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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.

Estate planning

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.

How to Choose a Guardian for Yourself

Every day we make hundreds of decisions from what to eat for breakfast to where we go on vacation.  With each passing day, there are more choices to be made.  But, what will happen if you can’t make decisions for yourself?  Before that time comes, there is one important decision you need to make.  Who do you want to serve as your guardian?

For those of you who have had your estate planning recently done or reviewed, you probably discussed and executed a Financial Power of Attorney.  For those of you on the fence about having your estate planning completed, this is another valuable reason why it is so crucial.  With this document, you are authorizing someone to handle your financial affairs (sign checks in your name, open up a bank account, enter into contracts on your behalf, etc.).  This can be very beneficial because if you are no longer able to do these things for yourself, someone else can immediately step in and do them for you.  However, you may run into situations in which third parties are going to want the person to have more authority than just a signed Financial Power of Attorney.  In these cases, they are going to require you have a Guardian appointed.

A Guardian is essentially a court-appointed and court-“controlled” agent.  They have the court’s authority to handle your financial affairs on your behalf if you cannot.  In many jurisdictions, the court will give priority to an individual who has been named as agent under a Financial Power of Attorney, making it incredibly important that you have one prepared.  If you do not have one, each state will have a law that lists the order in which people are appointed.  In some cases, you could end up having someone handling your affairs that you would have never wanted, like an estranged parent or sibling.  A financial power of attorney lets you share your wishes with the court.

To ensure that you are taken care of when you can no longer take care of yourself, it is important that you choose the right person.  When analyzing the pool of candidates, consider the following questions:

  • Does he or she have the time to act as your guardian?  Often times, those individuals who are the most organized and knowledgeable to help out are also the most heavily scheduled individuals and may not be able to step in.
  • Does he or she live close by?  Even in our digital world, some issues may take multiple steps or in-person interactions to resolve.  If the individual you are looking to appoint lives far away, he or she may not be able to fully carry out their duties.
  • Does he or she have the skill set needed?  When acting as a Guardian, it is crucial that the individual is organized, thorough, and can communicate clearly.  A person who is scattered or flies off the handle easily is not going to be a good advocate for you.

While we all want to retain as much autonomy as possible, there may come a time when we need someone to act for us.  Selecting the right individual will ensure that you are taken care according to your wishes.  If you have any questions or would like to discuss who you should appoint for this role, call or contact us.  We’re here to help.

Do It Now: Name a Guardian for Your Minor Child(ren)

angel guardian and child

We know it’s hard.  Thinking about someone else raising your children can stop you in your tracks.  It feels crushing and too horrific to consider.  But you must.  If you don’t, a stranger will determine who raises your children if something happens to you – your children’s guardian could be a relative you despise or even a stranger you’ve never met.

No one will ever be you or parent exactly like you, but more than likely, there is someone you know that could do a decent job providing for your children’s general welfare, education, and medical needs if you are no longer available to do so.  Parents with minor children need to name someone to raise them (a guardian) in the event both parents should die before the child becomes an adult.  While the likelihood of that actually happening is slim, the consequences of not naming a guardian are more than intense.

If no guardian is named in your will, a judge – a stranger who does not know you, your child, or your relatives and friends – will decide who will raise your child.  Anyone can ask to be considered, and the judge will select the person he or she deems most appropriate.  Families tend to fight over children, especially if there’s money involved – and worse – no one may be willing to take your child; if that happens, the judge will place your child in foster care.  On the other hand, if you name a guardian, the judge will likely support your choice.

How to Choose a Guardian

Your children’s guardian can be a relative or friend.  Here are the factors our clients have considered when selecting guardians (and backup guardians).

  • How well the children and potential guardian know and enjoy each other
  • Parenting style, moral values, educational level, health practices, religious/spiritual beliefs
  • Location – if the guardian lives far away, your children would have to move from a familiar school, friends, and neighborhood
  • The age and health of the guardian-candidates:
  • Grandparents may have the time, but they may or may not have the energy to keep up with a toddler or teenager.
  • An older guardian may become ill and/or even die before a child is grown, so there would be a double loss.
  • A younger guardian, especially a sibling, may be concentrating on finishing college or starting a career.
  • Emotional preparedness:
  • Someone who is single or who doesn’t want children may resent having to care for your children.
  • Someone with a houseful of their own children may or may not want more around.

WARNING: Serving as guardian and raising your children is a big deal; don’t spring such a responsibility on anyone.  Ask your top candidates if they would be willing to serve, and name at least one alternate in case the first choice becomes unable to serve.

