurance, homeowners, auto insurance, disability insurance, and long-term care policies.
  • Financial and investment accounts: Your parents should also consider compiling a list of their brokerage, bank, and mutual fund accounts as well as the account numbers. This will make things easier if someone needs to step in and assist with financial matters due to their death or incapacity.

Why Estate Planning Matters

Failing to put together an estate plan often leads to chaos, unnecessary costs and taxes, potential hurt feelings, delays in distribution of assets, and even unexpected outcomes after death.  For example, if your parents hold some assets in joint tenancy with a child who lives nearby but does not include other children, the distribution of the asset becomes distorted. When joint tenancy is used instead of an estate planning tool like a trust, adult children left behind will be offended as a result of the parents’ asset distribution.

Do not let fear or discomfort keep you from sitting down and having this important estate planning conversation with your parents. As estate planning attorneys, we can give you and your parents advice on what options are available to them so that their wishes are followed upon their death.

If you would like to create or update your estate plan, call our office today to schedule a time for us to sit down and talk.

How to Leave Your Life Insurance and Retirement Plan to Your Minor Children

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Your children are your pride and joy.  It is no surprise that at some point or another, every parent likely becomes concerned about who will care for a minor child or children if one or both parents die or are incapacitated.  From a financial perspective, many parents turn to life insurance in an effort to take care of their family in the event of death.  While it is true that life insurance is a particularly helpful financial tool to protect your loved ones, it is just as important to consider how to leave the proceeds to your minor children.  Beyond this, you should also take into account how to incorporate your retirement money (IRAs and 401(k)s), another common, significant asset into your overall estate plan.

mother and child

Once you decide to purchase life insurance you will name a beneficiary of the death benefits.  You also name a beneficiary on your retirement accounts.  But, if you fail to have a system in place and your children are minors at the time they inherit these assets, the court will appoint a property guardian or a conservator (the title depends on state law, but the role of this person is to “watch over” a minor person’s money).  This process will require attorneys’ fees, court proceedings, supervision from the court, and will generally limit investment options — all costs and delays that will not help your children, but rather cost them a significant percentage of their inheritance.  Another downside?  Whatever’s left when the child becomes an adult (usually at age 18, but may be older, 19 or 21, in some states) will be handed over, without any guidance or boundaries.  This can impact college financial aid opportunities as well as open up a ready opportunity for irresponsible spending that most parents would never intend.

How To Leave Assets?

There are several ways in which you can structure your life insurance policies, retirement accounts, and overall estate plan to benefit your minor children in the most streamlined way possible.

First, instead of naming minor children as beneficiaries, use a children’s trust to manage and use the money for the benefit of your children.  This lets you designate someone you think will manage the money well, rather than leaving it to the whims of the court.

Second, select and name a guardian to handle the day-to-day care for your children.  This person can be different than the person managing in the money, which can sometimes work well depending on the amounts involved and the different skill sets needed to manage money versus raise children.

Third, if you have a living trust, make sure you have properly funded the trust and aligned your retirement assets with the plan.  If you do not yet have a trust, consider the benefits of one over will-based planning.  Both types of plans will allow you to designate how much and when your children will receive the money, but a trust-based plan will allow you to do so without court involvement.

Benefits of a Trust

Generally, parents list a minor child as the secondary or contingent beneficiary on life insurance and retirement accounts after first naming the surviving spouse as a primary beneficiary.  This may work, as long as everyone dies in the “right” order and at the “right” time.  But, it’s a gamble, and providing structure through a trust for these inheritances is a vastly better option.  Unlike guardianship or custodian accounts, where the proceeds must be handed over once the minor(s) turns a certain age, you can specify at which age your child receives the proceeds.  This allows you to specifically designate how the money is to be used, so it will be available for the important life events, while protecting your children from reckless spending.  Ultimately you have more control with a trust, and your customized plan will provide the best protection for your family.

If you have any questions about how to leave assets to your minor children — whether it is a life insurance policy, a retirement account, or any other asset — contact us today.  A legal professional can explain the options available to your family, determine what tax implications will result, and advise you on the best structure that will protect your family’s needs.  Call or contact our office today to schedule a time for us to sit down and talk.

How to Fix 5 Common Estate Planning Problems

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Not surprisingly, most people loathe reviewing their estate plan because it can be both confusing and daunting.  Others do not want to think about death and avoid the topic altogether.  If you already have put an estate plan together, you are ahead of the curve as many people do not have one.  If you do not yet have an estate plan, there is no better time than now to sit down and get one in place.  In either scenario, below are five common estate planning mistakes and how to fix them so that you are fully protecting your family.

1. You Have Not Updated Your Plan

Many people consider estate planning a “one and done” proposition.  This could not be further from the truth.  Life happens.  This may include adding new beneficiaries due to the birth of children or grandchildren, or removing beneficiaries due to a change in circumstances.  Your family’s needs will almost certainly have changed over the years since you first created your estate plan.  Likewise, your executor – the person who will be in charge of your assets in the event of your untimely death – may have passed away or may no longer be able to serve.  For these reasons, it is key to keep your beneficiaries and successor executors current.

