Mistakes

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.

Protecting Your Children’s Inheritance When You are Divorced

Consider this story. Beth’s divorce from her husband was recently finalized. Her most valuable assets are her retirement plan at work and her life insurance policy. She updated the beneficiary designations on both to be her two minor children. She did not want her ex-husband to receive the money.

Beth passes away one year after her divorce. Her children are still minors, so the retirement plan and insurance company require an adult to be appointed to receive the inheritance Beth left behind. Who does the court presumptively look to serve as the caretaker of this money? Beth’s ex-husband who is now the only living parent of the children. (In some states, this caretaker of the money is called a guardian, whereas in others it is the conservator. The title does not matter as much as the role, which is to manage the funds on behalf of a minor, since the minor is not legally able to handle significant assets or money.)

Sadly, stories like Beth’s are all too familiar for the loved ones of divorced people who do not make effective use of the estate planning tools. Naming a beneficiary for retirement benefits or life insurance, or having a will can be a good start. However, the complexities of relationships, post-divorce, often render these basic tools inadequate. Luckily, there is a way to protect and control your children’s inheritance fully.

Enter the Trust

A trust allows you to coordinate and control your estate in a way that no other tool can. For those who are not yet familiar, a trust is a legal arrangement for managing your property while you are alive and quickly passing it at your death. There are a few key players in the trust. First, there is the person who created the trust, often called the Trustmaker, Grantor, or Settlor (this is you). Second, there’s the Trustee who manages the assets owned by the trust (usually you during your life and then anyone you select when you are no longer able to manage the assets). Finally, the Beneficiaries are the people who receive the benefit of the trust (usually you during your life, and then typically children or anyone else you choose).

How a Trust Protects Your Children’s Inheritance after a Divorce

A trust protects your children’s inheritance in a few distinct ways:

Since you select the Trustee, you can choose someone other than your ex-spouse to manage the assets. In fact, you can even state that the ex-spouse can never be a Trustee, if you wish. If Beth had a trust, she could have named her brother to be Trustee after her death. Her brother (rather than her ex-husband) would then be in charge of the children’s inheritance.
Since you select the Beneficiaries, you can determine how the trust assets can be used for them. You may have long-term goals for your beneficiaries, such as college, purchasing of a first home, or starting a business. When you share your intent, your Trustee can invest the assets appropriately and ensure your legacy is used the way you want, rather than the assets being potentially wasted or used in a thoughtless way. If Beth had a trust, she could have instructed how she wanted the inheritance used, rather than leaving it to the whims of a court and her ex-husband.
A fully funded trust avoids probate, so your children do not have to deal with the cost, publicity, and delay that is all-too-common in probate cases. Although “plain” beneficiary designations, like the one that Beth used, also avoid probate, they may still open the door for a guardianship or conservatorship court case, especially when your children are minors. A fully funded trust avoids these guardianship and conservatorship cases. This means more money for your intended beneficiaries and less for the lawyers and courts.

If you are divorced, it is essential to make sure your plan works precisely the way you want. Every situation is unique, but we are here to help design a plan that achieves your goals and works for your family. Give us a call today.

Why Not Just Go on Nolo® or LegalZoom or Other Form Provider and Create Your Own Estate Planning Documents Cheaply?

There are many software programs, as well as websites, that sell do-it-yourself estate planning documents. These websites and form tools seem to offer a convenient and cost-effective alternative to consulting with an estate planning attorney. But do they really meet your needs and protect your family? Is online, do-it-yourself estate planning worth the perceived upfront savings?

Penny Wise and Pound Foolish

In all but the simplest scenarios, do-it-yourself estate planning is risky and can become a costly substitute for comprehensive in-person planning with a professional legal advisor. Typically, these online programs and services have significant limitations when it comes to gathering information needed to properly craft an estate plan. This can result in crucial defects that, sadly, won’t become apparent until the situation becomes a legal and financial nightmare for your loved ones.

Creating your own estate plan without professional advice can also have unintended consequences. Bad or thoughtless documents can be invalid and/or useless when they are needed. For example, you can create a plan that has no instructions for when a beneficiary passes away or when a specific asset left to a loved one no longer exists. You may create a trust on your own but fail to fund it, resulting in your assets being tied up in probate courts, potentially for years. Worse yet, what you leave behind may then pass to those you did not intend.

