Business owners

Can a Trust Own My Business after I Die?

In general, the answer to the title question is yes, your trust can own your business after you die. However, there are a number of considerations that may impact the answer to this and the following questions. One consideration is the type of business interest you own. Is your business a limited liability company (LLC), a partnership, a corporation, or a sole proprietorship? Another consideration is how your business is managed. Is your business managed as an LLC, a partnership, or a corporation?

How Does the Trust Get Ownership of the Business?

  • LLC: If your business is an LLC, a trust can receive ownership of your business interest when you execute an assignment of interest. If you are the LLC’s sole member, then after you have executed the transfer document assigning your interest to the trust, the trust will own 100 percent of your business. If your LLC has other members, your trust will own only the percentage of the business that you own. For example, if you have a 25 percent ownership interest in an LLC, your trust will own 25 percent. It is important to review the LLC’s operating agreement to see what restrictions, if any, there are on transferring your interest. Also, some operating agreements will require the other members’ consent prior to any transfer. If your LLC issues membership certificates, you should submit your assignment document to the LLC and have new membership certificates issued in the trust’s name.
  • Partnership: As with an LLC, a partnership interest is transferred to a trust by an assignment of interest. Again, it is important to review any partnership agreement to determine if there are restrictions or other conditions, such as consent requirements, to a transfer.
  • Corporation: If your business is a corporation, you should contact the corporation to determine what documentation will be needed to transfer your stock to your trust. For closely held corporations without specific documentation requirements, you can transfer your stock to your trust by executing an assignment of stock. You should submit this document to the corporation so that new stock certificates can be issued showing that the trust owns the stock. As with other types of business interests, you should check the corporate governing document, if any, to determine if there are restrictions or other conditions on making a transfer to your trust.
  • Sole Proprietor: If you own your business as a sole proprietor, you have not created any separate legal business entity that needs to be transferred. To transfer ownership of your business’s assets to your trust, you will simply transfer ownership in the same way as you would any other assets that are in your personal name. 

How Is the Business Managed?

How the business is managed after it has been transferred to the trust is very fact specific and will depend on several factors, such as what kind of business has been transferred and how that business was managed prior to the transfer. 

  • LLC: After a business interest has been transferred to a trust, the trustee will own the interest. If the interest is a single-member LLC where the member runs the business and is also the trustee, the trustee would continue to run the business’s day-to-day affairs, just like prior to the transfer. After the member’s death, the successor trustee would manage the business unless the trust and operating agreements have specified otherwise or the trustee has delegated their business management duties to another person. If, however, the business interest is a manager-managed multimember LLC where the member has not participated in day-to-day management decisions and such decisions have been delegated to a manager, the LLC would continue to be managed by the manager both prior to and after the member’s death.
  • Partnership: In a partnership where the partner participated in day-to-day management and has now transferred their ownership portion to a trust of which they are the trustee, the trustee will continue to manage the business as before the transfer. As with an LLC, after the partner’s death, the successor trustee will step in to manage the business unless the trust and partnership agreements specify otherwise or the trustee has delegated their management duties to another person. If the partnership has delegated these duties to its officers or employees, then depending on what the trust and partnership agreements direct, the trustee will most likely continue to allow the other officers/employees to manage the business, both prior to and after the partner’s death.
  • Corporation: After transferring the corporate stock to the trust, the trustee, as the owner, will be entitled to vote that stock according to the terms and conditions of the corporation’s governing documents. Normally, a transfer of stock to a trust will not change the corporation’s management.

What Do the Beneficiaries Receive?

The trust’s terms will determine what the beneficiaries are entitled to receive. The trust is entitled to receive income or profit distributions to owners or stockholders. Whether that income is distributed to the beneficiaries, and on what terms, will depend on the trust agreement’s terms.

Special Note About S Corporations

If your business is taxed as an S corporation (and you do not have to actually be a corporation to be taxed as an S corporation), there are special rules about who can own an S corporation. It is important to seek the advice of a qualified legal or tax professional prior to transferring ownership of your S corporation business interest to a trust and after the death of the grantor/trustmaker.

Although your trust can own your business after you die, you must consider many factors when transferring your business ownership interest to your trust. Therefore, it is important to consult a qualified professional who can ensure that you have considered all the factors and help you properly complete the transfer.

Vacation Property

Important Questions to Ask When Investing in a Vacation Property

According to the National Association of Home Builders, in 2018 there were approximately 7.5 million second homes, making up 5.5 percent of the total number of homes.1 These homes are not only real estate that must be planned for, managed, and maintained, they are also the birthplace of happy memories for you and your loved ones. Following are some important estate planning questions to consider to ensure that your place of happy memories is protected.

What Will Happen to the Property at Your Death?

The fate of your vacation property at your death largely depends on how it is currently owned. If you are the property’s sole owner or if you own it as a tenant in common with one or more other people, you need to decide what will happen to your interest in the property. If you own the property with another person as joint tenants with rights of survivorship or with a spouse as tenants by the entirety, your interest will automatically transfer to the remaining owner without court involvement. If a trust or limited liability company owns your vacation property, the entity will continue to own the property after your death. The trust instrument or operating agreement may lay out additional instructions about what will happen at your death. 

What Do You Want to Happen to the Property at Your Death?