2. Your Plan is Missing Key Components

While you may already have an estate plan in place, it may not be comprehensive enough to fully protect your loved ones after you have passed.  At a minimum everyone should have a last will and testament, a financial power of attorney, and a health care directive.  These documents should have been reviewed by a knowledgeable estate plan attorney within the last 5 years and immediately after any major life event, such as a marriage, divorce, birth or death of a child, receiving an inheritance, or significant increase or decrease in assets.  With these life changes, the level of protection you need may have also changed.  Relying on an old strategy may leave you and your loved ones vulnerable.

3. You Have Not Kept Up with Changes in Tax Laws

In the past twenty years, the estate tax exemption has increased by fifteen times.  If you have significant wealth you need to make sure your estate plan takes advantage of unique planning opportunities under current law.  This is because an outdated estate plan structure that has not kept up with current tax law can actually do more harm than good for your loved ones, since it may needlessly cause taxes to be paid.  Accordingly, a qualified estate planning attorney who fully understands your circumstances should review your documents and make any necessary adjustments.

4. You Moved Without Updating Your Estate Documents

It is important to understand that each state has different laws that governs estate planning.  For this reason, if you move from one state to another it is vital that you have a local estate planning attorney review and revise your documents.  You want to make certain your plan is compliant with the laws in the state in which you primarily reside.  This also applies to medical powers of attorney or advance directives that may be valid in your old state but ruled invalid in your new state, depending on the local law.

5. You Failed to Focus on Life Insurance and Retirement Accounts

One common mistake is for individuals to fail to review life insurance policies after they were originally issued.  Neglected policies may not be properly funded, resulting in a lapse in coverage and requiring hefty premiums to keep the policy in force.  Likewise, it is important to take advantage of listing beneficiaries on retirement accounts rather than leaving them to your estate.  When a beneficiary is listed, these assets avoid probate – the long and expensive legal process of distributing your assets upon your death through court supervision – and allows beneficiaries to keep the majority of these funds in tax-advantaged accounts.

We’re Here to Help.

Without proper maintenance and administration, your carefully put together estate plan may not work as you intend.  Instead of allowing this to happen, give us a call today, so we can begin reviewing your estate plan to make sure all of your bases are covered and any needed changes are made.  Call or contact us today.  We’re here to help.

Beneficiary Designations and a Blended Family: Why You Need to Think Before You Sign

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familyWhether you are in your first marriage or have remarried after a divorce, blended families are a common part of modern society. That being said, it is important to understand that blended families and subsequent marries create important and unique issues when it comes to estate planning. You may need to account for a prior spouse who is still caring for minor or disabled children, and also possibly make sure your current spouse and any children you had together – and any step children – are also taken care of after you pass away. The good news is that estate planning can take all of these factors into account. This is true whether you are putting together your estate plan for the very first time or if you need to update your current estate plan due to a change in your circumstances.

Setting Up a Trust

It is common for married couples to leave everything to one another in their wills, or list their spouse as the sole beneficiary of any assets that allow for this designation. The result is that if one spouse passes away before the other, the surviving spouse will own all of the assets left behind outright. While this may work for some families, when it comes to blended families this strategy may inadvertently disinherit children or spouses from a prior marriage. One way to provide for a current spouse without leaving out children from a prior marriage is to place some or all of your assets in a trust that the spouse can use during his or her lifetime. Once the spouse dies, all of the property in the trust can go to the children from your current and prior marriage, or to other intended beneficiaries.

Beyond Simple Beneficiary Designation

The plain and simple beneficiary designation on assets (like life insurance, bank and investment accounts, etc.) that allow for outright distribution to the surviving spouse can inadvertently wreak havoc on an estate plan when a blended family is involved. These complications can apply to a couple who has children from prior marriages, someone who remarries late in life, or someone on their second or third marriage and beyond.

For example, you may purchase a large life insurance policy and designate your current spouse as the sole beneficiary and pass away shortly thereafter. Since the beneficiary designation takes precedence over your estate planning documents, the proceeds of the life insurance will not be placed in that trust and will be distributed outright to your current spouse. If you had instead named the trust as beneficiary, you could have determined when and how the funds would be spent for the benefit of your heirs. As an example, the funds could be used to provide support for your surviving spouse during his or her lifetime while also allocating a portion to help your children to pay for college, finance a down payment on a first home, pay for a wedding, or start a business. The key is that the money can be available for your spouse, but not with unfettered control, and still available for your children.

Ensuring Your Wishes Are Followed

While you hope that a surviving spouse with honor your wishes even if they are not in writing, you may accidentally disinherit your children. Instead, a knowledgeable estate planner will use your trust as the centerpiece of your estate plan and make sure to coordinate and align the beneficiaries on your assets so that your intent will become the reality once you have passed away. We can explain all of the options available to you and put together a plan that best suits your family’s needs.

Call or contact us today, we are here to help.