Who’s in Charge of the Money

Raising your children should not be a financial burden for the guardian, and a candidate’s lack of finances should not be the deciding factor.  You will need to provide enough money (from assets and/or life insurance) to provide for your children.  Some parents also earmark funds to help the guardian buy a larger car or add to their existing home, so there’s plenty of room for extra children.

Factors to consider:

  • Naming a separate person to handle the money can be a good idea.  That person would be the trustee in charge of the assets, but not guardian of the children, responsible for the day-to-day raising of the children.
  • However, having the same person raise the children and handle the money can make things simpler because the guardian would not have to ask someone else for money.
  • But the best person to raise the children may not be the best person to handle the money and it may be tempting for them to use this money for their own purposes.

Let’s Continue this Conversation

We know it’s not easy, but don’t let that stop you.  We’re happy to talk this through with you and legally document your wishes.  Know that you can change your mind and select a different guardian anytime you’d like.  The chances of needing the guardian to actually step in are usually slim (we always hope this is the one nomination that’s never actually needed); but, you’re a parent and your job is to provide for and protect your children, so let’s do this.  Call our office now for an appointment and we’ll get your children protected.

Cryptocurrency and Estate Planning: What You Need to Know

Cryptocurrencies have been making headlines as of late, with more and more investors wanting in on this digital currency.  Cryptocurrencies are attractive because they are unregulated, decentralized, and anonymous.  While secrecy is useful in some areas of life, when it comes to estate planning it can lead to disaster.  Indeed, your entire cryptocurrency investment can essentially disappear into thin air the moment you pass away or become incapacitated.  If you have not taken the proper steps to plan and protect these assets, your loved ones left behind have no way of accessing or recovering them.

Cryptocurrencies Explained

Cryptocurrency is a form of internet currency.  Instead of a central bank regulating the funds, encryption techniques are used to regulate the amount or units of currency.  These techniques are also used to verify the transfer of funds.  In this manner, cryptocurrency can be transferred online without a third party.  Some cryptoassets have units that are all the same (called “fungible tokens”).  Bitcoin is an example of a fungible token since all bitcoins are the same as one another.  Other cryptoassets have unique attributes (called “non-fungible tokens”).  Cryptokitties is an example of a nonfungible token since each digital “cat” is unique.

Notably, if you lose the key (i.e., the encryption) to your cryptocurrency, you will be unable to access your digital assets.  Thus, making access to your key available to your loved ones upon your death or incapacity is vital to estate planning.  This is because if there is no access to the key, there is no access to the assets.  Unlike more “traditional” assets, there is no third party to control or compel assets nor reset the key for access to these digital funds.  The software or hardware device that holds the keys to your cryptocurrency and manages your transaction is referred to as a “wallet.”

Digital Asset Estate Planning

It is important to understand that cryptocurrencies are typically a non-listed, non-vetted asset category.  In other words – cryptocurrencies are not like publicly traded stocks, which have a vetting process, legal disclosures, and are subject to other requirements.  In short, buyer beware when it comes to digital currencies.  Therefore, if you own cryptocurrency — or are thinking about investing in digital currency — understand that you will need a technical access plan (a way to ensure your successors can access your digital wealth) in addition to a legal plan in order to effectively create an estate plan that incorporates these digital assets.  And because what is going on with digital currency is evolving all the time, and quickly, it is important to touch base with a knowledgeable estate planning attorney at least once a year to make sure you and your family’s needs are being met.

Keeping your money, family heirlooms, and other values hidden from everyone in a safe in an unknown location without giving anyone the combination to the safe is foolish.  The same is true if you own cryptocurrencies and do not take the appropriate steps to protect this asset through estate planning.  Do not let life’s surprises leave your family in the dark.  Contact us today to learn about your options and how to protect the loved ones you will leave behind.

Rewarding Your Employees by Giving Them the Business

Retiring from your business can a tough decision.  To ensure that what you have built continues on, there needs to be a plan for succession.  For some people, they have spent years grooming a child or other family member to take over, wanting the business to stay in the family.  Others look to sell to a third party for a quick way out that will also give them a nest egg for their next phase of life.  However, there is a third option–transferring the business to your employees.  If you like the idea of transferring your business to long-time faithful employees who have contributed greatly to the company’s success over the years, below are a couple of options for you to consider.

Management Buyout

This type of transfer is a process, not an event.  The management team comes together with the financing and arranges a deal with you to buy the assets and operations of the business.  A management buyout has the benefit of being quicker and more confidential than a third party transaction, and the structure of the deal can be more flexible.  There is also the added benefit that the legacy of the company will continue in the hands of those in management who have earned the opportunity to buy the business with his or her loyalty and hard work.

With this option, you may also be able to provide some continued service to the company as an officer and/or director.  In addition, you may even be able to continue in some part of the business that you enjoy.  And you may be able to keep some control over the company.