The wonderful thing about proactively creating an estate plan is that you get to choose, in a legally binding way, what happens to your money and property. It is important to note that, if you do not create a plan for your property (and if it is not owned in joint tenancy with right of survivorship or tenancy by the entirety), your state will decide for you according to its laws and by putting your loved ones through the probate process. Probate is the court-supervised process that winds up your affairs and distributes your money and property to the appropriate people. It is also important to note that owning property in a different state from where you reside could lead to your loved ones having to open two probates (one in the state where you resided at death and one where the vacation property is located). There are several different options for handling your vacation property.

  • Give the property outright to a loved one. This person may be your oldest child, someone who has expressed interest in continuing to use the property, or an individual with the financial means to maintain the property.
  • Leave the property outright to a group of people. Because your whole family enjoys gathering together now, you may wish for them to continue gathering at the vacation property after you pass away.
  • Give the property to a group of people as tenants in common and create an ownership agreement. Because there are multiple parties involved, each with their own property interest and personal financial situations, an ownership agreement can lay out each one’s rights and responsibilities.
  • Prior to your death, transfer the property to your revocable living trust to be held for a long period of time or indefinitely. Because the trust is the property’s owner when you die, the beneficiaries will merely look to the trust to see what happens. There is no need for probate, and you can specify any rules you may have for the property and how it is to be held or distributed to one or more chosen beneficiaries. Note: State law may limit how long the trust can remain in effect (the rule against perpetuities). If you want the trust to hold the property indefinitely, speak with an experienced estate planning attorney about how to accomplish this goal.
  • Prior to your death, transfer the property to a special trust that owns only the property to be held for a long period of time or indefinitely. This option may be advisable if you want to separate one property from the rest of your money and property to be managed on its own or if you have asset protection concerns. This trust agreement would also lay out each beneficiary’s specific rights and responsibilities with respect to their use and enjoyment of the property.
  • Prior to your death, transfer the property to a limited liability company to be held for a long period of time or indefinitely. Depending on your objectives for the property, transferring it to a limited liability company may provide the beneficiaries with some additional asset and liability protection. The company operating agreement may also specify each company owner’s rights and responsibilities with respect to any company property. 
  • Instruct your trusted decision maker who will wind up your affairs to sell the property. If you believe that the money from the property’s sale would be of greater use to your beneficiaries or that none of them would want to buy the property, selling it can be an effective way to provide some money to benefit your loved ones differently.

Can Your Beneficiary Afford the Vacation Property?

While there may be a lot of happy memories associated with your vacation property, you know that there are also a lot of responsibilities. When you decide to leave your property outright to a person or group of people, they will become responsible for financial obligations such as mortgage payments (if any), utility bills, and property insurance and taxes. If you wish your beneficiary to keep the property, you need to consider whether they can meet the financial obligations; if not, they may end up prematurely selling it.

If More than One Person Will Have an Interest in the Property, Do They All Get Along?

All your children may get along now, but will they still be able to come together and see eye to eye when you are no longer living? Owning property together means that they need to be able to communicate, agree, and equally contribute to the property’s maintenance. A proper estate plan can address these potential issues by outlining

  • everyone’s responsibilities with respect to the property,
  • everyone’s rights to the property,
  • who makes the decisions,
  • what to do if a dispute arises, and
  • how someone can walk away from the property.

What Should You Do to Make Your Wish a Reality?

First, you need to legally document your wishes to ensure that your loved ones know what your wishes are, that they will be followed, and that all possible scenarios have been planned for. Second, if you have concerns about your beneficiaries being able to financially maintain the property, you need to meet with a financial advisor to design a plan that allows you to set aside money for its maintenance. Also, you need to meet with an insurance agent to make sure that the property is properly insured based on its intended use and to acquire additional life insurance in case you need another source of financial liquidity for its maintenance. Finally, you should meet with your tax adviser to make sure that you know of any potential tax consequences of transferring the vacation property, whether during your lifetime or at your death.

If you are interested in learning more about your options for protecting your vacation property and having your wishes for it carried out, please contact us.


Footnotes

  1. Na Zhao, Nation’s Stock of Second Homes, National Assoc. of Home Builders Discusses Economics and Housing Policy, Eye on Housing (Oct. 16, 2020), https://eyeonhousing.org/2020/10/nations-stock-of-second-homes-2/).
Family Office

Seven Reasons for Considering a Family Office

A family office provides management services to a family whose businesses and wealth have become too complex and significant to manage by themselves. A family office often combines investment, legal, and tax services along with lifestyle and administrative services, such as making travel arrangements or coordinating the use of the family’s private aircraft. In addition to supporting and simplifying a high-net-worth family’s lives, here are seven more reasons for considering a family office.

Reason 1: Passing Lessons and Values On to the Next Generation

With the structure and support processes of a family office in place, families are more likely to create an overall mission and cohesive vision for the legacy they would like to build. A family’s long-term vision will likely include more than just accumulating additional wealth; it will also include such things as charitable giving or making a social impact on the world in other ways. A family office can coordinate projects and plans that can help the next generation understand their potential role in executing the family’s long-term vision, as well as provide education and training to ensure that younger family members are ready to step into management or ownership roles that contribute to the family’s overall mission.

Reason 2: Comprehensive Investment Solution with Higher Returns

Families often think of their wealth in terms of separate silos: the family’s primary operating business is separate from its investment portfolio, which is separate from its real estate, which is separate from its charitable efforts. However, this disconnected mindset often inhibits a coordinated planning strategy that includes all of the family’s assets and liabilities.