Your family situation and assets are unique. Plus, each state has its own laws governing what happens when someone becomes incapacitated or dies. These nuances may not be adequately addressed in an off-the-shelf document. In addition, non-traditional families, or those with a complicated family arrangement, require more thorough estate planning. The options available in a do-it-yourself system may not provide the solutions that are necessary. A computer program or website cannot replicate the intricate knowledge a qualified local estate planning attorney will have and use to apply to your particular circumstances.

If you’re a person of significant wealth, then concerns about income and estate taxes enter the picture too. In addition to the federal estate tax, some states have a separate estate tax systems with significantly different tax thresholds. An online estate planning website or program that prepares basic wills without taking into account the size of the estate can result in hundreds of thousands of dollars in increased (and usually completely avoidable) tax liability. A qualified estate planning attorney will know how to structure your legal affairs to properly manage – or, in many cases, even avoid – the burden of the death tax as well as minimize the impact of ongoing income taxes.

One important aspect of estate planning is protecting adult children from the negative financial consequences of divorce, bankruptcy, lawsuits, or illness. An online planning tool will not take these additional steps into account when putting together what is usually a basic estate plan. Similarly, parents who have children or adult loved ones with special needs must take extra caution when planning. There are complicated rules regarding government benefits that these loved ones may receive that must be considered, so that valuable benefits are not lost due to an inheritance.

Consult an Estate Planning Attorney

No matter how good a do-it-yourself estate planning document may seem, it is no substitute for personalized advice. Estate planning is more than just document production. In many cases, the right legal solution to your situation may not be addressed by these do-it-yourself products – affecting not just you, but generations to come. To make sure you are fully protecting your family, contact us today. We offer Online Lawyer Drafted Estate Planning Services in addition to our office hours. We understand that you are busy, and that sometimes you need to get things done from the comfort of your home. We’re here to help. Give us a call or contact us today.

How to Fix 5 Common Estate Planning Problems

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.

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.
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.
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.
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.
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.

The One Thing Every New Grandparent Must Do As Soon As Possible

Congratulations on welcoming the newest addition to your family. Being a new grandparent changes everything — including how you approach your finances — and is one of the most joyous occasions in life. The excitement of a new baby — and all of the firsts that come with this bundle of joy — can grab all of your attention and focus. That being said, there is one thing that every new grandparent must do as soon as possible that is often overlooked. Specifically, every new grandparent should immediately create (or revise) an estate plan so that it includes your family’s newest generation.

Estate Planning for Grandchildren

Having an intentional financial strategy for incorporating your new grandchild’s future in your overall estate plan is an important part in addressing your growing family’s needs.

Not having an estate plan can have unintended results for your surviving family members. This is because intestacy — or your state’s applicable laws that determine who receives your assets upon your death if you have no estate plan — may not work the way you’d expect. As a result, it can have disastrous results for grandparents who had other intentions or plans for their assets. Instead of having the government decide who gets your asset when you die, now is the time to take control, while you can still put your wishes down on paper.

Failing to update an existing estate plan when a grandchild is born can be just as disastrous as intestacy. While you may have contemplated the birth of grandchildren in your initial estate plan, you may not have put a mechanism in place to ensure your grandchild receives the maximum benefit you intended. Likewise, failing to review or revise a beneficiary designation may inadvertently disinherit a grandchild. A comprehensive trust with coordinated asset ownership is the best way to fully protect your multi-generational family.

Options for Grandparents

There are several ways to plan for your grandchildren’s future. There are also different tools that may be used to incorporate this newer generation into an estate plan.

One way is to give the gift of education. With college tuition rising every year for both private and public universities, setting aside money for your grandchild’s education is one way to plan for their future success.

Another way to provide for your grandchildren is by establishing a trust. You can set aside a specific amount of money that can be used only for your minor grandchild’s benefit. The child’s parent, or even grandparents themselves, can be listed as the custodians of the account. As a custodian, the designated adult can make spending decisions on behalf of the minor child until he or she reaches the age of majority in his or her state of residence — or the age listed in the trust instrument.