When considering this option, it is important that you consider the following:

  • How much cash, debt, and earn-out will be involved?
  • When will the transfer of control occur?
  • If management has little or no capital, where will they get the money for the buyout?

Employee Stock Ownership Plans (ESOPs)

An ESOP is a qualified plan under the Employee Retirement Income Security Act of 1974 (ERISA).  Instead of selling directly to management, you are making the sale to the ESOP, which has been set up by the company.  The ESOP can either attempt to get bank financing to purchase the stock from you, or you can take a note for the value of your shares and have the repayment taken care of internally.  The employees become plan participants, similar to other employee incentive programs and are entitled to benefits at certain points as determined by the terms of the ESOP.

This option is similar to a management buyout, but with potentially valuable tax benefits.  With an ESOP, you are selling stock in the company, not the assets, so the taxes are capital gains, not ordinary income taxes.  Because of this distinction, there are planning techniques available that may help save on taxes with this transaction.

When reviewing this option, there are a few things to consider:

  • In order to repay the note, most (if not all) of the excess cash flow from the business may be needed, instead of using it to grow the company;
  • The company must set aside money to meet repurchase obligations on the ESOP when an employee retires, dies, becomes incapacitated or terminates his or her employment after vesting;
  • Stock in an ESOP is allocated based on payroll, so there are no extra management incentives.

Both management buyout and ESOPs are options that should be considered if you are looking to transfer your business to your employees.  However, we are here to help you.  Give us a call or contact us, we would be happy to discuss these options more and find a solution that best protects you and your legacy.

Should Your Child’s Guardian and Trustee be the Same Person?

If you have overheard any discussion about estate planning, you have likely heard the words “guardian” or “trustee” tossed around in the conversation.  When it comes to estate planning, who will be ultimately in charge of your minor child is an important decision that requires consideration of many factors.  Although there is no substitute for you as a parent, a guardian is essentially someone who steps in as a parent, assuming the parental role and raising the child through adulthood.  A trustee, on the other hand, is in charge of managing the financial legacy that has been left behind for the minor.  As a parent, you need to take into account the characteristics needed for each role.

Who Makes a Good Guardian?

When choosing a guardian, the top factor to consider is who is the best person that will love and raise your child in a manner that you would.  This would include religious beliefs, parenting style, interest in extracurricular activities, energy level, and whether or not he or she has children already.  Keep in mind that a guardian will provide day-to-day love, care, and support for your child.  While the guardian you choose may be great with your children, he or she may not be great with money.  For this reason, it may make sense to place the financial management of your minor child’s funds in the hands of someone else.

Who Makes a Good Trustee?

Not surprisingly, when choosing a trustee the most important characteristic is that he or she is great with finances.  Specifically, the trustee must be able to manage the funds in accordance with your intent and instructions that are left in your trust.  Consider whether he or she will honor your wishes.  Likewise, should you choose to grant your successor trustee discretion in making financial decisions regarding the management of funds left behind you should ensure the individual’s decisions will be aligned with your intent.  In short, you want to choose a successor trustee who will act in your minor child’s best interest within the limits you have set forth in your estate plan documents.  If you choose two different people for the role of guardian and trustee, make sure to consider how the two get along as they will likely have to work together throughout your minor’s childhood and possibly into adulthood.

Seek Help to Make Your Decision

While estate planning can be daunting, it does not have to be.  Contact a knowledgeable estate planning attorney to help guide you through this process.  We can explain your options and advise you on the best plan that will follow your wishes while at the same time meeting your family’s needs.

How to Pick a Trustee, Executor, and Agent Under a Power of Attorney

While the term fiduciary is a legal term with a rich history, it very generally means someone who is legally obligated to act in another person’s best interests.  Trustees, executors, and agents are all examples of fiduciaries.  When you pick trustees, executors, and agents in your estate plan, you’re picking one or more people to make decisions in your and your beneficiaries’ best interests and in accordance with the instructions you leave.  Luckily, understanding the basics of what each of these terms means and what to consider when making your choices can make your estate plan work far better.

Trustee

A revocable living trust is often the center of a well-designed estate plan because it is simply the best strategy for achieving most individuals’ goals.  In many revocable living trusts, you will serve as the initial trustee and will continue to manage the trust assets as you had in the past.  Your successor trustee will be responsible for making sure your wealth is passed on and managed in accordance with your wishes after your death or during your incapacity.  Like each of the following individuals involved in your estate planning, it’s best to have a trusted person or financial institution carry out this vitally important role.

It’s important to make the language in your trust as clear as possible so that your trustee knows exactly how to handle various situations that can arise is asset distribution.  Lastly, your trustee will only control the assets contained within the trust — not the rest of your estate, the reason why completely funding your living trust is crucial.