Because a family office provides a centralized and comprehensive investment solution tailored to the family’s unique values, goals, and competencies (such as industry expertise or networks), family offices can often lead to higher returns without creating additional risk.1 Further, because families who use a family office are more likely to have conversations about investment decisions and performance, there is a greater likelihood that they will reach their financial goals. Finally, a family office, with its built-in reporting and feedback, allows a family to respond quickly when a change in investment strategy is needed.

Reason 3: Comprehensive Legal and Tax Planning Solutions

As a family grows and develops, so does its need for comprehensive legal and tax planning. Life events such as marriage, retirement, divorce, and death require planning ahead to establish the right tax, insurance, and legal strategies. A family office, with legal and tax experts who understand the family and its internal dynamics, ensures that the proper plans will be in place to minimize disruptions to achieving the family’s goals when unexpected life events occur.

Reason 4: Efficiency

A family office can avoid duplication of effort and thus be more efficient and economical. By delegating the management of certain activities to a family office, family members are free to use their time and energies as they choose. Family members can also benefit from economies of scale because investing a single large pot of funds is more cost effective than having many small accounts. In addition, for many activities, adding more family members only marginally increases the activity’s cost. 

Reason 5: Increased Information Flow

A family office can serve as the center for gathering and summarizing information related to the family’s businesses, investments, property, and charitable endeavors and then circulating it to the family at large. Families with family offices report that they are more informed about family matters, which promotes a feeling of transparency among all family members and in turn increases trust within the family.2

Reason 6: Maintain Privacy and Relationships

Working with a private family office instead of several different service providers minimizes both the number of people who have confidential and sensitive information about the family as well as the disruption that comes with change at the service provider level. By limiting the sharing of private information to a need-to-know-basis in the family office, the family can better minimize the risk of, and protect itself from, external threats such as extortion or fraud.

Reason 7: Create Career Opportunities

Not every family member who wants to work in the family business will have the opportunity to do so. A family office, with its array of investment, development, managerial, and charitable activities, provides additional career opportunities for family members to participate in and enables them to contribute to the family’s greater mission, even when opportunities within the primary family business may not be available or the right fit.

While creating a family office may seem overwhelming, there are many good reasons to begin exploring the idea if your family’s wealth is becoming increasingly too complex to continue managing alone. Start with implementing the services for which your family has the greatest need and build over time. Given the many reasons to consider a family office, not having one could be more costly to your family in the long run. To learn more about a family office and how it could help your family, please call us.


Footnotes

  1. Marius A. Holzer & Courtney Collette, The Value of a Family Office: A Deep Dive into the Benefits and Services a Family Office Can Provide to a Family, Cambridge Family Enterprise Group, https://cfeg.com/insights_research/the-value-of-a-family-office (last visited May 27, 2022).
  2. Id.
Debt

What Happens to My Spouse’s Debts at Their Death?

A spouse’s death creates a difficult and demanding time for the surviving partner. As much as you might want space and time alone to process your grief, you may have certain responsibilities related to settling your deceased spouse’s affairs, including paying off their debt. 

Most Americans have some type of debt. The obligation to pay debts does not necessarily go away when a person dies. While most debts are paid by the deceased’s estate (money and property owned by the decedent at their death) and do not transfer to a surviving spouse or other beneficiaries, in some cases you may be responsible for paying off your deceased spouse’s creditor claims.

If the legal duty to pay off a spouse’s debt does fall to you, it has implications for your own finances, so you will want to be clear on what the laws are where you live. If debt collectors contact you, know that you have rights as well. You should discuss questions about your debt payment obligations and rights with an attorney who specializes in estate planning and administration. 

Debtor Nation

About 80 percent of Americans have some type of debt, from credit-card debt and student loans to mortgage debt and personal loans.1 An estimated 13 percent of Americans with debt expect that they will never pay it off during their lifetime. 

The average American has more than $90,000 in debt.2 Collectively, Americans owe $14 trillion. More than half of this amount is mortgage debt, which is not surprising, since a house is the largest purchase most Americans ever make. What may be surprising, however, is that people forty-five to fifty-four years old hold the greatest average debt. While Gen Xers have the largest average debt balance ($135,000), Baby Boomers, many of whom are at or near retirement age, hold the next-largest debt load (nearly $100,000). Members of the Silent Generation (age seventy-five and over) owe about half as much as the average Millennial, but people in the highest age category still have significant debt, owing an average of more than $40,000. 

In short, debt does not discriminate by age. Even as people near the end of life, they can struggle financially. And when a debtor passes away, questions arise for their surviving loved ones. 

Probate and Debt Payment

Before we delve into a surviving spouse’s possible debt obligations, a brief primer on how debt is handled after a death is useful. 

The legal process for distributing a person’s property after they die is called probate. During probate, estate assets (everything a person owned at the time of their death) are distributed according to the person’s will, if they had one, or to their legal heirs. But first, debts are paid. The remaining assets are then passed on to heirs or beneficiaries. 

Assets such as life insurance policies and other accounts with a named beneficiary, assets in trust, and jointly owned property are not subject to probate. In addition, each state has different rules for prioritizing the order in which debts must be paid. Usually, the estate pays funeral expenses and estate administration costs (e.g., court fees and attorney fees) first, followed by taxes and then other forms of debt, such as loans and credit card balances. 

This explanation of how probate works is, of course, extremely simplified. An attorney specializing in estate planning and administration can fill you in on the complete process and what is expected of you if you are named the estate administrator (the person in charge of overseeing the probate process and working with the probate court). 