To help ensure a successful future for your new grandchild, contact a knowledgeable estate planning attorney to learn about the options you have available so you can provide for this child’s future.

Call or contact us today. We’re here to help.

The Biggest Threats to Successful Estate Planning

Poor estate planning is a recipe for disaster. Look no further than Dickens’ Bleak House — or a telenovela — to witness the tragedy and melodrama inadequate estate planning can cause. While having your estate planning documents prepared is the first hurdle to overcoming these types of disasters, there are several threats that lurk around the corner that might derail your wishes.

Family Conflict

According to a TF Wealth survey of over 100 estate planning professionals, family conflict is the number one risk to a peaceful inheritance. If children are treated differently under the estate plan, there is often an assumption that a mistake was made in drafting the documents or that someone has exerted undue influence on the parent. While this may not be the case, without any guidance from you, family members can begin to think the worst of each other.

Sloppy or No Estate Planning

If you have not done any estate planning or if what you have done is ineffective, your estate will be subject to your state’s intestate laws. These laws predetermine who will inherit your assets and in what proportion. While these statutory schemes might work for some people, they will have adverse consequences for those who have been married multiple times, have children from prior relationships, or children who need additional asset protection. If you haven’t done any estate planning, you’re simply leaving your inheritance and your legacy in the hands of the government.

In order to ensure that your wishes are being carried out and safe from the ever present dangers, it is important that you know what a successful estate plan looks like.

No (or Little) Family Conflict

The goal here is for there to be no surprises. If you are choosing to treat children or other family members differently, be open and honest about it. It may be helpful to have a conversation about your wishes prior to your death so that those individuals understand why you have made those decisions. Even if you choose to not have such a conversation, it’s important to discuss your plan and reasons with your attorney, so that the plan can be drafted to carry out your wishes.

Eliminate (or Minimize) Costs and Taxes

Watching inheritance get whittled away by taxes and fees will only lead to frustration and hard feelings. When preparing your estate plan, your intent is to benefit your loved ones, not the government. Working with a qualified estate planning attorney can help ensure that your assets are being handled in such a way that the administrative costs of your passing and any income or estate tax are minimized or avoided.

A Chosen Representative

It is possible that, later in life, you may not be able to handle all of your affairs yourself and may require some assistance from a loved one, whether it be with your finances or healthcare. Look for someone you trust who understands you and your desires. Don’t necessarily rely on someone just because they are the most convenient. And, don’t rely on hope that everyone will know who you want to be in charge. You must ensure that you’ve granted proper authority using a power of attorney, a trust, and a will.

Ensure that Everyone Gets What You Want

Your assets may be, or may in some way, represent your legacy. Do some real soul-searching about how and what you want to share this with your family and friends. To ensure that your legacy is passed on in a meaningful way, consider including an explanation as to why someone is receiving a particular inheritance. If you have wishes as to how they use a gift of money, he or she may appreciate hearing the hopes and dreams you have for them and their future even though you are no longer with them.

Documents Are Up-to-Date

Life can change quickly. It is important that you review your estate planning documents with each life change (i.e. birth or death of a family member, purchase or sale of a major asset, change in health, etc.). It is also important that we stay in touch. Contact us when these major life changes occur and we will contact you when there are changes in the law. This will help ensure that your documents stay effective and your wishes are carried out.

So do the groundwork that a little planning requires. And leave the melodrama for entertainment. Call or contact us today. We’re here to help.

How That “Simple” Fix Can Really Cost You and Your Family

Joint Tenancy Pitfalls: The ‘Simple’ Fix that Can Leave Your Family Broke

There are many ways to own your assets. When you die, it is only natural that you want your family to share in the bounty of your hard work. As a way to simplify the transfer process and avoid probate, you may be tempted to add a child or other relative to the deed or bank account utilizing the ownership type of joint tenancy with right of survivorship (JTwROS). However, while this type of ownership delivers a lot of potential benefits, it may also be masking some dangerous pitfalls.