Powers of Attorney

Your power of attorney is the document in your estate plan that appoints individuals to make decisions on your behalf if you become unable to do so yourself.  There are a few different types of powers of attorney, each with their own specific provisions.  There is quite a wide range of situations covered by various powers of attorney, and we can help you decide which types you’ll need based on your current situation and future goals.  Here are two common types to cover in your estate plan:

Financial Powers of Attorney

Financial powers of attorney grant individuals the ability to take financial actions on your behalf such as purchasing life insurance or withdrawing money from your accounts to cover your expenses.  A person who acts under the authority given in a power of attorney is generally called an agent.  Regarding financial decisions, an institution like a trust company, can also be named.  Keep in mind that trust companies will charge a fee for this service.

Health Care Powers of Attorney

Health care powers of attorney cover a wide range of specific actions that can be taken regarding an individual’s medical needs such as making decisions about the types of care you receive or who will be providing the care.

Executor

Your executor is the person who will see your assets through probate, if necessary, and carry out your wishes based on your last will and testament.  Depending on your preferences, this may be the same person or institution as your trustee.  You might also see this position designated as personal representative, but it means the same thing.

Some individuals chose to go with a paid executor.  This is usually someone who doesn’t stand to gain anything from your will, and is often the best choice if your estate is large and will be divided among many beneficiaries.  Of course, family or friends can also serve, but it’s important to consider the amount of work involved before placing this burden on your family or friends.

Being an executor can be hard work and may have court-ordered deadlines, so it’s crucial to pick someone you know will be up for the job.  They will probably need to hire a CPA to help sort out your taxes and a lawyer to assist in the process.  Of course, if there’s a dispute, attorneys, appraisers, mediators, or other professionals will undoubtedly need to be involved.  Choosing a spouse or someone else intimately involved in your life can be convenient because they may already be familiar with your assets and have an easier time making sure your wishes are carried out.  However, because of the time involved and the nature of some assets, they may not be up to the task at the time.

Get in touch with us today

Let us help you make the process of picking your trustee, powers of attorney, and executor as smooth and headache-free as possible.  Once you have these choices in place, you’ll be able to rest easy knowing that your estate plan is in good hands no matter what life brings.  Call or contact us to make an appointment today.

Five Considerations When Selecting a Guardian for Your Children

There is no question that having children changes everything — and estate planning is no exception.  If you and your spouse pass away or become legally incapacitated, and arrangements were never made in the event of such an emergency, your minor child or children will have to be placed with a new family.  Not surprisingly, such a drastic change can be a disruptive process for minor children — even if they are placed with members of your family.  If you choose a guardian for your child in your will or other estate plan documents this difficult time can go much more smoothly.

Who Makes a Good Guardian?

A guardian for your minor child “steps into” your shoes in the event you can no longer care for him or her.  No one wants this to happen, but when a parent becomes incapacitated or dies, the minor child left behind will need care.  Because a guardian plays such an important role in your family’s life, there are several factors to consider when choosing someone to take on this role:

  1. Shared values. It is best to choose someone who has a common level of religious belief.  For example, if you are not the religious type you may have objections to someone who would expect your child to join and regularly attend church.
  2. Parenting style. Whether you run a tight ship at home or prefer a laissez-faire approach to raising children, choosing someone who will continue in your style is likely the best fit.
  3. Involvement. Someone who travels all the time will not be able to regularly show up to your kids’ soccer games, gymnastics meets, band concerts, and live theater performances — an important part of being a guardian to your children.
  4. Energy level. Having the stamina to be able to keep up with your child — especially during the younger years — is an important factor.
  5. Other children. While a potential guardian who already has children should not be a deal breaker, you should consider how adding more children into the family will affect the dynamic, particularly when it comes to the ages of the kids.

Other Factors to Consider

In the same manner that you can choose different individuals to manage the estate’s finances and your minor children’s day-to-day needs, you can also choose more than one guardian for your kids.  You may want to assign one guardian per child, depending on your family’s circumstances.  That being said, setting up guardianship this way may result in your children being separated from one another, which is usually not a good outcome.  Choosing someone who has the resources to care for your children — even if you have left money behind for their care — should also be a factor to consider.  Finally, choosing someone who is young enough to be able to care for your child through his or her adulthood, as well as someone who is in good enough health to withstand the challenges of raising a child, are important factors that should be taken into account.

Once you have made a decision on who will be your child’s guardian, contact an experienced estate planning attorney.  We can draft the documents you need in order to make this legally binding, as well as create an estate plan that suits your family’s needs and will protect your loved ones in the event you are no longer able to do so yourself.