When You May Be Liable for a Spouse’s Debts

An estate that lacks the money to pay off its liabilities is known as an insolvent estate. There may be nothing a creditor can legally do to collect a debt from an insolvent estate, and the debt could just go unpaid. But, in the following situations, you may be on the hook for your deceased spouse’s debts: 

  • You cosigned for a loan.
  • You are a joint account holder on a credit card (not merely a spouse who is an authorized user).
  • You live in a community property state that considers a couple’s assets and debts to be jointly owned by both spouses.

There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In Alaska, couples who sign a special agreement are considered to be living in a community property state. If you live in one of these states, the debts your spouse incurred during marriage are legally also your debts.  

As a result, if the estate is insolvent and cannot cover its debts, you may be personally liable for paying them, even if they were exclusively in your spouse’s name. Creditors can come after you for debts such as medical expenses and outstanding credit-card balances. They could even have the right to garnish your wages, put a lien on or seize your property, or take money from your bank account. 

Exceptions apply to the shared-debt rules of community property states. Generally, you are responsible only for debts that you took on as a member of a married couple. That is, any debt your spouse incurred before you were married is generally not yours unless you explicitly agreed to take it on. Also, you may not be responsible for a spouse’s debt if you were legally separated when they passed away. In addition, property that you received as a gift or inheritance is typically considered your separate property and may be protected from your spouse’s creditors. Check with an attorney specializing in estate planning and administration for guidance on specific community property rules in your state. 

Spousal Debts and Dealing with Debt Collectors

Unless you live in a community property state or are otherwise legally obligated to pay your deceased spouse’s debts, you should not have to worry about spousal debt. But debt collectors may contact you anyway. 

Creditors could attempt to collect the money they are owed from assets that pass to you outside probate. They might even try to sue you personally to collect the debt. Neither of these tactics will work, but simply ignoring a legal filing is a bad idea. You may need to hire an attorney to prove that you are not liable for your spouse’s debt. 

Debt collectors do have the right to contact a deceased person’s spouse to find out who is authorized to pay the estate’s debts, according to the Consumer Financial Protection Bureau.3 However, the bureau adds, they cannot represent that you are personally responsible for paying the debt unless you are legally obligated to do so. 

There are rules to debt collection under federal law. As a debtor’s surviving spouse, you have the right to tell a debt collector to stop contacting you. After you have made such a request in writing, they must end communications with you. However, they can still try to collect the debt from either you or the estate with an official filing. 

Any debt that you do not personally owe should not affect your credit score, but a debt collector could improperly report your spouse’s debts to a credit reporting agency under your name. Should that happen, contact the credit reporting company and file a dispute to get the erroneous information removed from your credit report. 

Talk to an Estate Administration Attorney about Dealing with Spousal Debt

After the loss of a spouse, the grieving process can be complicated by the probate process and lingering questions about debt and finances. Though you may not have to pay your spouse’s debt, you may have to serve as their personal representative, executor, or administrator and deal with creditors. To best honor your spouse’s legacy and protect your own rights, it helps to understand the laws around estate administration, unpaid bills, and creditors. 

Are you unsure of your rights and obligations regarding a spouse’s debts? An estate administration attorney can answer your questions and advise you on which steps to take next. Contact us to set up an appointment.


Footnotes

  1. American Debt Statistics, Shift Credit Card Processing (Mar. 2021), https://shiftprocessing.com/american-debt/.
  2. Megan DeMatteo, The average American has $90,460 in debt—here’s how much debt Americans have at every age, CNBC (Nov. 18, 2021), https://www.cnbc.com/select/average-american-debt-by-age/.
  3. Am I responsible for my spouse’s debts after they die? Consumer Fin. Prot. Bureau (May 16, 2022), https://www.consumerfinance.gov/ask-cfpb/am-i-responsible-for-my-spouses-debts-after-they-die-en-1467/.
child and father

An Estate Plan Should Not Be a Set-It-and-Forget-It Endeavor

As we all know, life happens. There is really nothing we can do about it. However, some of the most common life events can have a dramatic effect on your estate plan. If you think your estate plan is like a slow cooker and you can set it and forget it, you and your loved ones may be in for a stomach-turning surprise when it is time to put your plan into action. Let us take a look at some common life changes and the impact they may have on your already established estate plan.

Birth of a Child

It is common for parents to have their estate plan prepared after the birth of their first child. However, depending on what provisions are in the first iteration, a second child might have difficulty getting their share without court involvement if the clients do not revise their plan after the birth of a subsequent child.

Example: Ten years ago, Tim and Leslie had a daughter named Tabitha, which prompted them to have a revocable living trust prepared, outlining how the trust’s money and property were to be managed for Tabitha’s benefit. Five years later, Tim and Leslie had a second daughter, Tina. Months after Tina’s birth, Tim and Leslie both passed away in a plane crash. However, Tim and Leslie had not revisited their estate plan after Tina’s birth, so she is not mentioned anywhere in their trust. For Tina to receive any benefit from her parent’s money and property, someone will need to petition the probate court to sort out the situation. This process can be time-consuming, costly, and public, and the exact opposite of the outcome Tim and Leslie wanted when they created a revocable living trust to begin with.

Birth of a Grandchild

Many grandparents love spending time with and supporting their grandchildren in any way they can. However, depending on the family structure, a grandchild who has been left out of an estate plan may have no recourse and may miss out on the opportunities the grandparents may otherwise have intended their grandchildren to have.