Under JTwROS, when one owner dies, the other owner(s) inherit the deceased owner’s share of the property proportionately. Its benefits are specific: ownership is transferred automatically without entering probate. Because the property is transferred outside of probate, it is possible to keep this inheritance out of the clutches of creditors of your estate. On the surface, this seems like a smart way to streamline the inheritance process, sidestep creditor baggage, and bureaucratic charges. But the risks may outweigh the benefits.

You May Pay the Price

One of the main problems with JTwROS is that when you enter into this kind of agreement, you open yourself up to additional liability. When you agree to a JTwROS, you put your assets on the hook for the other owners’ creditors, ex-spouses and flights of fancy.

Another problem with JTwROS, as it relates to real estate, is that there are now multiple owners of the property. You must now get the approval of the other owners if you would like to mortgage, refinance, transfer, or sell the property. It does not matter if you are the only one who is occupying the property or paying the expenses, by adding additional people as owners, you are giving away control.

With respect to any bank accounts, once you add an additional owner, that individual, as an owner, has the right to go to the bank and withdraw whatever money is in the account. The bank is merely going to make sure that the individual is listed on the account and will freely turn over your money to him or her. If a joint owner’s creditor serves the bank with a garnishment order, they can also seize the money in the account, even if the joint owner was only added to help avoid probate.

Disinheriting Loved Ones

While JTwROS can have some impacts on you, it can also disrupt your estate plans because instead of property getting handed down, it’s handed over. For example, if someone with children remarries and a new spouse is added to the deed as a joint tenant, that new spouse will inherit the property, not the kids or grandkids. Because there’s a new spouse involved, the new spouse’s family will then be the ones to inherit upon his or her death, leaving the whole ‘branch’ of the original family may be disinherited—and not always intentionally!

Questions? Give Us a Call

Although there are some advantages to a JTwROS, don’t let simplicity or speed be your only measures. Call or contact us so we can discussing all of your options and tailor a solution that will best fit your needs.

Dennis Hopper Saves Heirs with Last Minute Estate Plan Changes

Dennis Hopper, known for his role in Easy Rider, wanted to leave his fortune to his family. Well, not everyone in his family. Hopper made numerous estate planning changes in the last months of his life. His goal? To make sure his heirs shared his approximately $40 million in wealth and that his fifth, and current wife, Victoria, did not.

The 5^th Marriage Isn’t Always the Charm…

At least that was the case between Hopper and his fifth wife, Victoria Duffy-Hopper, who was six years younger than Hopper’s oldest daughter from a previous marriage. It’s a long and rather ugly story, so let’s just touch on the highlights:

Hopper divorces four times and has several children.

Hopper marries Duffy, who is younger than all of the above children, and they have a daughter together.

Things go bad. Hopper files for divorce, accusing Duffy of being insane, inhuman, and volatile. He obtains a restraining order against her, but she refuses to move out of the home.

Things get worse. Victoria responds by claiming that Dennis is not mentally competent. She alleges that his adult children from his prior marriages improperly influenced him to file for divorce and suggested that he change his estate plan. She claims their motive was to cut Victoria out of his estate as well as the couple’s six-year-old daughter.

Hopper, at age 73, dies of cancer while all of this was happening.

Although Hopper died before this ordeal was over, he did some very smart things during the divorce process to ensure that his children received the bulk of his wealth. What he did applies to everyone.

Don’t Wait To Update Your Estate Plan!

Hopper made numerous changes to his estate planning documents instead of waiting for his divorce to be final. These included:

Changing his life insurance beneficiary designation

Making sure Duffy was not listed in his will or trust as a beneficiary

Verifying that his prenuptial agreement was in order

In the end, Duffy sued the estate for, well, everything and anything she could. When all was said and done, she settled with the estate, but for much less than she wanted. The majority of Hopper’s estate went where he wanted it to go – to his children. The lesson learned? Don’t wait to update your estate plan. Take action!

We Have the Tools and Advice You Need

It is imperative to update your estate plan documents when any significant or life changing events occur such as:

marriage

re-marriage

divorce

birth

adoption

income changes

circumstantial changes (to the health or wealth of loved ones)

change of state of residence

Even if you haven’t experienced anything “significant” since you last updated your estate plan, changes in the law (especially tax law) may make re-evaluating your estate plan a smart thing to do. We have the tools you need to make sure that your wishes are carried out after your death.