Example: Ted and Gladys had two children, John and Adam. In 2020, Ted and Gladys met with their estate planning attorney to create an estate plan. Because they strongly believed in the value of higher education, they created subtrusts for their two grandchildren, John’s daughters, Mary and Ellen, to help offset the cost of their future tuition. In 2021, Adam welcomed a son, George. Unfortunately, Ted and Gladys passed away shortly thereafter. Although updating their trust was on their to-do list, they never got around to it. Therefore, when Ted and Gladys passed, Mary and Ellen were the only grandchildren to receive money for their education, leaving George to find alternate avenues for funding his education.

Death of a Family Member

A number of people are involved in creating a will or trust. There are those who are creating the estate planning documents (will maker or trust maker, respectively), those who receive a benefit from the estate planning document (beneficiaries), and those who are in charge of carrying out the document’s instructions (personal representative, executor, or successor trustee). Aside from the will or trust maker, the death of any of these individuals can greatly impact the estate plan. A beneficiary’s death may mean that others receive a larger share or that the deceased beneficiary’s descendants receive that share. Reviewing your estate plan to make sure that your wishes will still be carried out is important, even if your first-named beneficiary is no longer living.

Example: Stacy, a single woman, created a will, leaving her modest amount of money and property to her mother, her only living parent. Ten years later, both Stacy and her mother passed away while bungee jumping in Costa Rica. Because Stacy named no contingent beneficiary in her estate plan, the probate judge must look to the state inheritance law, which gives everything to her only living sibling, her estranged brother, Robert, whom she has not seen for fifteen years.

In addition, it is crucial that you select backups for your personal representative, executor, or successor trustee in case the first person you named passes away (even if it is before you). If you named no alternate, or not enough alternates, then depending on your estate plan’s terms, your loved ones may be able to pick the successor person or a judge may have to look to state law to determine whom to appoint as the new person in charge. For families who are prone to conflict, this type of situation could spell disaster.

Example: Roger named his wife, Janice, as the successor trustee of his revocable living trust. Under the wise guidance of his estate planning attorney, Roger named his sister, Joan; his son, Jason; and his best friend, Charles, as additional successor trustees. Six years later, Roger, Janice, and Joan passed away while visiting Roger’s mother. Because Roger had named backup successor trustees, his trust’s administration continued smoothly under Jason’s direction, preserving Roger and Janice’s nest egg and keeping nosy relatives and neighbors from learning their financial details.

Purchasing a New Home

Purchasing a new home can dramatically impact a trust-based estate plan. Typically, for this type of plan to work as intended, either all accounts and property need to be owned by the trust or the trust needs to be named as the beneficiary. Usually, when you create the trust, you prepare a deed transferring your home to it, making it easy to ensure that the trust owns your home (if your estate planning attorney recommends that strategy). However, if you decide years later to buy a new or second home, you need to remember to fund your new real estate into your trust to avoid probate. When you purchase real estate, most title companies will assume that you are doing so as an individual or, if you are married, as a married couple. If you want the home to be purchased in the trust’s name, you will need to notify the title company or follow up with your estate planning attorney after the transaction has closed to transfer the new property into the trust.

estate planning attorney with an older couple

Do You Update Your Estate Plan as Often as Your Resume?

A resume is a snapshot of your experience, skill set, and education that provides prospective employers insight into who you are and how you will perform. Imagine not updating your resume for five, ten, or even fifteen years. Would it accurately reflect your professional abilities? Would it do what you want it to do? Probably not. Estate plans are similar in that they need to be regularly updated to reflect changes in your life and the law so they can do what you want them to do. Outdated estate plans, like outdated resumes, simply do not work.

Take a Moment to Reflect

Think for a moment about all of the changes in your life so far. What has changed since you signed your will, trust agreement, and other estate planning documents? If something has changed that affects you, your trusted helpers, or your beneficiaries, your estate plan probably needs to reflect that change.

Below are examples of changes that are significant enough to warrant an estate plan review and likely updates:

  • A new family member that you want to provide for in your estate plan (child, grandchild, etc.) was born.
  • A new family member that you want to provide for was adopted.
  • You, a trusted decision maker, or a beneficiary got married.
  • You or a beneficiary got divorced or separated from a spouse.
  • A loved one passed away.
  • A loved one is now battling an addiction.
  • One of your trusted decision makers is now incapacitated.
  • A loved one is now disabled.
  • You or a loved one is now suffering some health challenges.
  • Your financial status or a beneficiary’s has changed, either for better or worse.
  • Laws pertaining to tax, retirement accounts or benefits, property, or other relevant topics have changed.
  • You, a trusted decision maker, or a beneficiary moved to a new state.
  • Your family circumstances have changed.
  • Your business circumstances have changed.

Procrastination

Estate planning is usually at the bottom of a person’s to-do list. After it has been completed, most people do not think about it again. Do not be like most people. Estate planning is an ongoing project that requires review and attention. There is no time like the present to review your estate plan. Call our office now to get your estate planning review scheduled. As with most people, if it is on the calendar, you will make it happen. Just as you update your resume and meet with your doctor, dentist, CPA, or financial advisor regularly, you should meet with us regularly as well. We will ensure that your estate plan reflects your current needs and the needs of the people you love. Updating is the best way to ensure that your estate plan will do exactly what you want it to do.

family holding hands

Don’t Have a Lot of Money? Here Are Seven Ways You Can Still Leave Your Family a Great Legacy

Although the word “inheritance” usually conjures up images of property or accounts with significant monetary value, you can leave your family an even longer-lasting inheritance by doing these seven things, whether or not your bank account is overflowing.

Make a Plan

Often, people who do not have a lot of money think that it is unnecessary to have an estate plan. After all, what is an estate plan without an estate? Yet estate planning is more than making sure a person’s wealth passes to the next generation. It also involves making your wishes known with regard to certain items of property, burial arrangements, and end-of-life care decisions. Family relationships have been irreparably damaged over the question of who gets the homemade Christmas tree ornaments, and children have agonized over how much to spend on their parent’s casket and other burial arrangements, not wanting to skimp on something they feel represents their love for their parent.

Your family can have peace of mind knowing with certainty that they are carrying out your wishes if they have a crystal clear understanding of what those wishes are. Whether or not you have much money, you can leave an important legacy to your family simply by making a plan.

Avoid Unnecessary Expenses

Although a number of things are more important than money, there is nothing wrong with preserving the money you have. You can leave more money in your family’s hands  by avoiding unnecessary estate administration expenses such as probate. If you own real property, such as a home, you can avoid probate by creating a trust and transferring your property into the trust or by using a transfer-on-death deed, if your state’s law allows that. If you have bank accounts, retirement accounts, or life insurance policies, you can avoid probate by using payable-on-death designations, transfer-on-death registrations, and beneficiary designations or by transferring the accounts into a trust.

If your estate’s value is below a certain limit, small-estate proceedings allow the transfer of property by a simple affidavit, but the limit amounts vary from state to state, so it is important to understand what your state’s limits are and rely on the affidavit option only as a last resort. Spending a small amount of effort up front by using such types of designations can save a lot in later expenses and delays.

Write Personal Letters

Aside from the time it takes, writing personal letters to your family members costs little or nothing, but such letters can be far more valuable than vast amounts of money. Personal letters could share stories, give encouragement, provide advice, or express emotions. For example, a grandparent could write a letter to a grandchild commemorating a special occasion in that grandchild’s life (such as high school graduation) with the grandparent’s memories of the grandchild and expressions of love and admiration for the grandchild’s talents and qualities. This type of personal letter will be a family treasure that will endure long after any possession that money can buy.

Family Traditions

Family traditions are a wonderful and lasting legacy. What makes them even more wonderful is that they can be completely tailored to your family’s interests and priorities, they can be started at any time, and they do not have to cost a lot of money. Many traditions revolve around holidays, such as picnics at the lake on the Fourth of July or making Great-grandma’s sugar cookies every Valentine’s Day. Maybe your family has traditions around the Super Bowl or Friday night movies.

Even if you do not currently have many family traditions, it is not too late to start. Your own imagination is the only limit on creating a fun tradition that your family looks forward to and repeats regularly.

Family Heirlooms

It is important not to underestimate the value of family heirlooms. Although heirlooms may or may not be worth much money, their sentimental value can be enormous. From Grandma’s wedding dress to the trunk that Great-great-grandpa used to haul his possessions across the sea when he emigrated from Italy to the United States, such heirlooms are a treasured part of a family’s legacy.

It is crucial that the story of the item’s significance also be preserved so that an unsuspecting but well-meaning person does not throw the item out with the trash. So be sure to record to whom the item belonged, how it was used, and why it is important.

Pictures

The adage says that a picture is worth a thousand words, and sometimes, a picture is worth more than thousands of dollars. You can create a family history with pictures by snapping photos of everyday family activities as well as big family events.

Also, be sure to go through old family photos, because you may be the keeper of some of the only surviving photos of certain ancestors. Helping younger generations understand who their grandparents and great-grandparents were with pictures that can put faces to names is a valuable legacy to leave.

Family History

A person can derive identity and much strength from knowing where they came from, what struggles and challenges their ancestors went through, and how they prevailed. Numerous websites are available to help you trace your family history back through hundreds of years. But a family history can also start with your own story, which you can preserve by writing down or making a voice recording of your personal experiences.

Children, grandchildren, and subsequent generations will consider it a great treasure to learn your thoughts about where and how you grew up, the challenges you faced, and how you persevered through them. You can also write down your memories of your parents and grandparents if they did not write their own personal histories.

Even if you do not have a lot of money to leave to your family, you can still leave them a great legacy by making a plan, avoiding unnecessary expenses, writing personal letters, leaving family heirlooms, creating family traditions memorialized with pictures, and recording your own and your family’s history.

child helping elderly parent

Dutiful Child or Manipulator of the Elderly?

As parents age and their physical and mental capacities diminish, it is natural for their adult children, recognizing the parents’ decreasing ability to care for themselves, to step in and help them. Often, a specific child will take over the bulk of the responsibilities such as taking the parent to doctor’s appointments or the attorney’s office. As the parent begins to depend on the child more and more, it may make sense to appoint the child as a trusted decision maker and even to give them a larger inheritance to compensate them for their time. At the same time, other family members must take extreme care to ensure that the elderly parent is not being exploited by a manipulative caretaker.

Who Is Susceptible to Financial Exploitation?

With more people living into their eighties and nineties, elder abuse is a serious and increasingly common problem in our society.[1] Elder abuse can take several forms, such as physical, sexual, emotional, and verbal abuse or caretaker neglect or exploitation. Up to one-half of all elder abuse in the United States is financial exploitation,[2] which is the aspect this article focuses on. Financial exploitation includes outright theft of money or property, illegal transfers of property, identity theft, and misusing a position of trust, such as through a power of attorney.

Research has shown that the following characteristics indicate that an elderly person is more likely to be financially exploited through undue influence[3]:

  • Physical limitations that require them to depend on others to perform daily living activities such as home and yard maintenance, personal health and hygiene, preparing meals, paying bills, and transportation
  • Mental limitations resulting from medication side effects, dementia, or injury
  • Having recently experienced the death of a close loved one, such as a spouse or sibling
  • Social isolation that results from few family or friends who visit or living alone with little or no access to community activities or healthcare services
  • Experiencing anxiety or depression caused or worsened by loss or isolation
  • Being generally naive and extremely trusting
  • Having little to no knowledge about their financial situation or little to no experience handling finances, for example, if their recently deceased spouse handled all the finances

Often, people who use undue influence to financially exploit an elderly person do not begin helping them with the intent of using the elderly person’s trust to manipulate or exploit them. Nevertheless, as time goes on, whether because of resentment or entitlement or another reason, the helper begins to feel justified in helping themselves to the elderly person’s money and property.

Although it is most often a family member who financially exploits the elderly person through undue influence, financial exploitation can also occur at the hands of any person whom the elderly person trusts, such as a neighbor, a fellow member of a religious organization, a housekeeper, or a professional adviser.

Exploitation Warning Signs

Below are some warning signs that a dutiful caretaker has crossed the line into elder abuse:

  • Disappearance of the elderly person’s cash or valuable possessions
  • Unusual charges on the elderly person’s credit or debit cards or unusual withdrawals from their bank accounts
  • Unexplained transfer of accounts to another institution or person
  • Changes to legal documents, such as a power of attorney, will, or trust, by the elderly person naming the caretaker to trusted positions or granting an inheritance or a larger inheritance, particularly when such a change goes against the elderly person’s previously expressed wishes
  • Placing the caretaker’s name on accounts as a joint owner or payable-on-death beneficiary
  • Signatures other than the elderly person’s signature, or forged signatures, appearing on checks or credit card or loan applications
  • The caretaker socially isolating the elderly person by limiting their access to communication (phone, mail, or email) or social visits or disallowing privacy on the phone or with visitors
  • The elderly person’s bills going unpaid or the elderly person expressing concern about not having enough money to pay bills when there is sufficient income or other financial resources available
  • Unexplained changes in the elderly person’s demeanor or interests

How to Prevent Financial Exploitation

Although the estimated annual cost of elder financial abuse is billions of dollars, it regularly goes unreported because the abuser is often a family member or trusted caregiver and the elderly person is either unaware of the abuse or too embarrassed or afraid to report it.[4] Yet by being aware of the warning signs and helping to create a community network around the elderly person, as well as taking careful and appropriate steps to plan for their decreasing ability to manage their own finances, such as setting up automatic bill pay or creating a power of attorney or trust, you can greatly reduce the risks. We can help you take the steps necessary to protect yourself as you age or to protect your vulnerable loved ones. Call us so we can discuss the appropriate steps to take.


[1] Bennett Blum, M.D., Elder Financial Abuse and Financial Exploitation, Forensic and Geriatric Psychology, http://www.bennettblummd.com/elder_abuse_financial.html (last visited Apr. 27, 2022).

[2] Michael J. Tueth, M.D., Exposing Financial Exploitation of Impaired Elderly Persons, 8 Am. J. Geriatric Psychiatry 104 (2000), https://www.ajgponline.org/article/S1064-7481(12)61467-5/fulltext.

[3] Martin Hagan, Financial Exploitation of the Elderly through Undue Influence: How to Spot It and What to Do about It, Martin Hagan’s Estate Planning Resource Center, https://haganlaw.net/?page_id=95 (last visited Apr. 27, 2022).

[4] Marguerita Cheng, Elder Financial Exploitation: Warning Signs, Prevention and Reporting, U.S.News and World Report (May 27, 2021, 2:09 PM), https://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/articles/elder-financial-exploitation-warning-signs-prevention-and-reporting.

multi-generational family

Estate Planning Lessons We Can Learn from Encanto

Not only is Disney’s award-winning animated film Encanto hugely entertaining, it also contains the following valuable estate planning lessons:

  • Leaving a family legacy is important and can have an impact beyond your immediate family.
  • Be sure to consider the significance of multigenerational planning.
  • Treating each beneficiary as a unique person is essential.
  • Naming the “strongest” child as your fiduciary may not always be the most sensible decision.

A Family Legacy Can Impact More Than Just Your Immediate Family

In Encanto, the Madrigal family had received a “miracle,” and family members received unique “gifts” associated with the miracle. Along with the miracle and the gifts they had received, the Madrigal family also recognized their responsibility to use their miracle and gifts to benefit the whole town. They took their responsibility very seriously.

Like the Madrigal family, you can use your estate plan to benefit the world around you. You can design your plan so that the money and property you leave will cultivate a legacy that will not only impact your immediate family but can also benefit the community for generations to come. The Carnegie Foundation, which funds libraries and learning centers around the country, and the Bill & Melinda Gates Foundation, which fights poverty, disease, and inequity around the world, are well-known examples. But you do not have to be a billionaire to establish a family foundation. In its simplest terms, a family foundation is a means of providing charity that is funded with family assets and often employs family members to work for its cause. Family foundations are an effective way to involve your family in establishing a charitable legacy that can benefit the community.

If a family foundation does not fit your estate planning goals, there are additional ways to leave a legacy and impact your community on a smaller scale. For example, you could fund a scholarship, a room in a library, or even a park bench. Another option is to talk to your financial advisor about donor-advised funds. Such charitable gifts can be a powerful source of family pride, creating meaning and a legacy for your family.

The Significance of Multigenerational Planning

In Encanto, Abuela was just as concerned about her grandchildren and helping them to obtain and properly use their gifts as she was about her own children. Although designing an estate plan that benefits only your children is typical, grandparents may also want to look at ways they can benefit multiple generations by using vehicles such as family trusts, family “banks,” or funding 529 college savings plans. Encanto teaches us to think beyond what we can leave to only our children; there are multiple ways to help future generations as well, financially or otherwise.

Each Beneficiary Is Unique

Encanto’s soundtrack went viral, and the song “We Don’t Talk about Bruno” hit No. 1 on the U.S. Billboard Hot 200 chart.[1] Bruno is the black sheep of the Madrigal family and can be viewed as a metaphor for any family’s marginalized members. Just like Bruno, there may be members of our own family whom we are reluctant to talk about—perhaps the one who is an embarrassment to the family because they have not lived up to expectations or followed societal norms. Still, we need to acknowledge that family members come in a lot of different flavors and be willing to recognize the good and potential in each of them, even if they do not fit the mold. Likewise, you should tailor your estate plan to fit each beneficiary’s individual needs. For example, an incentive trust or special needs trust may make sense for some beneficiaries to help them reach their potential, but it may not make sense for others.

Another cautionary tale from Encanto is about exerting control. Abuela Madrigal did not want to involve Bruno or Mirabel in the family endeavors because they did not conform to her idea of what they were supposed to do and how they were supposed to act. When designing your own estate plan, be careful about trying to exert control from the grave by requiring children or grandchildren to do or achieve certain things to qualify for their inheritance. At some point, you have to let people make their own choices and live their lives without punishing them for not conforming by withholding money or property.

Think Before Putting More Pressure on the “Strong” One

In Encanto, Luisa is the physically strong sibling. Most families have the characteristically “strong” child who takes on most of the responsibility along with most of the pressure. It is natural to appoint this responsible child as the trustee, the agent under a power of attorney, or in another fiduciary role in your estate plan. Yet, just as Luisa sings, “pressure that’ll tip, tip, tip till you just go pop,” sometimes we, too, assume that the “strong” or “responsible” one can continue taking on more responsibility. Think twice about whom you appoint as a trustee or fiduciary because that person might just be at their breaking point; maybe that responsibility is a load that can be shared.

If after watching Encanto you begin thinking about your estate plan and the kind of legacy that you want to leave for successive generations and the community, please call us. We can help you ensure that your legacy is properly planned, administered, and enduring.


[1] Gary Trust, Encanto’s “We Don’t Talk About Bruno” Hits No. 1 on Billboard Global 200, Billboard (Feb. 7, 2022), https://www.billboard.com/music/chart-beat/we-dont-talk-about-bruno-encanto-number-one-global-200-1235028107/.

Your Role in a Client’s Summertime Family Gathering

Along with warmer weather and lazy days spent at the pool, summertime also often includes a family gathering, such as a Fourth of July barbecue, a family vacation, a reunion, or time spent at a family cabin or lake house. Whatever the form, in our always-on-the-go society, getting the whole family together is a rare occurrence. Clients should take advantage of this time together to discuss their estate and financial wishes with their families. As an advisor, you can help facilitate and encourage this discussion in the following ways.

Meet Your Client’s Trusted Decision Makers Now

You can encourage a client to discuss their estate and financial plans with their family by offering to meet with your client and their trusted decision makers now. Clients often select adult children to act in trusted decision-making roles, such as a successor trustee, executor or personal representative, or agent under a financial power of attorney. By meeting these trusted decision makers now before they are needed, you can begin to develop a relationship with them and be an advisor that the family feels comfortable turning to for guidance when needed. Summertime, when family comes to visit, is the perfect time to have this meeting.

As part of this meeting, you can review the client’s important documents with the trusted decision makers so that they know what the client’s wishes are and how they should be carried out when the time comes. You can also answer any questions the client or the decision makers have about the client’s plan or their roles.

Have a Family Meeting

Another way you can help your client have a family discussion about their estate and financial plans is to offer to meet with your client’s entire family and conduct a family meeting. Clients often feel that they lack the skill set or knowledge to explain the sometimes complicated legal and financial concepts involved in their plans. After all, it is one thing to understand a concept when it is explained to you but quite another to try to explain the concept to someone else.

A client may also feel uncertain about how their family will react to their estate and financial plans. Having their advisor, an unrelated and objective party, there to explain the client’s plans and the benefits of those plans and answer any questions or concerns that their family members may have can remove some of the emotional upset or criticism that could emerge.

By offering to attend and conduct a family meeting, you can reduce or eliminate your client’s fears about explaining their estate and financial plans to their family. You can also be invaluable in helping the client determine the best format for this family meeting. For example, should the family meeting be siblings only, or should in-laws also be included? Should the family meeting include grandchildren? Your knowledge of your client’s family dynamics and plans will be extremely useful in determining the best format for the family meeting.

Summertime is a common time for families to get together. Encourage your clients to take advantage of this time to discuss their estate and financial wishes with their families by offering to meet with their trusted decision makers or to conduct a family meeting. Doing so is a great way to provide added value to your clients. Please reach out to us if you need assistance discussing these ideas with your clients or hosting a meeting.